Charlotte Mathews
16 October 2007
Johannesburg — THE diamond industry should be enthusiastically supporting the creation of new African diamond centres, not out of altruism but because it is right, makes good business sense and will create the conditions for the future sustainability of the business, says De Beers Group MD Gareth Penny.
He said yesterday at the Antwerp World Diamond Conference that De Beers believed a strategy of strengthening communities and countries by drawing direct benefit from their natural resources was the right strategy for Africa today.
Good governance, the rule of law, independent judiciaries, a free press and the rising confidence in civil society were increasingly the norm in Africa. Among diamond-producing countries such as the Democratic Republic of Congo, Sierra Leone and Liberia, there had been remarkable changes.
For African diamond producers, beneficiation was an imperative, Penny said. There were competitive challenges, but long-term government subsidies were not the answer. Everyone had a role to play in making beneficiation in Africa a success.
Governments would have to create an environment conducive to attracting international capital and skills, including competitive and predictable fiscal regimes, an educated workforce, good infrastructure, a supportive civil service and "above all, a safe and secure environment".
De Beers would work closely with governments to ensure diamond supply was appropriate and consistent while manufacturers would have to invest their capital, technology and experience. De Beers urged manufacturers to bring Africans into their businesses to develop skills. Diamond manufacturers would also have to put their well-developed distribution channels to work for the new factories.
For traditional diamond cutting centres such as Antwerp, the centre of gravity would shift, but this was important for the future stability of the industry and it presented new opportunities, Penny said.
Consumers would not buy products if they were concerned about where or how they were mined.
"Demand and the consumer love affair with our product is and must always remain our industry's top priority."
Later, interviewed by Reuters, Penny said the global diamond market had proven robust in the face of a credit crisis. Rough prices had held up. "The market has been pretty robust through the second half of this year, and we certainly haven't seen price declines," he said. "I think the market looks in reasonable shape."
De Beers was receiving positive feedback from retailers in India and China. The US market had also been respectable. The US accounts for about half the retail diamond jewellery market, and there is concern about the health of the economy, particularly ahead of Christmas.
Penny said the credit crunch had not affected the rough diamond market. The jury was still out on the US retail market as the vital fourth quarter had only just begun.
"I don't think we've seen a discernible impact, but we will have to wait and see the results through to Christmas," he said.
Penny said De Beers expected a "reasonable" year, although he cautioned against making year-on-year comparisons. Sales in the first half dropped 8% to $2,99bn due in part to reduced Russian material.
"You are not comparing apples with apples, and that will continue through in the second half of this year," Penny said.
De Beers settled a monopoly case with the European Union (EU) by agreeing to stop trade with Russia's Alrosa, the world's second-largest producer, by 2009, although a European court lifted the curbs in a decision in July.
De Beers planned to cut its trade with Alrosa by $100m to $500m this year and to $400m next year.
Penny said De Beers was in "wait and see" mode while EU regulatory authorities discussed the court ruling. With Reuters
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