South Africa's Kimberley Diamond Jewellery Incubator (KDJI) initiated a memorandum of understanding (MoU) last year that was signed by the State Diamond Trader, the South African Diamond and Precious Metal Regulator, the Shanghai Diamond Exchange and the China Diamonds Administration.
This resulted in the establishment of a dedicated retail shop in Shanghai called “Diamonds of South Africa”.
T3 Diamonds founder Tshepo Molusi told Rough & Polished’s Mathew Nyaungwa at the inaugural South Africa Diamond Show in Cape Town that the shop opened an opportunity for diamond manufacturers under the incubation to export their products to China.
He said he was elated by the move as most of their products were previously sold locally.
Molusi said the Chinese market has specific product requirements, which KDJI is working to align with the participating companies.
He said the process was still in its initial phase and a delegation recently visited Kimberley for further engagements.
KDJI provides access to state-of-the-art diamond cutting and polishing facilities and assists in sourcing diamonds through partnerships with the State Diamond Trader.
However, Molusi said funding to purchase rough diamonds remains a challenge, forcing the budding diamond manufacturers to seek out investors to provide the necessary capital.
How did you get into the diamond cutting and polishing industry?
It's something that I've always wanted to do since 2013 when I was in Botswana. I was attending a SADC conference there, and there was an exhibition where De Beers had its store. So, because at that time I did not know anything about diamonds, I was curious to know more, [especially] when you see a product and you know that it's a product that comes from where you come from. I couldn't tell the difference between all the diamonds that were displayed. I saw lots of diamonds with different characteristics and different grading certificates, and so I thought, maybe one day I should just learn so that I understand what all this means. So it was just something that was always in the back of my mind that I should pursue and learn more about. But in 2018, eventually, I decided that I should take a course. So, I started with a diamond evaluation course and while I was still studying the Kimberley Diamond Jewellery Incubator offered us a bursary to study with the Gemological Institute of America. Then, I did the diamond grading course with them. After I did that, there was another opportunity that came up to do diamond cutting and polishing. So, I also pursued diamond cutting and polishing. After I did that, I then decided to open up my own company.
When was it when you commenced work as T3 Diamonds?
It was in 2019 when I started the business itself, but I did not have a license yet. So I started in 2019 with the registration, 2020, did the licence, but then COVID-19 came about. So it was a little bit difficult because, you know, everything was at a standstill. But then I thought, okay, it's nothing, it's not a disadvantage for me because I'm only starting up now. Probably it's giving me a chance to get my ducks in a row so that when the market starts opening up, then I'm already in the mainstream.
What was the process like when you decided to apply for a licence? Was it hard?
Fortunately, we have the Kimberly Diamond Jewellery Incubator, which is our principal. They assisted me to get the licence. So the process was fairly smooth. It took a little bit long, maybe three months or so. But it was still because of the COVID-19 issues, so it could have been shorter, yes, so that's when it happened.
Are you still under the incubation?
We are still under the incubation, but we are also in the post-graduation phase of the incubation.
How does it operate? Take me through the process of incubation?
They realised that there is a need for the students that come from the Kimberley Diamond Jewellery Incubation to get more skills and to get absorbed into the mainstream. So now they decided, okay, they'll open up an incubator in Kimberley, so that those who are past the phase of the academy, the schooling, can now go into the incubator. They are mentored so that they can understand how the business side of things works. So that's how it came about.
What sort of assistance do they offer you? Do they just offer you their facilities? How do you source the stones?
We use their facilities. They have state-of-the-art diamond cutting and polishing machinery. The facility is actually well-equipped. So, they also assist with the sourcing of diamonds, because the State Diamond Trader is a stakeholder of the incubator. So we work closely with them, hence they can invite us to their events and give us more exposure to the market and stuff like that.
Where are you getting funding to buy the stones you are polishing?
We partner with investors. We still need people who can assist us with funds to buy the stones. What happens is that if you are going to start with your savings, with your own money, you run out quickly because the return is not as quick as it should be. So you end up getting stuck while you are still trying to offload the products. And then you end up being dry, with no money to buy the rough stones. So it only helps when we get investors into our companies that are willing to put in the funds. And then we know that we work over a certain period to get the [stones] manufactured, and then we sell it to them.
Have you knocked on any doors of investors and what was their response?
Because of what has been happening in the market, it's been a little bit difficult even for the investors to see the return being positive. You know, the return on their investment is positive. Because prices have been affected, diamond prices have gone down drastically. We've been mostly affected by the geopolitical tensions between Russia and Ukraine, which has made things a little bit difficult for us to trade with the international market even because now we have a bigger burden of having to prove how conflict-free is our diamonds and all that. But the whole industry is affected by this. So, the industry is trying to find means and ways of mitigating this challenge in order for the prices and for the regulations to be much more friendly for us.
Where do you sell some of your products? Are you exporting or targeting the local market?
We have not gone into the export market as such. But we've been mostly working within the borders. And we are also looking for opportunities even within the continent, African continent, and trying to take advantage of the intra-Africa trade. But we know that things are just at the initial stage of opening up opportunities for us. So, we are engaging also with China at the moment because China wants to procure products that we are manufacturing from Kimberley.
And the incubator itself has opened up a shop in China, which is called the Diamonds of South Africa. It's a brand that was recently opened up. They are still in the initial phase of making that happen. So a delegation from China travelled to Kimberley. So more engagements will be happening. And so soon we will be exporting to places like China. And we don't know what other markets might open up doors for us. But China is fully picking us up. So we're hoping that we'll be there. We've been through a lot of challenges such as COVID-19. We couldn't export. So now that things are moving, we're getting there.
Do you know in which municipality the shop was set up?
It's in Shanghai. I've personally not been to the shop. But a few of my colleagues, two of them, were [recently] in China. So hopefully this year we will be going to China.
So they'll be taking diamonds from all the guys that are participating in the incubation?
Yes. So all the products that are manufactured from the incubator will now be procured by the Chinese as they want us to be sustainable. What they said is that they will give us money so that whenever we are done with our products, as long as it is inspected and evaluated, then the incubator will pay us the value of the products. So we don't have to wait for the products to be bought in China in order for us to make money. This will make things a little bit easier for us. You procure and then you sell, you get your money, you get to buy again, you procure, then it will make things much more efficient.
How excited are you and your colleagues about this arrangement?
I'm excited because it's something new. It's something I think we need to explore. We just don't know yet how it will work, or what kind of spin-offs it will have. But we anticipate that it will be a very good relationship between us and them. It's just that we're hoping that the market is also friendly for us to do that. Because if prices continue going up, then it will also affect the type of relationship that we're trying to build with the Chinese market. So, we are hopeful.
Are there any specific products that they are asking you to produce as a collective?
Yes, there are specifications that they demand from us. Mostly, like the one-carat diamond stones in the rings. They do give us the specifications. They will also give us a full spectrum of the specifications that the Chinese market needs. And yeah, so there is a specific requirement.
Going forward, where do you see T3 Diamonds in five years?
My brother, I see T3 Diamonds as a resilient company. You know, being through everything that we've been through, all these difficult times, and having survived till today. I think in the next five years we'll be doing very well because mainly I think the thing is to be able to take the punch. And you know, after the storm, the sun always shines. So I see us shining after this whole storm that we've been through. I see us exporting to markets, more markets within Africa and in China and other places.
So us being here also at this inaugural event, this inaugural diamond show organised by the State Diamond Trader, it is also creating new markets, opening up new markets for us. We've met people from Angola, Namibia and Zambia, who are trying to establish relationships with us. They are also trying to find markets within South Africa. Instead of exporting their rough diamonds to Dubai, or far places overseas, they are looking for markets within the region. So we're trying to see, even with Botswana, what we can do, you know, and how we can collaborate with them and see how we can break through.
Mathew Nyaungwa, Editor-In-Chief, recently in Cape Town, South Africa, Rough & Polished
