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Last Updated: 12/01/2005The End of Diamond Wars?
It's been a rough month for De Beers, the largest diamond manufacturer in the world. Facing stiff criticism and increasing competition, the company sold off 26 percent of its mining operations. And what's this? Synthetic diamonds so real they can fool the experts? Maybe it is time to sell, sell, sell.
Eighty per cent of diamonds mined are used in industry. The other twenty per cent are used for decoration and status, or a hedge against inflation, or a store of value. Over the years, these stones, not really in short supply, have been the cause of much death and destruction. Black diamonds are another matter as they make up about 1:10,000 of all diamonds mined. At the superstitious level is the ‘cursed’ Black Orlov Diamond. The 67.5 carat stone is supposed to have been stolen from a Hindu idol near Pondicherry in India. Two former owners and a diamond dealer that handled it all jumped to their deaths in successful acts of suicide. One source (the London Natural History Museum where the stone is on display) even claims that black diamonds are magnetic…now there’s a concept for a heist movie!
On a somewhat larger scale of death and destruction than three involuntary defenestrations, diamonds are regarded as a key factor in past colonial and imperial wars, and more recently in, say, Sierra Leone and Angola where diamonds have contributed significantly to violent conflict. The rich resource of diamonds is responsible for, if not the start of wars, at least their prolongation.
Solutions to this have involved proposals to break the monopsonist practices in the industry with one company in particular controlling so much of the buying up and stock-piling of African diamonds. Little wealth, it has been argued, has filtered back to the developing economies there apart from enriching a tiny group of governmental or warlord elites. But this month De Beers has started to respond, by announcing the sale of 26% of the mining operations to a black empowerment firm in South Africa. It is the biggest ownership change since the company was founded nearly 120 years ago by the arch imperialist Cecil Rhodes. Ponahalo Investment Holdings (PIH) will acquire 26 percent of De Beers Consolidated Mines. PIH will be 50 percent owned by South-African-based De Beers workers and pensioners.
De Beers has been facing increasing pressure for some time to reform and the South African government has passed legislation, also this month, to give it much greater control over directing the way in which De Beers operates in South Africa, in particular placing the South African government in a better position to levy taxes, especially on diamond exports.
But there has this month been a rush of blood to the head in the diamond world as De Beers now has to face competition in the Angolan capital of Luanda, where a diamond polishing plant has been opened by Israeli entrepreneur and former Uzbekistani, Lev Leviev, who has already opened a plant in Namibia and will open another in Botswana. The new plant will cut and polish diamonds with a market value up to $20 million per month. The Luanda plant will employ around 600 workers. Angola is the fifth biggest diamond producer in the world and mines about $1 billion worth each year. Good money, if properly spent, for one of the poorest countries in the world.
One might have thought that’s enough diamond industry upheaval for one month. Not so. It may well be, if you can believe what you read in Wired magazine, that diamonds are no longer for ever.
Joshua Davis reports in that magazine that there are now at least two methods of mass producing diamonds in such a way that they cannot be distinguished from the three billion year old diamonds to which we have grown accustomed. (If those are the circles you move in). One Amsterdam based diamond expert, Aron Weingarten, on seeing the manufactured gems simply exclaimed: “These stones will bankrupt the industry”. Manufactured stones are in use and have been since the fifties. But this new generation, it is claimed, is quite different. Untraceable and perfect diamonds can now be made at $100 per carat but, more importantly, can be made into large enough wafers to replace silicon chips. Which method will revolutionise the computing industry? Keep an eye out for the two methods: Gemesis or Apollo. No more resource wars? Maybe even coltan is under threat. Is it time for De Beers to get out and sell, sell, before it’s too late?
Perhaps diamonds will become so cheap we can all have a handful. On the other hand, even if diamonds are not forever there’ll always be some resource for the greedy to grab. Better buy gold even though it is at an eighteen year high.
Simon Stander is the editor-in-chief.