Distribution Networks
Namakwa Diamonds has established trading operations in Johannesburg, Kinshasa and Tel Aviv, with extensive distribution networks in Europe, the USA, the Middle East, Far-East and Africa.
The principle of trust underlies the diamond industry and the Company’s distribution channels and relationships have been built and developed on this foundation over a significant number of years. This in turn has enabled Namakwa Diamonds to develop a detailed knowledge of specific private customers and their requirements for differentiated diamond parcels, depending on the colour, clarity, cut and carat of a particular diamond or parcel of diamonds. This detailed knowledge enables management to quickly and effectively evaluate the most profitable distribution channel for a particular diamond.
Alongside private sales, the Company also engages in local and international tender auctions, if its management team believe that as a result of the cyclical nature of the tender auction process, specific value can be extracted from the Group’s inventory of rough and polished diamonds, when measured against current and prevailing market conditions and trends for particular types of diamonds. Such tenders usually take place with parcels of diamonds identified for their range of colour, clarity, cut and carat, with prospective purchasers being invited to bid for whole lots of parcels on a seen or unseen basis. Historically, such auctions have been a useful means for the Company to raise short-term working capital to fund further inventory purchases.
Another channel of distribution open to Namakwa when selling and buying diamond inventory, is to enter into joint marketing or consortium arrangements with third parties, such as diamond wholesalers, polishers, jewellery retailers and brokers to create value scale benefits and deepen relationships, with the aim of increasing Namakwa Diamonds share of the diamond value chain. In particular, through the cutting and polishing business, the Company has forged strong, long-term relationships with third party suppliers and it offers "Agterskot" payment structures to suppliers to ensure a constant supply. Agterskot is a payment that compensates suppliers if polished diamonds are sold for prices in excess of the estimated price at the time that a particular parcel is acquired by Namakwa Diamonds. Other techniques to extract value and enhance relationships include partnerships with jewellery manufacturers and retailers to enhance their own inventory and the Namakwa Diamonds brand, with each party taking a specific share of any profit on sales.
