Namib Desert Diamonds (Pty) Ltd (Namdia) has emphasized that its strategy of both procuring diamonds in US dollars from its suppliers and selling diamonds in US dollars to its customers serves as a natural safeguard against currency risk. The company operates with three bank accounts denominated in US dollars, exclusively for diamond trading purposes. In contrast, Namdia settles all its operational and tax expenses in Namibian dollars. This duality in currency exposure arises because the majority of the company’s income is earned in US dollars, but it faces foreign currency risk when converting funds from its US dollar accounts into Namibian dollars.
The financial year 2022/2023 marked a significant milestone for Namdia, as it achieved its strongest performance to date, with revenue reaching N$3.1 billion, reflecting an impressive 63% increase compared to the previous year’s revenue of N$1.9 billion. The 2022/2023 Annual Report also highlights other risks, such as the potential impact of fluctuations in interest rates on the value of investments and financing activities, thereby giving rise to interest rate risk. The company’s debt portfolio comprises various instruments, including credit cards and short-term financing for commodity acquisition, which carry floating interest rates.
Namdia adeptly manages its liquidity risk by efficiently overseeing its working capital, capital expenditure, and cash flows. In terms of financial risk management, the company faces credit risk, liquidity risk, and market risk, which encompasses currency risk, interest rate risk, and price risk.
During the 2022/23 financial year, Namdia successfully concluded nine sales, resulting in a remarkable 24.9% increase in its purchase entitlement, from 222,978 carats in the previous year to 278,609 carats. This achievement was made possible by a substantial 46% surge in Namibia’s rough diamond production, escalating from 1.467 million carats in 2021 to 2.137 million carats in 2022. This increase was primarily attributed to the inauguration of the diamond recovery vessel, Benguela Gem, enabling Debmarine Namibia to boost production by 52%, from 1.137 million carats in 2021 to 1.725 million carats in 2022. Additionally, the processing of higher-grade ore at Namdeb’s land operations contributed to the rise in rough diamond production.
