Leveraging South Africa’s Diamonds

By all accounts, South Africa should have a vibrant and growing diamond industry. The country has numerous mines, albeit old ones, and a trade that dates back more than a century. Not to mention a marketing pull perhaps surpassed only by De Beers — diamonds are still largely associated with South Africa by the general public. Even locals are surprised to learn that the country is only the fourth largest producer by value and sixth or seventh by volume.

However, the mood in Johannesburg’s Jewel City hardly exudes optimism. Rather, dealers and manufacturers seem at a loss for words or strategy regarding the industry.

The demise of South Africa’s diamond trade is not a matter of production but a question of ensuring that sufficient supply is kept in the country to support, or rather grow, the local industry. Most agree that the legislative changes of 2005 governing the industry have not effectively facilitated growth, or job creation, in the local beneficiation sector.

Indeed, from the trade’s point of view, little progress has been made since Rapaport News last reviewed the industry about a year ago (see editorial “Diamonds & Jobs in South Africa” published on April 28, 2011). If anything, its prospects appear bleaker and the beneficiation sector has shrunk.

Industry leaders estimate that the number of cutters employed in South Africa has fallen to about 900, down from last year’s count of about 1,200. Ernie Blom, president of the Diamond Dealers Club, which represents the local industry at the World Federation of Diamond Bourses (WFDB), reasoned that the workforce has dwindled due to a combination of insufficient training, an aging skilled labor force, and competition from other centers in the region, particularly Botswana.

These are all valid. However, Blom and others stress that fewer goods are being supplied to sustain the local factories. This scenario became most evident when De Beers Diamond Trading Company (DTC) announced in December 2011 that it is cutting the number of its South African sightholders from 14 to 10, effective from next month’s April sight. In addition, De Beers is expected to supply fewer goods to those successful sightholders as the company continues to shift its focus toward Botswana (see Editorial “Moving DTC” published on March 16, 2012).

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