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School of Business | Department of Economics | Economics | 2015
Thesis number: 14248
An economic value chain analysis of Namibian diamonds
Author: Palander, Daniel
Title: An economic value chain analysis of Namibian diamonds
Year: 2015  Language: eng
Department: Department of Economics
Academic subject: Economics
Index terms: taloustieteet; economic science; arvoketju; value chain; luonnonvarat; natural resources; kaivosteollisuus; mining industry; Afrikka; Africa; Namibia; Namibia
Pages: 140
Full text:
» hse_ethesis_14248.pdf pdf  size:3 MB (2303870)
Key terms: value chain; arvoketju; natural resources; luonnonvarat; development policy; kehityspolitiikka; mining industry; kaivosteollisuus; Namibia; Namibia; Africa; Afrikka
The Offshore Development Company under the Ministry of Trade and Industry in Namibia initiated this study to assess the suitability of value chain analysis as a tool for identifying local beneficiation possibilities in the Namibian mineral sector. Diamonds are an important con-tributor to the Namibian GDP and export earnings and were thus chosen as the study subject. The purpose of the study is twofold; to create knowledge on how value chain analysis can be applied to mineral sector research in Namibia, and to carry out a descriptive analysis of Na-mibian diamond industry value creation.

A literature review of value chain analysis is carried out, as well as a review of global diamond industry studies to set the case of the Namibian diamond industry into perspective.

The Namibian diamond value chain is divided into four stages of processing: (1) rough dia-mond mining, (2) sorting, valuating and trading of rough diamonds, (3) cutting and polishing of rough diamonds, and (4) jewellery manufacturing and retail. Diamond mining produces gem quality diamonds for the global jewellery end market and is found relatively successful in creating national value added. The main incentive for cutting and polishing companies to lo-cate in Namibia is the access to rough diamonds. Namibia is currently not competitive in productivity terms in this middle part of the chain where companies create substantial reve-nues but low value addition due to limited local processing and global market realities. Locally active cutting and polishing companies sell only a small share, approximately 0,4 %, of their output as inputs to Namibian jewellery manufacturers. Despite low volumes of inputs, the end of the chain is able to create the highest per carat value addition and revenue increases in the chain. This is in line with global industry studies indicating that largest margins are created in the beginning and end of the chain. Calculations suggest that increasing the volume of Na-mibian origin diamonds reaching local jewellery manufacturing and retail holds substantial local value addition potential. Policy efforts should focus on quality over cost competence and easing the joint search for this in the middle and end of the chain.

Value chain analysis is found to be a viable tool for mapping the creation and distribution of economic benefits at different stages of a particular mineral sector value chain. Assessing rel-ative importance of chain links in national value creation is also possible. The main challenge of value chain analysis is the acquiring of accurate financial input-output data from all chain participants. The creation and collection of such national data for policy building purposes is important.
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