Maurice Tempelsman, a leading New York diamond merchant, has offered to obtain a secret offshore loan of $80-million for Namibia if, and only if, the government agrees to drop its plan to check the prices De Beers pays for its diamonds against the prices available on the open market.
The offer was made in a letter to President Sam Nujoma.
Namibian diamonds are among the finest in the world and Tempelsman is one of De Beers’s larger customers. He receives regular consignments from the company.
Tempelsman is also a major donor to the United States Democratic Party, and frequently escorted Jacqueline Kennedy Onassis.
The privileges that De Beers has in Namibia are rare. It has exclusive rights to trade all of Namibia’s diamonds and, effectively, to decide the price it will pay the country for them. It also has the power to curtail production by imposing purchasing quotas and to reduce prices.
Namibia asked De Beers what prices it had obtained for its diamonds, but De Beers replied that it could not say because it had mixed them with gems from other countries before selling them. The system has not changed since Namibia’s auditor general reported in 1991: “The Namibian diamond industry is so completely intermingled with the international diamond trading business that auditing in the true sense of the word of some of the books and accounts of the local industry is not possible.”
In August last year Jesaya Nyamu, Namibia’s Minister of Mines, explained, in a letter to Gary Ralfe, managing director of De Beers, why his government had agreed to such deals.
“One of the basic premises on which we have approved two renewals of the Namdeb-De Beers Sales Agreement since independence is that, in return for exclusivity and a substantial fee, De Beers assures both the offtake of Namdeb’s full production and price stability in the market, through good and bad times.”
Nyamu however was blunt. His letter continued: “In several of the past few years this assurance has been in practice missing.”
“We have great difficulty with the price and potential quota cutbacks,” he added.
He suggested that the high quality of Namibian diamonds should result in their getting special treatment. Namibia was entitled to expect “solid prices, in spite of the weakened industry conditions”. And he warned: “We would thus be forced seriously to consider all options should De Beers pursue further cutbacks.”
Eight months later, on April 30 this year, the Ministry for Mines issued notice to De Beers that it was going to invoke Section 59 of the Diamond Act, which empowers it to independently check the fairness of De Beers’s prices by offering a selection of diamonds on the open market.
Within a week Tempelsman was in Windhoek, asking to see Nujoma. There he issued the president with a warning, a warning repeated in a letter he wrote to Nujoma dated May 27.
“Mr President, you may recall that on my last visit I drew an analogy between Section 59 and nuclear weapons. Both are worth more when threatened than when used. All would now gain if that weapon were now to be disarmed for a suitable period, clearing the way for a substantial infusion of financial resources,” he wrote.
The seven-page letter to Nujoma offered to raise a confidential loan of $50-million for the government. It was to come to the government indirectly, in the form of a pre-payment for Namibia’s diamonds. He advised that this method meant “no necessity for public disclosure or debate”. It would, however, as a loan, entail fees and interest payments.
Tempelsman proposed to do this by raising $80-million (R800-million) as “an offshore loan for the buyer of Namibia’s diamonds”, that is to De Beers. De Beers would use this to pre-buy Namibia’s diamonds. From this, $50-million (R500-million) would flow to the government. The unspecified interest payments and fees for the loan would be paid by Namibia’s national diamond company, Namdeb, but not until 2004, near the end of Nujoma’s term of office in early 2005.
Tempelsman said the provider of the funds would be “one or more banks of high international standing”. The only bank mentioned by name was the Export-Import bank of the US.
“My own company, Lazare Kaplan International, successfully completed an [identically sized operation] $80-million transaction with Alrosa, the Russian diamond producer, and EX-IM Bank.”
In his May 27 letter, Tempelsman detailed what the Namibian government had to do to get this loan.
“Mr President, whether we wish it or not, the proposal above cannot bear fruit without the cooperation at several levels of your partner in Namdeb, De Beers, and thus some acknowledgement of their interests. They have every incentive to extend such cooperation, and I firmly believe they will. But both they and the bank lenders will, as part of this process, undoubtedly seek formal assurances that, during the time of the [seven-year] financing facility, there will be no legal conflicts between government and De Beers over marketing, and no disruption of the delivery for sale through De Beers of Namdeb’s entire production. [Mail & Guardian‘s italics] This would also mean an extension of the existing sales agreement through 2008 (three years beyond their currently scheduled renegotiation date.)”
This condition would also require the government not activating a provision in Namibia’s Diamond Act, which provides for Namibian citizens to take a much more active role in mining and marketing their country’s diamonds.
Nyamu confirmed on July 25 that the Namibian government had “some time ago proposed” that the country should begin selling diamonds on the open market. He did not say when, but pointed out that the proposal was “not well received by diamond producers”.
Asked whether Namdeb was among the companies that objected, Nyamu said the semi-state company “maybe wasn’t opposed” but De Beers “had some problems with the idea”.
Tempelsman also said in his letter of May 27 that only if the government abandoned its intended price check on De Beers would the company give a refund to Namibia on the sale to the country of a dud mining vessel worth several millions rands.
Tempelsman did not express any personal interest in offering to facilitate this deal. He left open the question of what fees he would charge. In Russia he is believed to have charged 1,5% of the total value of the loan. His entire concern in this letter seemed to be to protect De Beers’s profits.
He is well positioned to make this deal.
It seems that Tempelsman’s proposal did not meet with a favourable reaction from the minister of mines. On June 10 the minister wrote to Ralfe: “Re Notice to Invoke Section 59 of the Diamond Act of 1999. Since my office has not yet received any response from your side on this issue, I am therefore left with no other alternative but to assume that silence on your part implies consent.”
Last week in Windhoek, both Joseph Kashea, acting secretary to the president, and his spokesperson Daniel Smith denied any knowledge of Tempelsman’s letter and therefore declined to comment.
Contacted again this week, Kashea said: “I don’t know anything about that at all. Therefore I cannot make any comment … At present [Nujoma] is not in the country, so it is difficult for us to confirm.”
Tempelsman’s spokesperson in New York also said he was unavailable to comment. A later attempt elicited the same response from a spokesperson, who acknowledged that the M&G had given Tempelsman a fair opportunity to comment.
The M&G asked De Beers five crucial questions to establish whether Tempelsman had acted on behalf of De Beers or with its knowledge.
De Beers failed to respond directly to the issues raised, saying: “De Beers and the government of Namibia enjoy a long-standing relationship that spans more than a decade. As partners in Namdeb, the government of Namibia and De Beers enjoy a fiduciary relationship and routinely engage in discussions on the basis of mutually satisfactory long-term contractual arrangements on issues of common interests … It is also not our place to provide third-party comment on correspondence between the government of Namibia and other players in the diamond industry.”
Tempelsman has meanwhile sent a representative, James Barnes, to Windhoek. He was to have arrived on Thursday for meetings with the government.
Janine F Roberts is author of Blood Diamonds: The First 100 Years, available from www.sparkle.plus.com. She can be contacted through [email protected]. Additional reporting by Stefaans Brummer and Howard Barrell