Writing the obituary of the South African diamond industry

LIONEL SLIER

Diamond cutting and polishing are time consuming and capital-intensive and cannot easily be mechanised.

Botswana two years ago persuaded De Beers, the leading light in South Africa’s diamond industry, to move its sorting operations and sight holdings there, to the detriment of South Africa.

At a “diamond indaba” in Sandton recently, called by the State Diamond Company and sponsored by the country’s biggest diamond mines, figures were touted of some 4 500 diamond cutters and polishers having dwindled to fewer than 300 – some maintain as little as 200. An accusing finger pointed at government, accusing bureaucracy of intervening in a flourishing industry and also of “no co-ordinated strategy” between government and the local diamond industry.

Ernst Blom, chairman of the Diamond Traders Club pointed out that forcing South African diamond mines to sell 10 per cent of their production to the State Government Company, who would then resell the stones to local cutters, seemed a laudable idea. Also, an export tax of between 15 and five per cent on uncut diamonds was being levied.

“But in real life it could just not reach its targets due to legislative restrictions.”

Diamond cutting and polishing started in South Africa in the mid 1920s shortly after the National Party and the Labour Party coalition won the 1924 elections and formed the Pact Government. They said that as South Africa was a major source of rough diamonds, it was necessary to train local (white) youths to polish them. Kimberley was to be the centre.

Qualified journeymen were recruited in Holland and Belgium. Many Jews were involved in teaching the apprentices in diamond cutting and developing the trade here. A few years later the trade faltered and moved to Johannesburg, where the money was. Diamond factories opened and many of the owners were Jews. The trade flourished and Johannesburg became a world centre of diamond polishing.

The trade went through a rough patch in the 1930s but recovered during the war years. After the founding of the State of Israel in 1948, competition came from that quarter, but there was also co-operation.

Then India, Russia, the US and latterly China developed their own cutting industries. But diamond cutting still managed to hold its own locally, with a few thousand white male polishers. (Cutting and polishing are different aspects of the process.)

In 1994 when the ANC government came into power, the trade was opened up to all races, male and female. The number of workers peaked at 4 500. But as the new century dawned, the writing was on the wall for the traditional trade.

India expanded enormously, polishing at low cost; Israel increased its influence especially in the American market; Belgium held its own, but it was the arrival of the Chinese that changed the landscape.

Dubai opened the biggest diamond centre in the world. De Beers moved to Botswana. The elite sight-holders who are allowed to buy rough diamonds direct from De Beers no longer came to South but had to go to Gaborone in Botswana. Alas, there was no longer a single South African sight-holder.

Local factory owners had to go to private tenders and make offers on what rough stones were on offer. Many complained that they could not compete price-wise with the overseas buyers. South Africa could no longer produce polished diamonds competitively.

High labour costs and bad government legislation with the trade now being run by appointees with practically no knowledge of the business, virtually put local polishers out of business.

Now due to the slowdown of the Chinese economy and a decreased demand for rough diamonds by the world’s bigger manufacturers – especially harmful as the traditional high-volume Christmas sales are faltering – South Africa is bearing the brunt.

The signs were there – from some 4 500 diamond workers 10 years ago with fewer than 300 today.

The largest South African cutting works have announced that they would be closing down in the new year, despite being owned by a Hong Kong company.

The Democratic Alliance’s shadow resources minister, James Lorimer, commented that the destruction of 95 per cent of South Africa’s once buoyant diamond cutting industry, showed that the government could not micromanage business.

The local diamond industry is not a disaster waiting to happen – it has happened!

• Lionel Slier trained as a brilliandeer.