Under Pressure

By: Nelendhre Moodley

The South African diamond industry hopes that the SADPMR will address issues related to the red tape hampering progress in the local diamond industry, Ernie Blom, president of the World Federation of Diamond Bourses (WFDB), tells SA Mining.

According to the SADPMR, the board tenure came to an end on 31 August, but the Minister of Mineral Resources and Energy Gwede Mantashe extended it by a further three months. The board appointment is undertaken by the Department of Mineral Resources and Energy.

Blom notes that one of the key challenges facing the industry is related to value-added tax (VAT) for both the rough and polished diamond industries. Given the slow repayment turnaround time, diamantaires have to wait lengthy periods before being compensated. According to Blom, there is a huge amount of VAT that is owing to industry at any given time.

“We hope that the new board will be open to opportunities to discussing these challenges which have been cited as among the reasons for the contraction of the manufacturing sector of the diamond industry from 4 500 members to just 300.”

The SADPMR states on its website that it is looking to be a leading catalyst for the transformation of a sustainable diamond beneficiation industry.

Apart from engaging with the SADPMR, Blom also concedes that there is an urgent need for the local industry to engage with the Department of Mineral Resources to thrash out the concerns facing the struggling industry.

Celebration time

2019 has been a challenging year for the diamond industry following subdued appetite for diamond jewellery from leading consumers China and India. Only the US, the largest consumer of diamonds, at 52% of global consumption, continues to have a robust appetite.

In fact, major diamond producers Alrosa and De Beers have recently announced a significant decline in diamond sales for rough diamonds, with Alrosa flagging low availability of credit facilities and trade tensions between the US and China as some of the reasons for lower diamond demand. De Beers has cited an oversupply of polished gems, which has depressed demand for rough stones. “Much of the polishing and trading industry is based in India, where companies have been squeezed by tight bank financing and currency fluctuations,” De Beers said.

However there remains a glimmer of hope with the expectation that yearly festivals, such as Thanksgiving in the US, Diwali, Christmas, New Year and the Chinese New Year and Valentine’s Day, will drive demand for the precious stones. “Between Thanksgiving and the Chinese New Year in February, consumers take up as much as 75% of diamond production,” explains Blom.

Africa, meanwhile, a significant producer of rough diamonds, with production mainly from Botswana, the Democratic Republic of the Congo, Zimbabwe, Angola and South Africa, is not a massive consumer of polished diamonds. “Demand from Africa is largely driven by the tourist market,” says Blom.

Technology

Bain & Company’s report The Global Diamond Industry 2018 cites technology as being at the forefront of the trends influencing the diamond industry.

“Emerging and maturing digital technologies are affecting all parts of the value chain, enabling diamond producers, midstream players and retailers to increase efficiencies within their operations. Marketing efforts that use digital technology can also deliver superior customer experiences,” the report noted.

It added that apart from technology, the growing presence of lab-grown diamonds and the shifting preferences of younger generations of consumers to self-purchase continued to grow, this as millennial and Generation Z’s female spending power increased.

According to Blom, technology is key in helping diamond cutters and polishers determine the best options to cut and polish diamonds and thereby extract maximum value from the process. “In this tough operating climate, technology is ensuring the sustainability of diamond cutters and polishers,” he said.

Apart from improving efficiencies, technology has led to the growth and development of the synthetic diamond industry, with De Beers having launched its Lightbox Jewelry initiative.

“The launch of Lightbox Jewelry set the platform for a dramatic reduction in the price of lab-grown diamond jewellery, which is selling at a discounted rate of between 85% and 90% of the natural diamond,” says Blom. He adds that technology plays an essential role in the development of tools to easily identify lab-grown diamonds from natural diamonds.