Diamond industry: a time for change

Marianne Riou

The diamond industry must change. Everywhere, everybody is saying the same thing, so nobody can doubt that it must be so. Many reasons are given: ever more demanding diamond consumers, the need to remain competitive, a better balance between the forces involved and profits, or ethics. But, is this just a hobby horse for the industry or the trade press? Hasn’t the diamond industry already changed?

The winds of change have been blowing through the world of the diamond industry for some time now. De Beers no longer has a monopoly, compelled and forced, even if they still dominate global rough diamond production in terms of value. And it is them amongst other that is encouraging the industry to ride on the winds of change, whilst at the same time communicating more and more about the diversification of their activities and inaugurating a new kind of regular sales contract: Accredited Buyers.

In 2013, De Beers moved its trade activities to Botswana where the inaugural sight took place in November. The subject gave rise to a wave of articles—or even a tsunami—as a turning point and a building block for the diamond industry. The change seems finally to have taken place.

Botswana and Namibia definitely intend to come out on top of this shuffling of the deck at the world diamond industry table. Since September 2013, Botswana, that holds 15% of De Beers, has sold diamonds at auction via its online auction platform, the Okavango Diamond Company. Namibia on the other hand, which sold its diamonds via Namdeb, a joint venture between the Namibian government and De Beers, and for which the commercial agreement with De Beers stopped at the end of 2013, has come closer to the Dubai Diamond Exchange. Its aim is to reclaim ownership of its own diamond production…

“Why Dubai?” you ask. Because the diamond center of the capital of the United Arab Emirates has been expanding rapidly in recent years. Ideally located between the African coast on one side and India and China on the other, and with high quality infrastructures and significant tax benefits, the Dubai Diamond Exchange is now a diamond exchange to be reckoned with. This means that the top ranking competition, like Antwerp or Ramat Gan, are obliged to pull out all the stops to remain competitive. But its privileged position as an exchange caught up with Dubai this summer, following the discovery of a batch of diamonds from the Central African Republic with forged KP certificates.

If there is one area in which the diamond industry has changed, it is that of ethics (and if there is one section that we did not hesitate over creating when we built this information site it is of course: Ethics!). Today, no diamond is welcomed without a KP or GIA certificate. Under pressure from consumers, ethics and CSR standards now have to be complied with, and all the stakeholders in the industry, from gem producers to retailers must be able to prove not only the quality, but also the origin and the disclosure for the supply chain that they offer. As evidenced by the great number of new machines on the market in 2013-2014 that can detect synthetics: DiamondCheck, DiamondSure™ and DiamondView™, ASDI, etc.

The aim is to avoid the industry being obliged to explain away another batch of non-disclosed synthetic diamonds without being accused of conning consumers.

Finally, we cannot talk about change without mentioning the place now held by ALROSA. As for De Beers, if today it stands out through the diversity of its activities and the development of its strategic positioning, it is best known for its dominant market position and its ability to dictate prices. Its stated aim is to be the number one in 2018, that is to say the biggest gem producer by value—bearing in mind that ALROSA is already the biggest producer by volume.

What can still be improved? The living conditions for artisanal miners, the sharing of profits with diamond producing countries, a better balance of price between rough and polished, renewed contact with banks (ah, cash!) and dialog with consumers, moving further towards full disclosure, putting in place a generic advertising program, etc.

And I’m sure I left something out. But one thing is for sure, for the diamond industry: it is a time for change.