Almod in the thick of things

Reuven Paikin (RP), Almod Diamonds Namibia General Director discusses how the flagship of the country’s diamond cutting and polishing industry has created an edge in the Caribbean over other world giants, despite hurricanes, global economic storms and also opens up on the first ever diamond selling shop in Windhoek.

 

Ten years and you have not closed the door not a single day, despite the turbulent times globally and locally, what has been the secret to your survival?

RP: Of course, the resilience and guidance of the company’s President (Albert Gad) has been one key leadership secret that most in our trade have not been privileged to have, but in addition to that, Almod Diamonds has its own pattern diamond shape unique to its own self and different from the rest of the diamonds in the world.

Only Almod produces this special shape of a diamond, therefore we have not been in competition with world leading countries like India and China who polish for about US$30 per carat.

The diamond from Namibia is cut and polished by Almod and we then supply it to our head office in New York which then distributes it to around 130 jewelry stores mostly in the Caribbean. These shops are our own duty-free shops. The advantage of supplying our own diamond to our own shops has been key.

However, that does not mean everything has been smooth sailing. The year 2008 was the toughest for us, as we were fairly starting, but the strong belief that we were on the right track inspired us to sail through the global economic storm. We also went through a rough patch in 2015, but we made it.

From a staff of 30, we have now built our own training program which started in 2011, where we train our own people, Namibians for that matter, to cut and polish. We now have 200 employees. We realized that taking employees from other companies was costlier in terms of risk than developing our own team from scratch. It has worked.

Of course, we still have a group of foreign experts on hand but it’s the locals that now steer the company’s key areas. That smart integration for adequate skills transfer has given us the edge. Today, we can polish all types of sizes in Namibia without, that is how seasoned we have become.

But how has the diamond manufacturing needs evolved over the years?

RP: The whole manufacturing industry has changed in general, particularly in the diamond industry where competition is intense. The manufacturing marketing is not growing.

We have too many people involved in the manufacturing but the polishing and the market itself are not in sync. The rough diamond prize is still high, and so are the labour costs and strong competition from China, therefore the main challenge becomes the need to sell the final product at a profit, especially for the polished product. Fortunately, not many have the same structure as ours where our own product is sold by our own shops.

Most of the business sell to other retailers, which limits their profit margins, hence many companies close shop after a short while.

How is the outlook for the Crown of Light in 2018? Has it surpassed the US$150m sales target for 2017?

RP: Our season is usually November to April. That is the peak season of cruises in the Caribbean. However, this season we were badly affected by the hurricanes. Our shops suffered major losses in infrastructure damage at the beginning of the season.

A lot of rebuilding had to be undertaken, therefore it is still early to forecast on the target as we are still in the recovery mode. The Crown of Light is the best seller in the Caribbean. Perhaps by end of February, we will be in a position to know how our figures look like.

But what makes it so tick?

RP: It sparkles. The Crown of Light is the diamond with the most sparkle on the market today. Its nightly facets are a marvel. We have invested a lot in its promotion too and it comes with a strong design, thanks to creative jewelry department in New York.

The level of the polish from Namibia is highly regarded once it reaches New York. In fact, all the products from Namibia are on the highest level of excellence when they are graded in the US.

The Crown of Light has so much sparkle and fire, that a Diamond Light Performance scope was developed by an independent gemological tool manufacturer to show that this diamond had superior sparkle and fire to any other diamond.

The scope shows side-by-side comparisons of a Crown of Light diamond and a round brilliant diamond. So, customers can see that the sparkle and fire of a Crown of Light out-performs any other diamond. Hence it’s our best seller in the Caribbean.

Now you have a 200 strong workforce, how come you have not choked at the skills gap in the country that every investor worries of?

RP: It is more about the amount of effort one places in creating skills and transferring them. It is not an easy process. In some instances, we recruit 50 for training but only 15 become polishers.

For us to get to 200, we lost thousands through the process, some would give up on the last minute, some are just not into it, others get greener pastures etcetera. And throughout the whole training, we would have provided transport allowance, food allowance and other costs which are just flushed down the drain when the person calls it a day.

Our efforts take time and with time you get quality staff. For instance, Helemia Eigab, who manages the training center joined the company as a polisher. Today he has risen through the ranks and calls the shots in that department.

But where is downstream beneficiation in your operations?

RP: Beside the fringe benefits of medical aid, pension funds and transport allowances, we actually prefer using the smaller supplier who is just starting.

All our service providers, plumbers, electricians, catering services, transport providers are all Namibian. Technically, we use Namibian engineering companies like PACO for servicing of our equipment.

Take note, most diamond tools are mainly in India, but we have given local engineering companies most of whom have never dealt with diamonds to handle our equipment.

“Ladies then had nice shoes, nice ring, black coat with the glittery neck. But today, it’s the iPhone X that the ladies crave for.”

Where are the frustrations?

RP: Public transport. We have a huge challenge when the public transport does not operate and does so without notice. At times our employees do not show up to work, sometimes they show up very late and in other instances, we actually ask them to grab a taxi for us to pay-forward, all because the public transport system is a malfunction and inconsistent. In the manufacturing sector, if you do not produce, you have no bread on the table. We need our people at work.

The other frustration is the December holiday. The country shuts down for the festive season during our mid-season. But we try to shorten it as possible, just for a week, the major problem becomes that all the other service providers are also on holiday.

Generally, Namibia is the most supportive and welcoming country to investors that we have dealt with. The authorities are professional and that keeps you on your toes with regards to compliance and we often get problems when operating in countries where people take short-cuts.

Here its just compliance to regulation, so the parameters are suitable, from the Ministry of Mines and Energy to the Customs Officials and inspectorates. Our President of Almod Diamond often refers to Namibia as the friendliest and most professional set-up whose only demand is adherence.

Is there sustainability in your model though?

RP: We work hard to produce as much as we can. From the view of the investors, they have a plan beyond 2030 for Namibia and in Namibia. We want to grow beyond the next 15 years. And to do that, it means we should be good enough to be at the level where the headquarters in New York expects us to be, as a big operation. We are aware that we won’t compete with China and India on labour costs, but we can outwit them with our product quality, making it better, nicer and more attractive for the world.

Offshore mining has now surpassed onshore mining. How does that play into your model?

RP: Our agreement with DeBeers has been honoured in earnest since day 1. If production offshore doubles, we expect more supply. DeBeers recently acquired a new vessel to double up their efforts, we also are bracing up to double our works, just in case. Of course, we buy the goods that fit our needs, either unaggregated or aggregated.

You have made a promise to the Namibian President Dr. Hage Geingob to ensure that our people can start buying the diamonds locally. Is there really room for that?

RP: We have the drawings of the shop ready. We have also identified the place for the shop to operate from. We are now finalising the technical details, such as the need to create a different company to do the selling of diamonds here. Currently, we are operating on an Export Processing Zone (EPZ) status, and for us to start selling that needs to change. We are already making the necessary Customs inquiries, remember all our other shops are duty-free.

Therefore we need to complete certain legal aspects before selling to locals and tourists. Everything is on track, we wish to honour our promise to the President. Between 2018 and 2019, we should have a shop in Namibia.

How do you view the DeBeers/Namibian Government Agreement?

RP: It is a good deal. We know our position here. Now that there is a ten-year contract, it gives the industry stability. It also means another 10 year supply to the factory. We are impressed by how Namibia handles her wealth, with the peace and tranquillity prevail.

So where is the risk? What is the worst that could happen to diamonds?

RP: Synthetic diamonds. We hope people will still buy a diamonds. The rise of synthetic diamonds is a huge threat as it might affect our operations. Synthetic diamonds are produced in an artificial process as opposed to our natural diamonds which are created by geological processes.

Given the rarity and value of diamonds, it is not surprising that some would seek ways to replicate their beauty. The rise in synthetic diamonds becomes a worry as it might take over the market share. Promotion and marketing, therefore, need to be increased to give the next generation the same appetite for the same diamond that my mother wanted when she was growing up.

Ladies then had nice shoes, nice ring, black coat with the glittery neck. But today, it’s the iPhone X that the ladies crave for. A diamond has never been like bread, water or food. It has been there for a woman to like. So the polish has to be on a higher level to the women of today that appetite.

About Reuven Paikin (RP)

45 years of experience in the Diamond Industry Managing Operations in Israel, Moscow, Namibia, Belgium. In Diamonds from February 1977 in Israel, started as a polisher, polished all sizes and shapes, Gemologist Diploma, Industrial engineering studies, Diamond marking and dezine. Was managing small operations, in Israel, until 1995.

From 1995 started managing big operations in Russia including rough buying for Belgium companies. From 2005 – 2007 rough buyer in west Africa. From 2007 established and managed the operation for Almod in Namibia and Global rough and production manager for Almod international.

 

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