Description
A research report submitted in partial fulfillment of the requirements for the degree of masters of science accounting and finance of the university of namibia.
ANALYSIS OF NAMDEB’S TURNAROUND STRATEGY TO IMPROVE
ITS FINANCIAL PERFORMANCE IN VIEW OF DECLINING CARATS
PROFILE
A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF
SCIENCE: ACCOUNTING AND FINANCE
OF
THE UNIVERSITY OF NAMIBIA,
BY
LORNA PEYAVALI MBWALE
9642242
OCTOBER 200
Supervisor: P!"#$%%"!& '(%)*!(+ R& S)(!+( C",%-.$!/*%"!: D!& U0(* L& P(1*2(1
ANALYSIS OF
NAMDEB’s TURNAROUND STRATEGY
TO IMPROVE ITS FINANCIAL PERFORMANCE
IN VIEW OF DECLINING CARATS PROFILE
2
3
DECLARATION
I Lorna Peyaval M!"ale# $e%lare &ere!y '&a' '&s s'($y s a 'r(e re)le%'on o) *y o"n resear%&# an$
'&a' '&s "or+# or ,ar' '&ereo) &as no' !een s(!*''e$ )or a $e-ree n any o'&er ns''('on o) &-&er
e$(%a'on. W&erever %on'r!('ons o) o'&ers are nvolve$# every e))or' s *a$e 'o n$%a'e '&s %learly#
"'& $(e re)eren%e 'o '&e l'era'(re# an$ a%+no"le$-e*en' o) %olla!ora've resear%& an$ $s%(ssons.
No ,ar' o) '&s '&ess *ay !e re,ro$(%e$# s'ore$ n any re'reval sys'e*# or 'rans*''e$ n any )or*# or
!y *eans /e.-. ele%'ron%# *e%&an%al# ,&o'o%o,yn-# re%or$n- or o'&er"se0 "'&o(' '&e ,ror
,er*sson o) '&e a('&or# or T&e Unvers'y o) Na*!a n '&a' !e&al).
I Lorna Peyaval M!"ale# -ran' T&e Unvers'y o) Na*!a '&e r-&' 'o re,ro$(%e '&s '&ess n "&ole or
n ,ar'# n any *anner or )or*a'# "&%& T&e Unvers'y o) Na*!a *ay $ee* )'# )or any ,erson or
ns''('on re1(rn- ' )or s'($y an$ resear%&# ,rov$n- '&a' T&e Unvers'y o) Na*!a s&all "ave '&s
r-&' ) '&e "&ole '&ess &as !een or s !en- ,(!ls&e$ n a *anner sa's)a%'ory 'o '&e Unvers'y.
222222222222222222222222222222 3 Da'e 2222222222222222222
Lorna Peyaval M!"ale#
De$%a'on
T&s "or+ s $e$%a'e$ 'o *y &(s!an$ 4erry an$ all o(r $eares' %&l$ren )or s'an$n- n )or *y role as
")e# s'($en' an$ "or+n- *o'&er.
A!s'ra%'
This study reviews the effectiveness of the analysis of Namdeb’s turnaround strategy to improve its
financial performance in view of declining carats profile. The study was triggered by the continuous
uncertainty in land operations, which is affecting Namdeb’s financial profits. The study determines the
extent to which the company’s financial performance is attributed to its turnaround strategy, identify
factors that are crucial to the company and suggest ways to improve the company’s overall financial
performance.
The study uses the qualitative approach, taking into consideration experience from other mining
industries as a frame of reference. The sources of data include grey literature, official documentations,
secondary literature, questionnaires and interviews.
The analysis done and conclusions drawn underlines the need to review the current introduced
turnaround strategy and adopt strategies that might be useful to improve the financial performance and
extend the life of the mine successfully. A great emphasis need to be drawn on attracting and retaining
skilled staff, determine an approach to deal with possible retrenchment, introduce and identify new
technological methods. The role of management in the current situation is going to be crucial.
A%+no"le$-e*en's
y profound gratitude goes to all who supported me morally, financially and intellectually during my
years of study. ! am grateful to the moral support provided by my friends, parents and our children. y
sincere appreciation to the Almighty for giving me and surround me with such wonderful, honest, loyal
and trustworthy people whose names ! cannot finish mentioning.
! would also like to thank various people who responded to my questionnaires and interviews. "owever, !
remain personally responsible for the errors and failures contained in this study.
Ta!le o) Con'en' Pa-e
#eclaration i
#edication ii
Abstract iii
Aknowledgements iv
Table of contents v
$ist of charts, figures and maps ix
Acronomics ix
C&a,'er 56 !ntroduction
%.% &ackground of the problem %
%.' Namdeb’s status, changes and turnaround strategy (
%.( )lobal financial crisis and diamond mining and exports *
%.+ ,tatement of the research problem -
%.* .esearch ob/ectives 0
%.- .esearch questions 0
%.1 !mportance of the study 0
%.0 $imitations of the study
2
%.2 3onclusions %4
C&a,'er 76 $iterature .eview
'.% !ntroduction %%
'.' !ssues specific to mining industry %'
'.( "andling of materials and equipments in mines %+
'.+ !nvestment in research and development %*
'.* 3onsumption of natural capital and sustainable income %-
'.- 5nvironmental impact of mining %1
'.1 ,kills shortage and other challenges in mining industry %0
'.0 6erformance measurement with &alance ,corecard %2
'.2 !mpact of turnaround strategies on financial performance '(
'.%4 3ountry7specific literature review '1
'.%% Africa including Namibia (4
'.%' .eview of cases ('
'.%( 3onclusions from survey of literature (1
C&a,'er 86 3onceptual 8ramework
(.% !ntroduction +4
(.' 3onceptual odel +4
(.( Terminology 9sed +%
(.+ 8inancial Turnaround and ,trategies +2
(.* 3onclusions *4
C&a,'er 96 .esearch ethodology
+.% !ntroduction *%
+.' #esign of research *(
+.( 6opulation *+
+.+ ,ample #esign **
+.* ,ampling ethod **
+.- !nstrument for data collection *-
+.1 :alidation of instruments *0
+.0 8ield survey and data collection *0
+.2 #ata from secondary sources -4
+.%4 #ata Analysis -%
+.%% 3hapter scheme -%
+.%' 3onclusions -'
C&a,'er :6 #ata Analysis and 8indings
*.%. !ntroduction
-(
*.' 8indings from research -(
*.( Turnaround ,trategy -+
*.+ &alance ,corecard -1
*.* !mplementation of performance measures 1%
*.- anagement and $eadership 1(
*.1 Technology and ;perations 11
*.0 , ;ngoing &usiness odel to #rive 8uture *(
8igure ( > 3urrent performance levels 0+
Ls' o) Ta!les
Table % > ,ummary of ;perating .esults 0'
A%rono*%s
A!#, ? Acquired !mmune #eficiency ,yndrome
A! ? American !nstitute of ining
&,3 ? &alanced ,corecard
35; ? 3hief 5xecutive ;fficer
3 ? 3onsultant anager
3pht ? 3arats per hundred tons
#&N ? #e &eers arine Namibia
#.3 ? #emocratic .epublic of 3ongo
#T3 ? #iamond Trading 3ompany
5:A ? 5conomic :alue Added
)#6 ? )ross #omestic 6roduct
)N6 ? )ross National 6roduct
"!: ? "uman !mmunodeficiency :irus
@6!s ? @ey 6erformance !ndicators
,: ? anaging ,hareholder :alue
N#T3 ? Namibia #iamond Trading 3ompany
N83 ? Near 8iled 3ommunication
N6: ? Net 6resent :alue
;T3 ? ;ran/emund Town anagement 3ompany
.&3T ? .ichard &ay 3oal Terminal
. A # ? .esearch and #evelopment
,A35 ? ,outh Africa 3oal 5state
,#3T ? ,outh #unes 3oal Terminal
9@ ? 9nited @ingdom
9,A ? 9nited ,tates of America
:&. ? :alue &ased .emuneration
C exploration,
mining, sorting and marketing, cutting and polishing, /ewellery design and manufacture B#e &eers,
%220C. To maintain a leading position in what has become a highly competitive business and to be ready
to meet increasing demand for diamonds, mining industries are continuously searching for new diamond
deposits. 9sing technology, the mining industry is ever becoming challenging and because of the
depletion of the scarce natural resources, more experienced staff and advanced technology remain an
additional challenge to the geological surveys and explorations. 6erformance decline therefore, is an
ever present danger and integral part of organisational reality BEeyavelu, '441C.
The magnitude of the world’s mineral consumption has increased sharply, and there are no indications
that growth is likely to subside in the near future. 3urrently, new discoveries and technology add to the
reserves of various mineral commodities at a rate that has exceeded depletion. As a result, life
expectancies have remained nearly constant. "owever, it is questionable whether this condition is
sustainable in the future, BAdachi and Nishiyama, %22*C.
Namdeb’s contribution to the Namibian economy through revenues generated and partnerships forged
has meant that it is the country’s largest contributor to gross domestic products B)#6C. #iamonds remain
the important generator of export earnings, accounting for more than +4F of export revenue, 1F of
government revenue and more than %4F of )#6 in %202 B3orbett,%202C. "owever, this trend has been
declining due to depletion of land carat profile over the subsequent years.
Adachi and Nishiyama B%22*C indicated that the potential of recovering resources for the (* minerals in
the earth’s crust was estimated on the basis of the relationship between crustal abundance and the
reserve of currently recoverable minerals. 8rom the economic perspective, the price of diamond is
among the top. New mining technologies and new processing methods have been developed during the
%224s as a response to high exploration demands.
,ome diamond deposits in Namibia are concentrated in the north7eastern and eastern parts. ost are
mined from secondary deposits located along the ;range .iver, and in the southern portion of the coast.
,uch diamonds are exceptionally of high quality, with about 24F being of gem quality. At an estimated
resource potential of over %.*bn carats, Namibia has the richest marine diamond deposits in the world
B5ven7Gohar, '441C.
#iamonds are Namibia’s single biggest export product and the backbone of the economy, acting as a
catalyst for the provision and extension of infrastructure such as roads, hospitals, houses and schools.
Through its commitment to working in tandem with )overnment’s developmental policies, Namdeb’s
social upliftment strategy is aimed at improving the living standard of Namibian people. This has
contributed to the development of impressive corporate social investment activities over the past '*
years.
5.7 Na*$e!’s s'a'(s# %&an-es an$ '(rnaro(n$ s'ra'e-y
Namdeb’s current ore bodies consist of four principal diamond sources. These are the recovery of
diamonds inland, along the shores of the Atlantic ;cean and beneath its wavesH and recoveries from the
deep waters Bwhich will be the main source of future production increasesC being operated by #e &eers
arine Namibia, a contractor to Namdeb in its deep water lease areas. The achievements are of
substantial high standards and the increase of diamonds in the area of the Namibian seabed, and
efficiency improvements are continuing Bbako, %222C.
!n early arch '440, Namibia’s )#6 growth was expected to accelerate to +.1F up from +F in '441, as a
result of high metal commodity prices.
%C To determine the extent to which Namdeb’s financial performance is attributed to its turnaround
strategy.
'C To identify the strategic factors crucial to Namdeb’s financial performance.
(C To explore the alternatives available to Namdeb under the existing situation.
+C To suggest a strategy for improving Namdeb’s financial performance.
5.; Resear%& @(es'ons
Namdeb has developed a turnaround financial and operational strategy to cushion the possible adverse
effects of declining carats on its profitability, sustainability and economic viability. &ased on past
performance and future pro/ections, the study aims to address the following questions>
%C +C. easurement error is caused by poorly worded
questions, length of the instrument, bias, etc. ;ne of the ways to reduce the measurement error
included the use of multi7item measures that can average out individual items, make better distinctions
and have higher reliability B)rover, '44'C.
3onsidering the above aspect a pilot study was undertaken for validation of research instruments and
survey methodology. &efore the final form of questionnaire was administered to the respondents in this
study, a pilot study was conducted to determine whether the items would in fact yield the kind of
information needed to answer the research questions, and if there were any ambiguities or difficulties in
reaching the respondents. The knowledge gained was used to design appropriate approach for survey
and data collection.
!n recent years, the economic, social and environmental dimensions of diamond mining have been the
sub/ect of wide7ranging consultations, critical comments, research and analysis, most notably the future
sustainability of the ore body. "owever, much of the critical commentaries about diamond mining sector
have focused on problems rather than solutions. This limited their practical use in designing a turn7
around strategy or filing gaps in knowledge.
5.C Con%l(sons
The introductory chapter started with the background of research mentioning that like growth decline is
natural in the life of a business enterprise. Namdeb, a premier diamond company of Namibia passed
through a similar phase during this decade due particularly to declining carats profile. The global
financial slowdown also added to their difficulties. The company had a turnaround strategy in place to
meet the situation and went ahead with it. !t used &alanced ,corecard to continuously monitor the
internal and external developments. !n this background the ob/ectives and research questions of the
present research have been set. The main ob/ective of the research is to analyse the situation, find
alternative and suggest possible solutions to the problems faced by the company. .eview of literature
has been undertaken in the next chapter to use the findings of other researches and develop a basis for
the present research.
C
According to .obinson B'44%C, @umba 3oal aimed to triple its cash from operations within the timeframe
of four years. !n order to create value to its shareholders, the company identified what needs to be done
to extract maximum value out of the operations and actively pursuing strategic alliances with others in
the coal industry.
The memorandum of understanding signed between ,outh #unes 3oal Terminal B,#3TC and the .ichards
&ay 3oal Terminal B.&3TC represents a ma/or breakthrough for @umba 3oal. The company produces the
widest range of different coals of all ,outh African coal producers, ranging from blend coking coal to low
grade steam coal with high ash and low calorific value, coal for domestic power stations. &eing the
largest producer of metallurgical coal in ,outh Africa with supplies of about *4F of the total production
of metallurgical coal, the company had a chance to improve its financial performance within the
stipulated period B.obinson, '44%C. !scor’s motivation for acquiring coal assets was to supply its own
steel operations, while other markets were developed as a consequence of the need to sell large
quantities of non7metallurgical coal produced as a co7product together with the metallurgical coal.
Two factors D resources and demand D determined the percentage of @umba’s coal production, which is
sold for metallurgical application. The production of metallurgical coal boosted @umba’s earning as it
usually commands a premium over steam coal, while coking coal commands the largest premium,
B.obinson, '44%C.PPuk.biL.yahoo.comP'(%''440P('(. accessed %2P4%P'442.
&lechner, T. and Nail, $. B'444C. ,ntegration problems and turnaround strategies in a cross border merger(
A clinical examination of the %harmacia4+p5ohn merger. !nternational .eview of 8inancial Analysis,
l.2
No.', p'%27'(+.
&lignaut, E.N., "assan, .. B'44'C. A natural "esource Accounting Analysis of the 1ontribution of )ineral
resources to Sustainable .evelopment in South Africa. ,outh African E. 5conomic anagement ,cience
,upplement.,er.(.
&owman, T. B'440C. Solving industry6s tough challenges 7 together. 5A6. )lobal 5xploration A 6roduction
News. Technology 9pdate.Analysis.l.0%.!ssue %'. #ec '440.
&ristow,E.B'441C. .iamonds in 8imberley* ining irror.l, %2.No.%'. Eune '441.
&ruton, ).#., Ahlstrom, #., and ,ustainability perspectives for resources
and business. 9,A p+%7-'.
5ven7Gohar, 3. B'441C.9rom )ine to )istress( 1orporate Strategies and >overnment %olicies in the
,nternational .iamond ,ndustry* )utenberg 6ress $td.
8eng, &.B'442C @ey #rivers of 6rofitability and 3ompetitiveness in supply chain.
http>PPgsmotion.wordpress. Accessed 4(P%'P'4%4
)ary #. ,hank. B'44-C. -uantitative "esearch* A %ersonal Skills Approach# ,econd 5dition, New Eersey,
6earson 5ducation !nc.
)asiuniene, :.5. B'44%C. State )ineral "esources %olicy )eological ,urvey of $ithuania, ,wets A Gietlinger
6ublishers $isse, !,&N 24 '-*% 0+- (, $ithuania.
)rover, :. B'44'C.A tutorial on survey research( 9rom constructs to theory. Accessed on '%
st
Eune,
'440.http>PPdmsweb.badm.sc.eduPgroverPsurveyP!,7,9:y.htmlUwhat.
)upta, #. and ,athye, . B'440C.9inancial 'urnaround of the ,ndian "ailways* A case study. 8aculty of
&usiness A )overnment, 9niversity of 3anberra, 3anberra, Australia.
"eany,#.8. B%202C.:usiness in %rofit 'rouble, Eournal of &usiness ,trategy.
"ambrick, #.3. and #’Aveni, ..A. B%200C.3arge 1orporate 9ailures as .ownward Spirals* Administrative
,cience =uarterly,l.((. pp %7'(.
"ammond, E.,., @eeney, ..$., and .aiffa, ".B%220C. 'he hidden traps in decision making* "arvard &usiness
.eview,l.1-, No.1. pp +17*0.
"annan, .T. and 8reeman, E.". B%211C. 'he population ecology of organi0ations* American Eournal of
,ociology,l. 0'.
"arris, ,.). and ,utton, ..!. B%20-C. 9unctions of parting ceremonies in dying organi0ations. Academy of
anagement Eournal,l. '2, No.%, pp *7(4.
"artwick, E. B%224C. !atural "esources# !ational Accounting and 2conomic .epreciation. E. 6ublic 5con,
+(, 5nvironmental Accounting for ,ustainable #evelopment, A 9N,TAT7PPwww.marketinganalyticsgroup.comP97turn7tools?performance7turnaround7tactics.
Ooungquist, eo.estinies* 'he ,nevitable 1ontrol of 2arth "esources Over !ations and
,ndividuals* 6ortlandH National &ook 3ompany.
A research report submitted in partial fulfillment of the requirements for the degree of masters of science accounting and finance of the university of namibia.
ANALYSIS OF NAMDEB’S TURNAROUND STRATEGY TO IMPROVE
ITS FINANCIAL PERFORMANCE IN VIEW OF DECLINING CARATS
PROFILE
A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF
SCIENCE: ACCOUNTING AND FINANCE
OF
THE UNIVERSITY OF NAMIBIA,
BY
LORNA PEYAVALI MBWALE
9642242
OCTOBER 200
Supervisor: P!"#$%%"!& '(%)*!(+ R& S)(!+( C",%-.$!/*%"!: D!& U0(* L& P(1*2(1
ANALYSIS OF
NAMDEB’s TURNAROUND STRATEGY
TO IMPROVE ITS FINANCIAL PERFORMANCE
IN VIEW OF DECLINING CARATS PROFILE
2
3
DECLARATION
I Lorna Peyaval M!"ale# $e%lare &ere!y '&a' '&s s'($y s a 'r(e re)le%'on o) *y o"n resear%&# an$
'&a' '&s "or+# or ,ar' '&ereo) &as no' !een s(!*''e$ )or a $e-ree n any o'&er ns''('on o) &-&er
e$(%a'on. W&erever %on'r!('ons o) o'&ers are nvolve$# every e))or' s *a$e 'o n$%a'e '&s %learly#
"'& $(e re)eren%e 'o '&e l'era'(re# an$ a%+no"le$-e*en' o) %olla!ora've resear%& an$ $s%(ssons.
No ,ar' o) '&s '&ess *ay !e re,ro$(%e$# s'ore$ n any re'reval sys'e*# or 'rans*''e$ n any )or*# or
!y *eans /e.-. ele%'ron%# *e%&an%al# ,&o'o%o,yn-# re%or$n- or o'&er"se0 "'&o(' '&e ,ror
,er*sson o) '&e a('&or# or T&e Unvers'y o) Na*!a n '&a' !e&al).
I Lorna Peyaval M!"ale# -ran' T&e Unvers'y o) Na*!a '&e r-&' 'o re,ro$(%e '&s '&ess n "&ole or
n ,ar'# n any *anner or )or*a'# "&%& T&e Unvers'y o) Na*!a *ay $ee* )'# )or any ,erson or
ns''('on re1(rn- ' )or s'($y an$ resear%&# ,rov$n- '&a' T&e Unvers'y o) Na*!a s&all "ave '&s
r-&' ) '&e "&ole '&ess &as !een or s !en- ,(!ls&e$ n a *anner sa's)a%'ory 'o '&e Unvers'y.
222222222222222222222222222222 3 Da'e 2222222222222222222
Lorna Peyaval M!"ale#
De$%a'on
T&s "or+ s $e$%a'e$ 'o *y &(s!an$ 4erry an$ all o(r $eares' %&l$ren )or s'an$n- n )or *y role as
")e# s'($en' an$ "or+n- *o'&er.
A!s'ra%'
This study reviews the effectiveness of the analysis of Namdeb’s turnaround strategy to improve its
financial performance in view of declining carats profile. The study was triggered by the continuous
uncertainty in land operations, which is affecting Namdeb’s financial profits. The study determines the
extent to which the company’s financial performance is attributed to its turnaround strategy, identify
factors that are crucial to the company and suggest ways to improve the company’s overall financial
performance.
The study uses the qualitative approach, taking into consideration experience from other mining
industries as a frame of reference. The sources of data include grey literature, official documentations,
secondary literature, questionnaires and interviews.
The analysis done and conclusions drawn underlines the need to review the current introduced
turnaround strategy and adopt strategies that might be useful to improve the financial performance and
extend the life of the mine successfully. A great emphasis need to be drawn on attracting and retaining
skilled staff, determine an approach to deal with possible retrenchment, introduce and identify new
technological methods. The role of management in the current situation is going to be crucial.
A%+no"le$-e*en's
y profound gratitude goes to all who supported me morally, financially and intellectually during my
years of study. ! am grateful to the moral support provided by my friends, parents and our children. y
sincere appreciation to the Almighty for giving me and surround me with such wonderful, honest, loyal
and trustworthy people whose names ! cannot finish mentioning.
! would also like to thank various people who responded to my questionnaires and interviews. "owever, !
remain personally responsible for the errors and failures contained in this study.
Ta!le o) Con'en' Pa-e
#eclaration i
#edication ii
Abstract iii
Aknowledgements iv
Table of contents v
$ist of charts, figures and maps ix
Acronomics ix
C&a,'er 56 !ntroduction
%.% &ackground of the problem %
%.' Namdeb’s status, changes and turnaround strategy (
%.( )lobal financial crisis and diamond mining and exports *
%.+ ,tatement of the research problem -
%.* .esearch ob/ectives 0
%.- .esearch questions 0
%.1 !mportance of the study 0
%.0 $imitations of the study
2
%.2 3onclusions %4
C&a,'er 76 $iterature .eview
'.% !ntroduction %%
'.' !ssues specific to mining industry %'
'.( "andling of materials and equipments in mines %+
'.+ !nvestment in research and development %*
'.* 3onsumption of natural capital and sustainable income %-
'.- 5nvironmental impact of mining %1
'.1 ,kills shortage and other challenges in mining industry %0
'.0 6erformance measurement with &alance ,corecard %2
'.2 !mpact of turnaround strategies on financial performance '(
'.%4 3ountry7specific literature review '1
'.%% Africa including Namibia (4
'.%' .eview of cases ('
'.%( 3onclusions from survey of literature (1
C&a,'er 86 3onceptual 8ramework
(.% !ntroduction +4
(.' 3onceptual odel +4
(.( Terminology 9sed +%
(.+ 8inancial Turnaround and ,trategies +2
(.* 3onclusions *4
C&a,'er 96 .esearch ethodology
+.% !ntroduction *%
+.' #esign of research *(
+.( 6opulation *+
+.+ ,ample #esign **
+.* ,ampling ethod **
+.- !nstrument for data collection *-
+.1 :alidation of instruments *0
+.0 8ield survey and data collection *0
+.2 #ata from secondary sources -4
+.%4 #ata Analysis -%
+.%% 3hapter scheme -%
+.%' 3onclusions -'
C&a,'er :6 #ata Analysis and 8indings
*.%. !ntroduction
-(
*.' 8indings from research -(
*.( Turnaround ,trategy -+
*.+ &alance ,corecard -1
*.* !mplementation of performance measures 1%
*.- anagement and $eadership 1(
*.1 Technology and ;perations 11
*.0 , ;ngoing &usiness odel to #rive 8uture *(
8igure ( > 3urrent performance levels 0+
Ls' o) Ta!les
Table % > ,ummary of ;perating .esults 0'
A%rono*%s
A!#, ? Acquired !mmune #eficiency ,yndrome
A! ? American !nstitute of ining
&,3 ? &alanced ,corecard
35; ? 3hief 5xecutive ;fficer
3 ? 3onsultant anager
3pht ? 3arats per hundred tons
#&N ? #e &eers arine Namibia
#.3 ? #emocratic .epublic of 3ongo
#T3 ? #iamond Trading 3ompany
5:A ? 5conomic :alue Added
)#6 ? )ross #omestic 6roduct
)N6 ? )ross National 6roduct
"!: ? "uman !mmunodeficiency :irus
@6!s ? @ey 6erformance !ndicators
,: ? anaging ,hareholder :alue
N#T3 ? Namibia #iamond Trading 3ompany
N83 ? Near 8iled 3ommunication
N6: ? Net 6resent :alue
;T3 ? ;ran/emund Town anagement 3ompany
.&3T ? .ichard &ay 3oal Terminal
. A # ? .esearch and #evelopment
,A35 ? ,outh Africa 3oal 5state
,#3T ? ,outh #unes 3oal Terminal
9@ ? 9nited @ingdom
9,A ? 9nited ,tates of America
:&. ? :alue &ased .emuneration
C exploration,
mining, sorting and marketing, cutting and polishing, /ewellery design and manufacture B#e &eers,
%220C. To maintain a leading position in what has become a highly competitive business and to be ready
to meet increasing demand for diamonds, mining industries are continuously searching for new diamond
deposits. 9sing technology, the mining industry is ever becoming challenging and because of the
depletion of the scarce natural resources, more experienced staff and advanced technology remain an
additional challenge to the geological surveys and explorations. 6erformance decline therefore, is an
ever present danger and integral part of organisational reality BEeyavelu, '441C.
The magnitude of the world’s mineral consumption has increased sharply, and there are no indications
that growth is likely to subside in the near future. 3urrently, new discoveries and technology add to the
reserves of various mineral commodities at a rate that has exceeded depletion. As a result, life
expectancies have remained nearly constant. "owever, it is questionable whether this condition is
sustainable in the future, BAdachi and Nishiyama, %22*C.
Namdeb’s contribution to the Namibian economy through revenues generated and partnerships forged
has meant that it is the country’s largest contributor to gross domestic products B)#6C. #iamonds remain
the important generator of export earnings, accounting for more than +4F of export revenue, 1F of
government revenue and more than %4F of )#6 in %202 B3orbett,%202C. "owever, this trend has been
declining due to depletion of land carat profile over the subsequent years.
Adachi and Nishiyama B%22*C indicated that the potential of recovering resources for the (* minerals in
the earth’s crust was estimated on the basis of the relationship between crustal abundance and the
reserve of currently recoverable minerals. 8rom the economic perspective, the price of diamond is
among the top. New mining technologies and new processing methods have been developed during the
%224s as a response to high exploration demands.
,ome diamond deposits in Namibia are concentrated in the north7eastern and eastern parts. ost are
mined from secondary deposits located along the ;range .iver, and in the southern portion of the coast.
,uch diamonds are exceptionally of high quality, with about 24F being of gem quality. At an estimated
resource potential of over %.*bn carats, Namibia has the richest marine diamond deposits in the world
B5ven7Gohar, '441C.
#iamonds are Namibia’s single biggest export product and the backbone of the economy, acting as a
catalyst for the provision and extension of infrastructure such as roads, hospitals, houses and schools.
Through its commitment to working in tandem with )overnment’s developmental policies, Namdeb’s
social upliftment strategy is aimed at improving the living standard of Namibian people. This has
contributed to the development of impressive corporate social investment activities over the past '*
years.
5.7 Na*$e!’s s'a'(s# %&an-es an$ '(rnaro(n$ s'ra'e-y
Namdeb’s current ore bodies consist of four principal diamond sources. These are the recovery of
diamonds inland, along the shores of the Atlantic ;cean and beneath its wavesH and recoveries from the
deep waters Bwhich will be the main source of future production increasesC being operated by #e &eers
arine Namibia, a contractor to Namdeb in its deep water lease areas. The achievements are of
substantial high standards and the increase of diamonds in the area of the Namibian seabed, and
efficiency improvements are continuing Bbako, %222C.
!n early arch '440, Namibia’s )#6 growth was expected to accelerate to +.1F up from +F in '441, as a
result of high metal commodity prices.
%C To determine the extent to which Namdeb’s financial performance is attributed to its turnaround
strategy.
'C To identify the strategic factors crucial to Namdeb’s financial performance.
(C To explore the alternatives available to Namdeb under the existing situation.
+C To suggest a strategy for improving Namdeb’s financial performance.
5.; Resear%& @(es'ons
Namdeb has developed a turnaround financial and operational strategy to cushion the possible adverse
effects of declining carats on its profitability, sustainability and economic viability. &ased on past
performance and future pro/ections, the study aims to address the following questions>
%C +C. easurement error is caused by poorly worded
questions, length of the instrument, bias, etc. ;ne of the ways to reduce the measurement error
included the use of multi7item measures that can average out individual items, make better distinctions
and have higher reliability B)rover, '44'C.
3onsidering the above aspect a pilot study was undertaken for validation of research instruments and
survey methodology. &efore the final form of questionnaire was administered to the respondents in this
study, a pilot study was conducted to determine whether the items would in fact yield the kind of
information needed to answer the research questions, and if there were any ambiguities or difficulties in
reaching the respondents. The knowledge gained was used to design appropriate approach for survey
and data collection.
!n recent years, the economic, social and environmental dimensions of diamond mining have been the
sub/ect of wide7ranging consultations, critical comments, research and analysis, most notably the future
sustainability of the ore body. "owever, much of the critical commentaries about diamond mining sector
have focused on problems rather than solutions. This limited their practical use in designing a turn7
around strategy or filing gaps in knowledge.
5.C Con%l(sons
The introductory chapter started with the background of research mentioning that like growth decline is
natural in the life of a business enterprise. Namdeb, a premier diamond company of Namibia passed
through a similar phase during this decade due particularly to declining carats profile. The global
financial slowdown also added to their difficulties. The company had a turnaround strategy in place to
meet the situation and went ahead with it. !t used &alanced ,corecard to continuously monitor the
internal and external developments. !n this background the ob/ectives and research questions of the
present research have been set. The main ob/ective of the research is to analyse the situation, find
alternative and suggest possible solutions to the problems faced by the company. .eview of literature
has been undertaken in the next chapter to use the findings of other researches and develop a basis for
the present research.
C
According to .obinson B'44%C, @umba 3oal aimed to triple its cash from operations within the timeframe
of four years. !n order to create value to its shareholders, the company identified what needs to be done
to extract maximum value out of the operations and actively pursuing strategic alliances with others in
the coal industry.
The memorandum of understanding signed between ,outh #unes 3oal Terminal B,#3TC and the .ichards
&ay 3oal Terminal B.&3TC represents a ma/or breakthrough for @umba 3oal. The company produces the
widest range of different coals of all ,outh African coal producers, ranging from blend coking coal to low
grade steam coal with high ash and low calorific value, coal for domestic power stations. &eing the
largest producer of metallurgical coal in ,outh Africa with supplies of about *4F of the total production
of metallurgical coal, the company had a chance to improve its financial performance within the
stipulated period B.obinson, '44%C. !scor’s motivation for acquiring coal assets was to supply its own
steel operations, while other markets were developed as a consequence of the need to sell large
quantities of non7metallurgical coal produced as a co7product together with the metallurgical coal.
Two factors D resources and demand D determined the percentage of @umba’s coal production, which is
sold for metallurgical application. The production of metallurgical coal boosted @umba’s earning as it
usually commands a premium over steam coal, while coking coal commands the largest premium,
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