Leviev’s Namibian Dilemma: Samicor Output Disappointing and Factory Has No Access to Local Rough

At the first International Diamond "Omgungo" meeting in Windhoek, where issues of development and value-creation opportunities in Namibia were discussed, Lev Leviev demanded that the Namibian government sell rough diamonds to him “at the same export price it gets paid by Namdeb” (which is the DTC’s Standard Selling Value minus 10 percent). De Beers vehemently objected. DTC Managing Director Varda Shine didn’t fail to point out that every year some two million new consumers (customers) must be found to purchase the polished equivalent of the Namibia production and the 10 percent is largely applied to generate consumer demand.

Currently there are some seven domestic diamond plants in Namibia, of which the largest is Leviev's LLD Plant. It is followed in size by the Namdeb subsidiary NamGem, which is operated by Lazare Kaplan and the Namcot factory of the Beny Steinmetz Diamond Group.

Both Namcot and NamGem are Sightholders of the DTC, so they don't have supply problems. Leviev’s factory needs to source its own diamonds. When the factory was opened last year, the company had said it would source its diamonds from its own Samicor off-shore diamond mining operations. At the recent Namibian Diamond Conference, the head of the group’s Namibian operations, Yaki Adar, conceded “that it turns out that our Samicor offshore concession is of low quality and poor grade and too small for our local manufacturing needs."

Leviev’s pressure on the Namibian government was intense. It was not just a demand for rough diamonds; it was also an attack on De Beers and a message to the government: De Beers has cheated you and it doesn’t deserve the favorable treatment it is getting. Some of the more notable Leviev remarks follow – as they provide an unusual insight into the thinking, the philosophy and the strategy of this major player on the international diamond scene.

“De Beers has lied to governments”
“For over one hundred years, there has been a very clear and directed policy in African states to take out your resource - rough diamonds - and at the same time, to prevent the development of any significant local industry that would give you any economic, social or employment added value. The story that we heard all those years was that polishing diamonds in Africa was not economically viable. But, what is hiding behind these words? It is a very direct and patronizing concept - and we all know its roots very well – the concept is that people in Africa are NOT capable of polishing at a very high and efficient standard,” said Leviev to the 300 conference participants.

“And so ladies and gentlemen, I believe that I was invited here, because I do NOT hold and do NOT accept this opinion. I was invited here to disprove that false belief. I did this by taking very clear and determined actions and their results can be seen here in front of us. What better proof can there be? In a very short time (less than one year) we set up our factory, recruited and trained hundreds of local workers, and today we are producing polished diamonds in Namibia. And this is happening despite the fact that we have to depend on second hand sources – I am talking about imported rough.”

“You may ask: 'So, what is the problem?' The answer is simple. Today, like in the past, there is a shortage of raw material. The polishing ventures in the countries whose natural resources are taken away from them and sent thousands of kilometers to other countries for polishing are begging to get rough diamonds - and even at the same price that they are exported from here. Isn't that an amazing phenomenon? Isn't it surprising for countries in this region that won their independence many years ago? For all those people who know the history of the events, the answer to these questions is: 'No, this is not a surprise," he said.

Leviev continued: “The masters of the lands in southern Africa – who are also the masters of the diamonds here [in Namibia] – seized the right to fix the rules and to take over the control of the supply of rough diamonds to the whole world. This control over the sources of rough is distributed to an exclusive customers' club. If needed, the members of this club will also set up factories in your countries – acting on ORDERS from above.”

“They may do this,” said the diamond manufacturer, “to show that the supply of rough can reach here as well, and also, if needed, to prove that polishing in Africa is not economically viable. Most of the other traders and producers who were not chosen to be members of the club, stay behind the fence and must struggle for their survival. I know. I was there.”

“This situation is NOT acceptable.”
“In any other industry of the free and liberal economy, it would be rejected and protested against. In our branch it became a norm, because of acceptance of those club members who have no fear for their future. We must understand and face this basic truth. We must not forget that this great power stems from one simple fact. The countries in southern Africa were prevented from developing their diamond polishing industry independently. There are some who would say that government intervention in this issue would be against the rules of free trade. I would answer: 'These actions of the African states are not aimed against free trade but against decades of discrimination.' After all, the present situation is far from free trade,” said Leviev.

“Let me congratulate those countries that truly want your rich natural resources to benefit your lands and your people. Angola will go out on an independent road. With the end of the civil war, Angola is ready to set up its industry. We are there to help and support and these days we are launching a new diamond polishing factory in a joint venture with the government. It is based on an economically viable principle set out by the government. The factory will work with local rough diamonds and hundreds of local workers will be trained there. The factory will serve as the corner-stone for a future diamond industrialization of Angola, which will include production and marketing of diamond jewelry,” said Leviev

“Lately, we have seen and salute the significant rewards of the new reforms of the South Africa government regarding its management of rough diamonds in its territory.

The new legislation clearly demonstrates the new order of national priorities. South Africa has recognized that without a long range government commitment to supply rough diamonds, there CANNOT be a sustainable local industry. We see that this reform has been received by popular and positive public support, which gives a strong motivation for the continuing process. Encouragement of the local industry by supplying rough diamonds across the board and not only to the members of the exclusive club of yes-men will provide a real incentive for the growth and development of a healthy and viable diamond industry. First, the diamond industry, and after that, the development of the jewelry industry.”

“Victims of defamation”
“We have demonstrated our clear commitment by the solid work that we are investing in Africa every day - over a long period of time. Last year we established - here in Namibia, - the largest diamond polishing plant in Africa. Today, we already employ 590 local workers. There is no doubt that this number will grow significantly, as soon as we have enough rough diamonds from local Namibian sources. We stand ready to invest our energy, experience and billions of dollars in the future development of our concept. As I speak, we are completing a new diamond polishing plant in Angola. Many of its workers got their training here in Windhoek with their brothers in Namibia. These plants will join our existing plant in South Africa.

“This way, the revolution in thinking got an immediate solution from us - a 50 percent increase of polishers in Africa. And still, ladies and gentlemen, this represents only a small step in what can be achieved when the natural resources of South Africa, Angola, Namibia, and Botswana will be channeled into the establishment of industries for the benefit of your citizens,” said Leviev.

“In order to continue the momentum of development, we must win total and un-compromising support in actions to ensure the supply to the local industry of locally mined diamonds at the same export prices. This must become a practical reality. Let us hope and pray that our vision, the values, the political steps, the legislative process and our contribution, will together bring the needed results. Only in this way, if we do not miss the window of opportunity – we can promise a better future for you and for generations to come,” Leviev concluded his presentation.