/ 9 February 2005

De Beers has no plan to move London office

For the moment, world number one diamond-miner De Beers has no plans to move the venue of its main sight from London where its marketing arm, the Diamond Trading Company (DTC), has its headquarters, De Beers group MD Gary Ralfe said on Tuesday.

On Monday, South African Minister of Minerals and Energy Phumzile Mlambo-Ngcuka said it is the “desire” of the South African government that the DTC be relocated from London to Southern Africa, which produces about 50% of the world’s diamonds.

De Beers has diamond-mining interests in South Africa, Namibia, Botswana and Tanzania. It also buys a substantial amount of diamonds from Russian diamond group Alrosa. The group is planning to build diamond mines in Canada.

“Ours is a global business and we have a global business model for it. However, we are very sensitive to the needs of our government partners in Southern Africa,” Ralfe said.

In Botswana, which is the world’s number one diamond miner, De Beers is involved in Debswana, which is a 50:50 joint venture with the Botswana government, and in Namibia, De Beers has a 50% stake in Namdeb, which is a joint venture with the Namibian government.

As in Botswana and Namibia, De Beers is sensitive to the South African government’s needs on issues such as black empowerment in the downstream diamond industry, diamond jewellery manufacture or the beneficiation of diamonds, Ralfe said.

“There has been an enormous evolution over the past 10 years in terms of skills and jobs transfer from DTC London and Southern Africa,” he added.

Outside London, the DTC has offices in Kimberley and Windhoek, and has a close association with the Botswana Diamond Valuation Company.

“To those three Southern African companies there has been a transfer of skills and jobs. Ten years ago, the London DTC office had 1 300 jobs and that has fallen to 900 people as there has been a transfer of jobs to Southern Africa.

“We are going through a process of downsizing [at the London office] and that will see it reduced by another 200 to 250 jobs and that means further job creation in Southern Africa,” Ralfe said.

“We have been talking to government for some time and there is an evolution that is taking place,” he added.

The precursor to the DTC was the London syndicate, which bought diamonds from De Beers about 100 years ago, Ralfe said. In the 1920s, Ernest Oppenheimer set up a new syndicate and this entity was replaced by the DTC in 1932, he stated.

“Because of the colonial ties, South Africa’s diamonds went to London from the beginning of the diamond rush in Kimberley and they have been going there ever since,” Ralfe said.

Diamonds were discovered in Kimberley in 1871 and De Beers was formed in March 1888.

In 2004, the value of De Beers’ South African diamond production of 13,7-million carats was nearly $1-billion. Of that, $550-million was sold back to De Beers’ South African clients, he added.

“So the diamond industry, in terms of beneficiation, seems to be rather far ahead of the pack,” Ralfe said.

Mlambo-Ngcuka said this week that South Africa is keen to compete with the diamond -cutting centres of Israel and Antwerp, but not India.

“Unfortunately the vast bulk of cutting jobs are in India. India has a million people that are cutting and polishing diamonds at very low wages and high productivity, and in the rest of the world put together, there are no more than 50 000,” Ralfe said.

South African Director General of Minerals and Energy Sandile Nogxina has said that the cost of labour in India can’t be compared with South Africa because of the labour laws and the fact that child labour is used.

“Child labour has been largely eradicated, and according to our best-practice principles no Indian sight holder of the DTC or anyone contracted to those sight holders can have child labour … Our best-practice principles won’t tolerate it,” Ralfe said.

“Certainly, India is much for laissez-faire in the matter of industrial relations and the labour laws are not like those in South Africa — nor [is India’s] trade-union activity. India also has a pool of well-educated people. So, well-educated people, high productivity and low wages make them very competitive,” he added.

“As a South African, of course, I would love to see jobs migrate from India to South Africa. It is going to require competition … and if the wages are higher than in India, then South Africa will have to compete in terms of productivity,” Ralfe said.

On the empowerment front, De Beers is looking to select an empowerment partner for its South African operations. It will seek to sell off a 15% stake, which will see the group achieve the five-year target of the mining charter at its South African operations this year. — I-Net Bridge