Bruce Cleaver had a very focused “to do” list when he took over as De Beers CEO in July 2016. Having previously worked on strategy and business development at the company, as well as at parent Anglo American, he recognized De Beers’ need to evolve, and to protect it from the increasing volatility evident in the global economy and diamond market.
“I wanted to build a more sustainable business; one that was less prone to economic cycles,” Cleaver stresses in an interview with Rapaport News. “I wanted to ensure we’d never get caught in the position we had in 2008 when we hit a very serious downturn and our balance sheet was very stretched.”
He never imagined those goals would be challenged by a global pandemic and a war in Ukraine that has brought sanctions on Russian diamonds — approximately one-third of global rough supply. These aren’t events you predict in your risk analysis, he notes.
In contrast to 2008, when De Beers had to take on more debt to weather the financial crisis, the company emerged from Covid-19 stronger than before, and it may even have benefited from the limitations on Russia-based Alrosa — its biggest competitor. The $491 million in underlying earnings it reported in the first six months of 2022 was its best half-year profit since 2011, and the $3.54 billion in revenue its highest since 2014.
But Cleaver looks beyond the financials as he reflects on his tenure at the helm of the world’s largest diamond company. His six-and-a-half-year stint brought a significant transformation to De Beers’ structure, brand positioning, messaging, and relationships, all of which he believes demonstrate transparency and a willingness to change that were not always evident at the company.
Call to collaborate
His first public statement after being appointed to the position called for greater cooperation and partnerships within the trade. He actively sought to ease the tension that often stood between De Beers and sightholders and at times its government partners, he admits.
“It was important for us to show people we would change, listen more and collaborate more,” he reflects. “I do feel there is much more trust now than before, and a sense of working toward a common goal — that we can agree to disagree in a more friendly way.”
Central to achieving that was the refurbishment of the sightholder application process, which he concedes had previously been complicated and intimidating. The current system further demonstrates De Beers’ willingness to be more open and transparent, Cleaver insists. It’s a complicated task, he adds, considering the company distributes some 33 million carats a year and must set criteria to award goods to certain people and not to others.
The sheer volume of De Beers’ production means the company is unlikely to shift away from the sight system any time soon. However, it did tweak its distribution at the beginning of 2022 to provide more bespoke supply by classifying sightholders according to their business type: manufacturer, dealer, or retailer. The move was seen as an attempt to reduce the flipping of boxes on the secondary market and to bring more efficiency to the supply chain.
Special stones to sell
There has been speculation that the Botswana government — a 15% shareholder in De Beers and a joint venture partner in its mining and selling distribution businesses — is pressuring the miner to sell its specials through the parastatal Okavango Diamond Company, in vertically integrated deals with manufacturers. The two are currently negotiating a new 10-year supply deal and the renewal of De Beers’ mining licenses in the southern African country.
This article first appeared in the October issue of the Rapaport Research Report. Subscribe here.