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FROM THE SAND AND FROM THE SEA:
THE NAMIBIA CASE STUDY

Namibia’s spectacular and diamond-rich coastline, where the Namib Desert meets the Atlantic Ocean.

A seabed rich with high-quality

alluvial diamonds helps build

an industry and a nation

“Diamond Empowerment” is a series of articles, each one a case study, providing an objective overview of the contribution – both realized and still only potential – that the diamond mining industry makes to sustainable development in the African countries where it is present.

The third article in the series looks at the southwest African nation of Namibia, a country where diamonds instigated almost a century of colonial and foreign rule, but then supported its development after independence.

In 1906, work was completed on a railway line linking the inland settlement of Aus to the coastal town of Lüderitz, in what today is Namibia but then was the German colony of South West Africa. To keep the trains running on schedule in the harsh desert environment, small teams of workers were employed to ensure that sand did not drift onto the tracks.

At the railway stop of Kolmanskop, the bahnmeister (chief railway foreman) was August Stauch, a German immigrant and amateur mineralogist, who earlier had obtained a prospecting license from the Deutsche Kolonialgesellschaft fur Südwest Afrika. He asked his workers to watch out for anything unsusual in the sand they swept off the tracks.

And so it happened in April 1908 that Zacharias Lewala, a railway worker who previously had spent time in the Kimberley diamond fields about 1,000 kilometers to the south, found a stone that caught his attention. He handed it over to Stauch, who immediately sent it to the town of Swakopmund for testing. It was, as the German suspected, a diamond.

Word about the discovery spread quickly. It was soon apparent that it wasn’t simply a localized deposit but rather a vast alluvial diamond field, extending about 300 kilometers northwards from the Orange River, the major waterway seperating South Africa from South West Africa, and then about 100 kilometers inland from the Atlantic coast.

The Republic of Namibia, with the location of the Sperrgebiet indicated by the red-bordered square. It is there that most diamond resources are located, on land or on the Atlantic seabed.

The German colonial government of South West Africa soon after proclaimed the 26,000 square-kilometer area the Sperrgebiet, or Forbidden Territory, and much of it remains a no-go zone to this very day. Kolmanskop was the biggest of the diamond rush towns, and in its heyday was home to more than 1,500 people. Drinking water needed to be brought in from Cape Town, but the town had electricity at a time when Germany still had gas street lights, and its hospital was home to the the first X-ray machine in all of southern Africa.

Abandoned houses in what in the early 20th Century was the bustling mining town of Kolmanskop, where more than 1,500 residents lived and worked. (Photo: Patrick Garaud on Wikicommons)

Germany stakes its claim in the Namib Desert

Germany’s official presence in South West Africa dated back to 1884, in part the result of petitioning by an early German settler, Adolf Lüderitz, who insisted that, because of their proximity to the Kimberley diamond fields, the sands of the Namib Desert also likely held significant deposits of the gemstone.

In 1885, the Chancellor of the German Empire, Otto von Bismarck, held a convention in Berlin where European powers divided parts of Africa among themselves. A year later the border between Angola and what would become German South West Africa was negotiated between Germany and Portugal, and in 1890 the first German military fort was built at Windhoek, today the capital of Namibia.

The British government, which controlled South Africa, had also considered a push into the Namib region, but relented because its Colonial Office doubted whether exploiting the natural resources in the arid region north of the Orange River would be economically viable.

The South West African diamond rush in 1908 proved the British Colonial Office experts wrong.

Although sparsely populated, the terrritory that today is Namibia was home to numerous indigenous nations and tribes, including the San, Damaras, Ovambos, Namas, Hereros, Oorlams, Kavangos, East Caprivians, Rehoboth Basters, Kaokovelders and Tswanas. But the actions of the colonial powers occurred without their consent, and frequently at their expense.

 

The birth of a South African giant

Germany’s 31-year rule over South West Africa came to an end on July 9, 1915, when during the first year of World War I its forces surrended to the South African army.

The South African government had hoped to incorporate the entire country into its own territory, but, when the Great War ended, the League of Nations only agreed that it could administer South West Africa as a Class C Mandate.

Among those in South Africa who realized the massive economic potential of the South West African diamond fields was Ernest Oppenheimer. Having begun his career as an employee of a London diamond broker in Kimberley, in 1917 he established the Anglo American Corporation with backing from the New York financier J.P. Morgan. Its original  plan was to exploit the goldfields in the east Witwatersrand, near Johannesburg.

But Oppenheimer remained intensely interested in the diamond industry. He approached German investors in the Sperrgebiet, offering them shares in Anglo-American in exchange for their diamond holdings. He concentrated these in a new company called Consolidated Diamond Mines (CDM) of South West Africa. It was the forerunner of what today is Namdeb.

Oppenheimer’s eyes were firmly focused on South Africa’s most important diamond mining company, De Beers, whose dominant position in the market had been eroded by discoveries in the Belgian Congo and Angola, and the new players exploiting those resources. Now in an advantagous position, he offered CDM to De Beers, for a share of stock and a seat on the board. Its directors agreed.

Sir Ernest Oppenheimer in 1915. Realizing the potential of the diamond resources in the Sperrgebiet, he leveraged his holdings there to purchase a stake in De Beers, eventually becoming its managing director and then chairman.

Oppenheimer’s strategy paid off. He became managing director of De Beers in 1927 was elected chairman of the company in December 1929.

 

A seabed littered with gemstones

CDM’s alluvial diamond deposits in the Sperrgebiet for many years represented the bulk of the country’s output. In 1960s, however, geologists confirmed that, over millennia, a massive number of rough diamonds, sourced from ancient inland kimberlites, had been washed down by the Orange River into the Atlantic. The seabed east of where the river emptied into the ocean was rich with high-quality gemstones.

To extract these goods, marine diamond mining methods were required. The most notable of them involved the literal vacuuming of diamondiferous sand off the seafloor. It was initially developed by a Texan oilman named Sammy Collins, who obtained the first offshore mining concession, and formed the Marine Diamond Corporation. Between 1961 and 1970, it mined about 1.5 million carats from 20 meters beneath the ocean’s surface.

De Beers set up its own marine mining company in Cape Town, South Africa, and through the venture pioneered deep-sea diamond mining, exploiting deposits as deep as 140 meters under the sea.

But in 2000, De Beers agreed with the now independent Namibian government that its local marine operation would be run in-country. The first phase was completed the following year, with the transfer to Namibia of four diamond mining vessels from South Africa.

In 2005, Namibian diamond production from marine resources overtook land production for the first time, making Debmarine Namibia, a Namdeb subsidiary, the largest single diamond producer in the country.

A underwater diamond recovery ship, one of seven specialized vessels in the Debmarine Namibia fleet, which are equipped to mine diamonds off the seabed. (Photo: Debmarine Namibia)

An independent nation is born

The path to Namibian independence had been long and tortured. The country’s indigenous people began petitioning against South Arican rule as far back as 1947, and in 1966 the United Nations invalidated the mandate that had been granted to the country by the League of Nations 46 years earlier.

Over the years of German and then South African control, the interests of Namibia’s local communities had largely been ignored. Allocated only 10.6 percent of the available land, they had received as little as 3.6 percent of the territorial budget.

The liberation movement SWAPO (South West Africa People’s Organization) was founded as the Ovamboland People’s Organization in 1958, and it waged an armed struggle along the Angolan border starting in 1969. This picked up after Angolan independence in 1975.

The turning point came in 1988, when South Africa’s invasion of Angola was defeated and it had to negotiate a total withdrawal from the country to avoid a military disaster. By the end of December that year it had agreed to a UN-supervised transition to elections, a new constitution and independence for Namibia.

Free elections monitored by the UN were held in Namibia in 1989, and SWAPO swept into power, with its long-time leader Sam Nujoma becoming the country’s first president. On March 21, 1990, the South African flag was lowered in the National Stadium in Windhoek, and Namibia’s flag was raised.

 

The domestication of Namibia’s diamonds

Although Namibia gained its independence after a hard fought guerilla war, the country was never considered a source of conflict diamonds. This, in part was because its diamond deposits are predominently located in the south of the country, whereas the war was fought in the north, along the Angolan border and in the Caprivi Strip, But it also was because of SWAPO doctrine, which encouraged maintaining interests with the local business community after it came to power.

The government never advocated a wide-scale nationalization of previously South African-owned businesses, but it certainly enouraged increased Namibian control and equity, along the lines of similar processes underway in neighboring Botswana.

Namibia’s first President, Sam Nujome (right) and De Beers Chairman Julian Ogilvie Thompson in 1994, signing the agreement that led to the establishment of Namdeb, a 50:50 partnership between the Namibian government and De Beers.

Namibia’s leading diamond mining company, Namdeb, was established in 1994, four years after independence. It is the sucessor of CDM, and is structured similarly to Debswana in Botswana, as a 50:50 partnership between the Namibian government and De Beers. In addition to a half share of profits, the Namibian Treasury also levies a royalty on rough diamond exports.

Namibia has the richest known marine diamond deposits in the world, estimated to total more than 80 million carats. They represent the majority of Namdeb’s total diamond production and 90 percent of its resources.

Namdeb’s marine-based diamond recovery operation today includes seven specialized vessels, operating at depths of around 90 meters to 150 meters  below sea level in the Atlantic Ocean, off the Namibian coast.

The company’s land-based and coastal operations take place in a coastal strip known as the surf zone. At Elizabeth Bay, the company recovers diamonds from thin layers of diamond-bearing material, while marine contractors work with divers to recover gravel from the seabed at depths of 7 meters to 30 meters.

Namdeb had intended shutting down its land-based operation in 2022, but in October 2021 an agreement between the Namibian government and De Beers extended the mines’ life by 20 years to 2042. As part of the deal, Namibia offered Namdeb royalty relief from 2021 to 2025, cutting the rate in half from 10 percent to 5 percent, with De Beers promising to use the savings in costs by investing in increased capacity. Namdeb said the life of mine extension would create 600 new jobs.

 

Creation of a local industry

As it had in Botswana one year earlier, De Beers set up a sorting, valuation and sales facility in the Namibian capital of Windhoek in 2007, to handle all the diamonds being produced at the time by Namdeb, including Debmarine. Called the Namibia Diamond Trading Company (NDTC), one of its primary functions was to channel rough supply to a growing number of diamond cutting operations being set up in around the Namibian city.

NDTC then announced that 11 companies, out of 18 applicants, had qualified to receive supplies of rough diamonds for the first three-and-a-half year contract period, with those that already had operational factories receiving their first rough supply at the end of October 2007, and the remainder receiving theirs from the end of March 2008.

A diamond polisher at the Grandview Klein manufacturing facility in Windhoek, Namibia. The company is a NDTC Sightholder. (Photo: Grandview Klein Diamond Group)

There currently are 11 NDTC Sightholders, who like their counterparts in other countries receive their allocation 10 times a year. They are required to process these rough diamonds in Namibia, with the aim of creating sustainable employment locally, as well as developing the skills necessary for a cutting and polishing industry. The current value of NDTC supply via its Sightholders is about $430 million per annum.

According to the most recent 10-year sales agreement between the government of Namibia and De Beers, signed in July 2016, 15 percent by value of Namdeb production is sold to Namib Desert Diamonds, better known as Namdia, which is wholly owned by the government of Namibia.

What remains from Namdeb ouput, after supply to Sightholders and Namdia has been accounted for, is sold to De Beers and exported to Botswana for aggregation.

 

80 cents of every dollar earned

Namdia is an increasingly influential player in the Namibian diamond sector. Established as a result of the sales agreement with De Beers in 2016, its original objective was to serve as a price discovery mechanism for the government. But it has done more than that, seeking to create an iconic brand for the often high-quality Namibian diamonds, pitching them as niche products in the luxury brand segment.

Namdia operates what it refers to as a hybrid selling method, which includes direct sales to select clients and also competitive bidding. In March 2022, it raised the number of clients from 16 to 36. They are located in the UAE, Belgium, India, Israel, the United States and Namibia.

Like Namibia’s dominant diamond miner, Namdeb, and its rough sales hub, NDTC, Namdia’s role in the local industry has a counterpart filling a similar role in neighboring Botswana. There the Gaborone-based Okavango Diamond Company (ODC), established four years before Namdia was, is today responsible for the sale of 30 percent of national production, with the figure slated to rise to 50 percent over the coming years.  

Namdia, too would like to see its share of Namdeb’s output increase, when a new sales agreement between De Beers and the country’s government is concluded. The current agreement expires in May 2026. Its leadership has reportedly asked for that figure be raised at least to 25 percent, and possibly higher than that moving forward.

In March 2023, Namdia reported a 63 percent increase in revenues to a record $210 million, with a gross profit of $42 million, almost 55 percent more than the previous financial year. The dividend it paid the government was $20 million.

Whereas the Namibian mining sector in total currently accounts for 10 percent of the country’s gross national product, diamonds by themselves make up between 7 and 8 percent. According to NDTC’s CEO, Brent Eiseb,  considering the tax levies, royalties and dividends that the Namibian government derives from its diamond resources, for every dollar generated from diamonds in the country approximately 80 cents ends up in state coffers.

“It’s an industry that changes lives and creates opportunities for Namibian citizens,” he said in a recently published interview. “These are the immensely important stories that we need to tell.”

A Namdeb team vacuuming diamond-rich sand in the surf at Atlantic Ocean coastline, using specialized equipment. (Photo: Namdeb)

From the series