Covid steals Namdeb’s profit shine
Government expects tax income from diamond mining in 2020/21 to nosedive by nearly 46% or more than half a billion Namibia dollars compared to the previous fiscal year.
31 July 2020 | Business
The current market outlook is highly uncertain owing to the possibility of a second wave of Covid-19 infections. – Anglo American
“All parts of the diamond supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020,” Anglo American yesterday said in its interim results released on the Namibian Stock Exchange (NSX).
Anglo American owns De Beers, who has a 50%-shareholding in Namdeb Holdings, with the Namibian government owning the other half.
Namdeb Holdings reported an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of US$28 million in its latest half-year – 65% less than in the comparative period last year.
EBITDA is general used as an indication of profitability.
The latest results show Namdeb also had to settle for a lower diamond price. Diamonds from the local mining giant fetched a price of US$477 per carat in the period under review, nearly 14% less than the US$552 per carat in the same half-year in 2019.
‘In Namibia, production increased by 6% to 0.9 million carats (30 June 2019: 0.8 million carats), driven by the marine operations as the Mafuta crawler vessel was under planned maintenance in the second quarter of 2019, and supported by the implementation of measures to enable continuity of the fleet while safeguarding the workforce,” Anglo said.
“This increase was offset by a 30% reduction at the land operations to 0.1 million carats following the Covid-19 lockdown.”
According to its April economic outlook, the Bank of Namibia (BoN) expects diamond mining to grow by -14.9% this year, following a contraction of 17.7% in 2019.
“Diamonds constitute one of the luxury items and people are expected to shift from the consumption of luxury goods and services and rather focus on fighting Covid-19 by purchasing medical supplies and dietary foods to boost their health.
“In addition, with travel restrictions, lockdowns and prevention of large gatherings of people mean that prospective buyers cannot attend auctions to view and purchase diamonds,” the BoN said.
The sector’s bleak performance will hurt state coffers. In his maiden budget tabled towards the end of May, finance minister Iipumbu Shiimi forecast tax from diamond companies in 2020/21 to fall by nearly 46% compared to last year.
In 2019/20, an estimated N$1.3 billion in tax from diamond mining flowed to the Receiver of Revenue. For the current fiscal year, tax from the sector is expected to be nearly N$598.5 million less at some N$711.6 million.
De Beers reported an underlying EBITDA slump in its all its operations. Overall, the group showed an underlying EBITDA of US$2 million, down 99.6% from the US$518 million recorded in the first half-year in 2019.
Anglo yesterday said the current market outlook is highly uncertain owing to the possibility of a second wave of Covid-19 infections, the ability of fiscal and monetary measures to continue to support employment and businesses in consumer countries, as well as the shape and strength of the global macro-economic recovery.
“Significant challenges for rough diamond demand look set to continue in the short term with the ongoing restrictions to travel in Southern Africa, as well as the risk of further Covid-19 cases in the Indian cutting centres,” the group said.
Anglo concluded: “In the longer term, the outlook for the diamond sector remains positive, and De Beers is accelerating its business transformation – from discovery and mining, to how we sell rough diamonds to customers and how consumers purchase diamond jewellery – to ensure it retains its position as the world’s leading diamond business.”