Friday, July 23, 2010

Diamonds - Burden or Boon - Zimbabwe

The issue of 'blood diamonds' has once again made the news: Farai Maguwu, director of Zimbabwe's Mutare-based Centre for Research and Development (CRD), languishes under the long arm of Zimbabwe's law, on alleged charges related to his research on Zimbabwe's Marange mines.
According to a confidential 44-page report produced by investigators mandated by the Kimberley Process, an international scheme designed to prevent the sale of 'blood diamonds,' diamonds at Marange are being mined under the direct surveillance of the military, and alleged violations include forced labour, torture, beatings, and harassment.

Are Zimbabwe's diamonds, 300,000 carats of which were approved for sale by the Zimbabwe High Court in April 2010, even worth the effort, given that massive volumes of gem quality diamonds are stockpiled with controlled release to prevent value from plummeting? In context, 'blood diamonds' officially contribute less than one per cent of the global trade - a largely unnecessary one per cent given the massive volume of stockpiled diamonds.

For De Beers, founded in 1888 by colonialist explorer Cecil Rhodes and born from the carbon-rich soils of South Africa, however, 'price-fixing' the value chain has always been crucial to the survival and growth of the diamond market. By 1941, more than 90 per cent of the world's diamonds were produced in Africa and controlled by De Beers. While diamonds represent a perceived development vehicle for several southern African countries such as Botswana, Namibia, Angola and South Africa, stockpiles held by major players dominating the industry, including Russia's Alrosa as well as other developed diamond producing nations such as Canada and Australia, determine the state of the market and the value.

According to the WDC, pre-recession about US$13 billion in rough diamonds were produced each year, with 65 per cent of diamonds being of African origin and valued at US$8.5 billion. An average 70 per cent of diamonds are utilised for cutting, drilling, grinding and polishing, while diamonds of gem quality - a specialty of Botswana, the world's highest producer by value - are directed toward the jewellery industry, worth in excess of US$72 billion prior to the recession. The world's primary diamond producing countries are Angola, Botswana, South Africa, Namibia, Democratic Republic of Congo (DRC), Russia, Australia and Canada, while Belgium and Israel count amongst the world's leading cutting and polishing centres.

The process through which De Beers apportions rough diamonds is accomplished through 'sightholders' - persons or corporations approved by De Beers as 'Suppliers of Choice,' listed thereafter on the Diamond Trading Company's (DTC) roster, and eligible to participate in 'sights.'

Diamonds are classified in 12,000 different categories based on a variety of criteria, ranging from diamonds suitable for industrial purposes, to those with slight (S) and very slight (VS) inclusions or rents and clouds, and thereafter priced accordingly.

The DTC group hosts ten sights each year in the UK, South Africa, Botswana and Namibia, usually once every five weeks, disposing of De Beer's rough diamonds sourced from African nations as well as Canada. DTC sightholders - the company's sole customers - handle more than 75 per cent of the world's diamonds and are renowned as leading diamantaires (master diamond cutters and manufacturers), assessed against the DTC's Sightholder Criteria, and based on expertise and excellence for fixed contract periods. The present three-year period ends in 2011.

African News Online

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