Local beneficiation was the hot topic at the International Diamond Conference – Mines To Market 2005 – held May 24 and 25 in Mumbai, India, where Botswana President Festus Mogae addressed the issue in his keynote speech commenting, “We have no intention, for now, of making the export of rough diamonds illegal or uneconomical by imposing fiscal or other penalties on those who export diamonds in their raw state. Nor, I would add, do we have any expectation of supplanting India as the world’s leading center for diamond cutting.”

Established cutting and polishing centers like India have been growing increasingly concerned with the shortages and erratic supply of rough that have plagued the industry for the past few years. The situation has been attributed to a combination of a huge overcapacity in diamond processing in India and the business-concentrating effects of De Beers Supplier of Choice (SOC) initiative. Compounding this is the fact that there has been a growing chorus of voices from southern Africa diamond-mining nations to develop an indigenous cutting and polishing industry that would maximize the value addition to the mineral wealth of those countries.

Meanwhile, led by De Beers, all the major mining companies have been steadily hiking rough prices, while at the other end, retailers have been mightily resisting any increase in polished diamond prices. The result has been a profit squeeze on the diamond-processing industry.

With all these different forces pulling in various directions, the future of the diamond cutting and polishing industry has become increasingly uncertain. In an attempt to get all the different stakeholders in the diamond-processing chain onto one platform to discuss the many issues involved, India’s Gem & Jewellery Export Promotion Council (GJEPC) organized the two-day Mines To Market conference. Bakul Mehta, GJEPC chairman, commented that the most important aspect of the conference was that the different stakeholders in the global diamond-processing chain would have the chance to hear and appreciate each other’s perspectives.

Turning Resources Into Jobs

Explaining his country’s perspective, Mogae said that by a considerable margin, Botswana – along with Russia – is the market leader in rough diamond exports. This makes Botswana the world’s most “diamond-dependent” economy; the $2 billion in rough that Botswana exported in 2004 represented four-fifths of the country’s total exports.

Because of this, the government of Botswana faces a great deal of domestic criticism for exporting rough diamonds to places like India for processing. “Many of our citizens would rather see us taking advantage of what they see as an opportunity to derive greater direct benefit by adding value in the form of downstream production in our own country,” said Mogae. “Indeed, our sternest critics accuse us of conspiring with the Diamond Trading Company (DTC) to export from Botswana employment opportunities that are sorely needed at home.”

Striking a resonating note on this perspective, South Africa’s then Minister of Minerals and Energy – and recently appointed deputy president – Phumzile Mlambo-Ngcuka, the second keynote speaker, said that her country was “on the wrong side of the value chain.” She told the conference attendees that while the entire diamond-mining industry produces some $8 billion a year, the retail jewelry end of the chain is valued at approximately $56 billion in annual sales. For all its association with the diamond industry, Mlambo-Ngcuka said South Africa had just 30,300 people earning a livelihood from it. The minister added that South Africa was pushing toward greater downstream development in the industry and was also working on branding diamonds by leveraging the famous Kimberley name.

In contrast, India’s Minister for Commerce and Industry Kamal Nath said in his address that cut and polished diamond exports in the 2004 fiscal year accounted for $10.5 billion, a full 75 percent of the gem and jewelry exports for that year. The sector as a whole registered $14.5 billion, over 18 percent of the country’s total exports. Additionally, India’s exports in the 2004 fiscal year grew 25 percent year-over-year to $80 billion. Nath told the conference attendees that he understood the imperatives in the southern Africa nations for local beneficiation from the diamond-mining industry and said that he was open to India’s participation in initiatives, such as infrastructure projects in these countries.

Change is Coming

During the event’s introductory session, Martin Rapaport, CEO of Rapaport Inc. and one of the conference’s moderators, emphasized the message that the industry was going through changes, the likes of which it had never seen before. He used the analogy of several independent storm centers – each with different parameters – merging together to form one gigantic new one. How the industry perceived the changes and reacted to them would determine essentially how it would ride out the combined storm.

Quantifying some of the forces that were impacting the industry, diamond industry consultant Chaim Evan-Zohar of Tacy Ltd. said that by his estimation, the 10 million fewer carats that were produced by Rio Tinto’s Argyle Mine in Australia have impacted between 60,000 to 70,000 jobs in India’s cutting and polishing industry alone.

A leading Indian diamantaire, Ashish Mehta, partner, Kantilal Chhotalal, put a local spin on the topic, introducing his country’s historical background to the delegates and highlighting the transformation of the country as a steady climb out of abject poverty on the back of a vibrant and growing economy. He described how the family network had been the perfect foundation to build the global business network, which had helped India’s diamond industry grow to its world leadership position.

A. K. Purwar, chairman, State Bank of India, India’s largest bank, pushed for more change, however, saying that the diamond industry should now move from being a family business to assuming a more corporate identity in India. Urging the local diamond industry to tackle the long credit period, Purwar said there was a pressing need for more disclosures and added that it was time that India’s diamond industry put in place a self-regulatory mechanism.

Marketing and Sales Strategies

During the conference’s last session, ideas abounded as to what diamond marketing and sales strategies would be the most successful in the industry’s changed landscape. The way forward, according to Nirupa Bhatt, marketing manager of Rio Tinto Diamonds, is to develop new markets in India, China, the Middle East and Russia; to consolidate sales and marketing across the U.S. and Europe as well as to add a greater emphasis on systems and processes.

Graham Smith, DTC regional director, feels that there are four main points the diamond industry needs to keep in focus: change to compete, ideas win, have a design capital – design drives purchases – and talk to the heart while marketing. “We are in a battle. Our battle is against other luxury goods,” he added.

Regarding internet retailing – one of the biggest changes to hit the sales sector – Smith said that it depends on “the target group.” He believes that the new generation of consumers find buying diamonds on the internet an easy task. “Internet retailing has a growth curve. But how much?” Smith asked the audience.

In an attempt to quantify what drives diamond jewelry sales, Mehul Choksi, chairman and CEO of Gitanjali Group, touched on three main ideas: identity and stature – the sense of being socially enhanced – enrichment – the knowledge that one possesses a well-known brand – and reward – the feeling that one deserved the jewelry.