Chris Gordon
This decade has seen a major drop in De Beers’s Central Selling Organisation (CSO) share of the diamond market, and there are questions as to whether the cartel can survive in its current form. The diamond giant now controls an ever-decreasing share of the world’s diamond output.
The Southern African diamond industry, traditionally controlled by De Beers, has always been intensely regulated, in partnership with governments in the region. But changes in economic policy are leading governments to look at measures to increase competition.
The newest country to look at deregulation of the diamond trade is Namibia, producer of the world’s best gem diamonds, and a joint venture partner with De Beers in the NamDeb mines, producing around 10% of the CSO’s total yearly sales, it is said.
Now, the Namibian standing parliamentary committee on natural resources has recommended that the diamond trade be deregulated and decriminalised under the new Diamond Act. For the first time it is proposed that dealers be licensed to trade in rough diamonds and that a cutting and polishing industry be set up in Namibia.
More worryingly for De Beers, the committee has recommended that the new law should apply to Namibia’s 200km exclusive economic zone, bringing the offshore diamond deposits under direct state control.
The new system in Namibia, if passed into law, is likely to benefit Namibia’s new partnership with Almazy Rossii-Sakha (Alrosa), the Russian diamond company.
The Russians currently sell most of their diamond output to the CSO, and have stopped selling diamonds outside the terms of this contract, but the country had shaken De Beers’s tree badly in the early 1990s. Russia also has a long-term ambition to become a major presence in Africa, De Beers’s home territory
The diamond cartel smooths out the peaks and troughs in trading. The question may not be “Should a cartel exist?” but “How is it regulated and monitored and who has a say in it?” These issues are implicit in the recent government moves in South Africa and Namibia, and a reluctance in Angola to join the cartel. Only Botswana, of all diamond producers, has a seat on De Beers’s board and a direct voice in policy.
The wars in Angola and the Democratic Republic of Congo are keeping diamond production there much lower. But Angola is still something of a problem for De Beers, which has yet to gain the degree of control that it needs there.
De Beers’s policy since the Australian Argyle mine – the world’s single biggest producer of diamonds – pulled out of the CSO, has been quality, not quantity. The cartel now controls a much lower percentage of diamonds but at high value.
More regulation by governments and more competition in the diamond world may mean that De Beers’s role changes dramatically. It is a prospect for which the company clearly has a contingency plan. They will then be looking to a future in which, at worst, the CSO’s supplies come entirely from De Beers’s own mines and joint ventures. But it will not be easy for the giant to cease being the “Last Empire” and become just the world’s biggest diamond mining company.