Africa-Press – Namibia. LAST YEAR, state-owned Namibia Desert Diamonds (Pty) Ltd (Namdia) paid N$30 million to American diamond merchant Maurice Templesman, buying him out of the diamond-polishing factory at Okahandja.
This year, Namdia’s executives, led by Kennedy Hamutenya and directors are saying the N$30 million is worth nothing, and there are plans to write it off.
The Okahandja factory operates as NamGem Diamond Manufacturing Company, and was owned in equal portions by the state and Templesman until Namdia bought him out last year.
It is a loss-making company and Namdia was allegedly bullied into buying up the stake from Templesman by the Ministry of Mines and Energy. Last year, mines minister Tom Alweendo said the state did not want the company to shut down entirely, so it approached Namdia to buy the other half.
“While it is common for companies to only buy profitable businesses, new management could improve operations, and a return to profits could be seen,” he said at the time.
Namdia bought into NamGem despite lacking the technical capacity to run the factory, and has passed on the management of the company to an Indian entity as a technical partner.
NamGem, of which the board of directors is chaired by Kennedy Hamutenya, has been making losses in the past five years, and has been bailed out by shareholders all along.
In a press release issued last Friday, Namdia said it was considering impairing N$30,9 million of the investment made to acquire half of NamGem. This provision to impair the investment was run through the profit and loss, driving down Namdia’s profit to a mere N$13 million.
“An extraordinary impairment provision of N$30,9 million was raised on the acquisition of NamGem,” the press release read. Before the impairment provision the profit after tax was N$44,2 million, 86% down from the 2020 profit at N$95,2 million.
Namdia’s head of finance, Sven von Blottnitz, yesterday said the N$30,9 provision arises from a prudent assessment of the acquisition price paid compared to the tangible assets acquired.
According to him, Namdia’s possible earnings from this deal going forward would only be rental income and the possible use of the factory for Namdia in the future.
“NamGem has incurred losses historically, and the future business plan foresees that an Indian company leases the factory assets from NamGem and operates for its own account. That way, the downside potential is eliminated and Namdia, as the owner of NamGem, is guaranteed a rental return,” Von Blottnitz said.
This means despite Namdia paying for the actual value of NamGem’s operations and its intangible assets, there is no way they would be using such, and therefore it would just need to be written off.
Supporting the buyout last year, Hamutenya said the N$30 million is the “fair value” of half of NamGem. He said plans to turn NamGem around were also in place.
There were also plans for Namdia to acquire the other 50% from the state to become the sole shareholder in the company. DIVIDEND Despite Namdia only recording an after-tax profit of N$13,9 million, the company has declared a N$40 million dividend.
This is way more than the profit, and it may be partly paid from reserves. Von Blottnitz yesterday said despite the profit being just N$13 million, the company is not bound by just distributing out of the profits for this year.
He further said the current cash at hand meant there was sufficient working capital for next month’s diamond purchase and cover for six months’ operating costs.
“The increased future working capital requirements arising from the third mining vessel of DebMarine were also considered, as well as the fact that, owing to last year’s uncertainty arising from the outbreak of the Covid-19 pandemic, no dividend was paid then. As a result of considering all these factors, the directors found it appropriate to propose a dividend of N$40 million,” he said. The full financial statements for 2020/21 will be released this Friday. Email: [email protected] Twitter: @Lasarus_A
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