Israeli Diamond Portal Reports: South Africa: How the Diamond Industry is Weathering the Storm

Nov. 12, 2009 - PRLog -- . In an exclusive interview, Ernie Blom, Chairman of the Diamond Council of SA, Chairman of the Diamond Dealers Club of SA and WFDB Honorary Life President, talks about the challenges his country is facing.



In July, South Africa’s diamond production plummeted by 50%. Various diamond mining companies have placed some of their mines on care and maintenance. What effect have these developments had on the SA economy in general and the country’s diamond industry in particular?



Ernie Blom points out that as diamonds constitute only 2% of SA’s GDP, the country’s economy was not severely affected by the crisis in the diamond industry. However, he notes that the diamond industry itself was certainly impacted, as were the diamond producers and diamond polishers. He states: “Several diamond mines were put on care and maintenance. We are concerned that this may have long-term implications on supply to the industry.”



The National Union of Mineworkers (NUM) has called for South Africa to establish a state-owned diamond mining company much like Angola’s Endiama. It has also called for the nationalization of SA’s mines. SA’s Miner Resources Minister has adamantly rejected both of these proposals. What is the South African diamond industry’s response to these proposals?



Ernie Blom points out that SA already has a state-owned diamond company called ALEXCOR. “Our industry firmly believes in fair enterprise. Neither nationalization nor a state-owned company would serve this purpose. The diamond industry must be run by professionals from within, not laypeople.”



Mining giant Xstrata proposed a merger with Anglo which was rejected both by Anglo and the South African government. Do you think such a merger could be beneficial for South Africa’s diamond mining industry?



Blom points out that the proposed merger is much broader than the diamond industry and it relates to a variety of other sorts of mines. “It is obvious that SA’s largest diamond producer, De Beers (an Anglo subsidiary), would be affected by such a step, but it is not clear how. It would depend on how things pan out. However, other mining companies would not be affected at all.”



When the State Diamond Trader (SDT) was established it was hailed as a positive, innovative development. Since then it has been unsuccessful and the SA Industrial Development Company (IDC) has called for the entity to change its method of operation. What do you think should be done to remedy the situation?



Blom chooses to be diplomatic and states that the philosophy behind the SDT is sound. “When Diamdel pulled out, a vacuum was created with no one to supply the local diamond polishing industry. The SDT raised hopes and expectations among members of the local diamond industry.”



He adds: “Unfortunately, the model is not conducive to good business. It is currently operating on a run of mine solution, dealing with the whole process from industrial to gemstone quality. The law should be amended so that gem-quality diamonds can be purchased that are economically polishable in SA. We cannot compete with India when it comes to small stones but we can compete with industries that deal in large diamonds like the US, Antwerp and Israel.”



There are first signs of economic recovery in various parts of the world. How is SA’s economy currently faring? What about its diamond industry?



Blom responds: “SA is an exporter so we are obviously affected by the global economic crisis. Our diamond industry was definitely impaired by the crunch. But we are witness to a firming up in both rough and polished diamond prices which is particularly good news for the SA diamond mining sector.”



What do you envision for the future of South Africa’s economy in general and its diamond industry in particular?



SA is a resilient country when it comes to its economy and its diamond industry. I believe that the future bodes well both for the economy in general and the diamond industry in particular. The fact that SA fared fairly well during the global crisis is indicative of just how resilient our economy is.”



Blom concludes on an optimistic note: “We are looking forward to a good Christmas season in the US, Europe and all over the world.”

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