Southern African countries – where the bulk of the world’s diamonds are produced – have been pushing for accelerated efforts to beneficiate rough stones in a bid to derive maximum benefits from the gems.
The majority of the stones produced in these countries, which include Angola, Botswana, Lesotho, Namibia, South Africa and Zimbabwe, are exported leaving insignificant figures for local beneficiation.
The first KP chairperson Abbey Chikane told Rough & Polished’s African Bureau Editor In Chief, Mathew Nyaungwa that for diamond beneficiation to be a success in southern Africa there was need for constant supply of rough, access to capital, technology and markets as well as energy.
He argued that some governments had done a “good” job by crafting beneficiation policies that made it mandatory for diamond producers to set aside a certain percentage of their total annual produce for local cutters.
However, in countries such as Zimbabwe, there had been a low take-up of these diamonds while others complained of being allocated poor quality goods.
Below is the full text of the interview.
You have been calling for southern Africa to have an aggregate approach towards diamond beneficiation. Can you shed more light on what you are advocating for?
I think southern Africa has got an opportunity as the largest diamond producing region in Africa to aggregate its goods even if it’s a percentage of what it produces and put it in a common market. Individual countries can sell those goods at a cost, obviously and basically have a common centre, a common market and use some of the proceeds of that common centre to train people in Southern Africa to cut and polish their diamonds.
How applicable is this approach given the peculiarities one might find in respective countries in southern Africa?
The thing is that had we thought that because of our different policies, strategies and jurisdictions [then] we were not going to succeed in fighting [for] Kimberley Process? I can tell you now, we wouldn’t have gone anywhere. But what we did is that we basically put together countries that never agreed on anything. Bringing together Russia, the United States and China under the same roof ,especially after the Cold War, it was a hell of a task but there is a common understanding among all of us that we need to promote beneficiation and beneficiation is not feasible without supply of rough. Supply of rough can only be aggregately put together by the region not one particular country. Of course Botswana can do it because it has the largest portion of what is produced in southern Africa and success will be in Botswana, which is good for the Botswana government, its people and their partners. But am saying in the region if you would like other countries such as Zimbabwe, South Africa, [Namibia, Angola] and Lesotho to support beneficiation or realise beneficiation then they need to aggregate their goods, otherwise they will not be in a position to do anything. We have been talking about beneficiation for too long and we seem not to want to deal with the realities of what needs to be done.
In your opinion, what are some of the factors hampering the progress as far as beneficiation is concerned in southern Africa?
Some of the obstacles include security of supply, you cannot establish a fully-fledged beneficiation operation if you don’t have constant supply of raw [diamonds]. You just cannot. Because you will cut one diamond today and won’t be able to keep staff of 20 people if you don’t know whether you will have [rough diamonds] again tomorrow. So that is one, which is security of supply. Secondly, its access to finance. You know the majority of cutters and polishers, especially the emerging ones, do not have access to capital. Thirdly, of course, is the expertise, fourth, technology and fifth, it’s the cost of production especially in terms of the cost of energy.
Talking of supply, do you think that our governments are doing enough to come up with measures that will ensure better rough supplies to local diamond cutters and polishers?
I think the governments have done one thing good, which is to have good policies, maybe the second one is to have good strategies and thirdly, to have good legislation. Fourthly to create awareness about the importance of beneficiation but when it comes to the implementation of beneficiation it is very critical that producers in that particular country like Zimbabwe and the government work together in finding the most economical way of establishing and running beneficiation projects. It cannot be a government thing without the industry and neither can it be an industry thing without government. The two parties need to work together, it’s very critical. Failure to do that, the private sector or diamond miners will establish a little cutting factory and then they will come and complain about taxes and all sorts of other things and vice versa the government may complain that you are not beneficiating, but at the same time when you look at what is it to be beneficiated you will find out that the legislation is not explicit about making available the diamonds that you can cut. I understand the theory that you should cut everything, but from my experience and I have been in the industry for almost 20 years now, I can tell you that you can’t start with small goods. They are not economical, you can’t make profits, and you can’t keep a factory which cuts small goods. You can partner with countries such as India, Thailand and attract them to come and manufacture from here but I think it is important to start with the low hanging fruit, which is basically what you can cut, which unfortunately is a small percentage of what is produced.
Let’s look at South Africa, what has been the state of diamond beneficiation?
South Africa‘s experience is that we have good policies and strategies and we have cutters and polishers but I think the process has been very slow, simply because those people who started as the State Diamond Trader clients fell away among other things because of security of supply. They couldn’t get a consistent supply of diamonds certainly because they didn’t have access to capital. They always had issues about, ‘what do I produce and how many people do I need to support me?’ Some of them that I know ended up buying goods from the state diamond trader and give it to an existing white company, an international company for that matter, which has got all the expertise and everything and export all those goods in one way or the other. So there is a chunk of goods that were made available to small cutters and new players, but they could just not be in a position to succeed. Of course there has been some success, we can show some few companies that have succeeded, but am saying as a percentage of what is being exported there is very little that has been beneficiated.
So given the fact that most of the mines, especially in Zimbabwe produce low quality goods, what are the challenges they are likely to face when it comes to beneficiation coupled with the dearth of skilled people to cut such small diamonds?
I like the fact that there is already a policy on beneficiation and I like the fact that the government will be supporting beneficiation. Among other things it will train those people and impose on producers that 10 percent [of their output] should remain in Zimbabwe. The critical success factor is either to use the people who are new in the industry to cut and polish – and someone said you don’t give your diamonds to people who don’t know how to cut, but [I say] you can partner with people who want to invest in the country and make sure the goods are cut and polished locally. However make sure that you put all those elements together: supply of rough, access to capital, access to technology, access to market and energy. If you can, subsidize energy and other costs. You need innovative ways of supporting beneficiation.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
