Izhakoff: Zimbabwe Offers Substantial Rough Production & Opportunities

Press Release:  The following transcript was of the speech delivered by honorary World Diamond Council president Eli Izhakoff at the opening session of the November 6 and 7 second Zimbabwe Diamond Conference.

It is a pleasure to be back among friends. In so many ways, I feel that I have a personal stake in the future of the diamond industry in Zimbabwe – most probably because it was during my term as president of the World Diamond Council that the magnitude of this country’s potential as a diamond producer was fully understood, as were the possibilities that the diamond resource offered Zimbabwe and its people.

As many of you know, of course, it was at the World Diamond Council’s annual meeting in St. Petersburg in July 2010 that the agreement was reached that enabled the renewal of rough diamond exports from the Marange diamond fields. It was a testament to the principle that, when such important issues are at stake, one must continue talking until common ground can be found.

Those of us who were involved in the talks at the time understood what was at stake, and that failure should not be considered an option. Opinions and positions between the various participants were often far apart, but the glue that held us together was that, ultimately, we all wanted to do the right thing. And the right thing was to allow Zimbabwe to develop its diamond resource for the benefit of the country and its citizens.   

The results of that momentous meeting, I believe, speak for themselves. Zimbabwe’s diamond output rose to a peak of about 12 million carats in 2012.  Zimbabwe's share of African production stood at 15.2 percent by volume in 2013, and accounted for 8 percent of global output, making the country the world’s sixth largest producer.

Following a decade of contraction, Zimbabwe's economy recorded real growth of 10 percent per year, reaching its height in 2012, which is when diamond production was also at it greatest. The possibilities that the diamond sector offer as generator of economic opportunity are unquestionable.

But, as we know, alluvial diamond deposits come with technical challenges and those were evidently responsible for the reduction in Zimbabwe’s output last year. They emphasize the importance of reinvesting in the diamond industry – in technology and exploration, as well as the quest to discover kimberlite sources. It is worth noting that in neighboring Botswana, where most diamonds are mined in the source rock, the average income is $156 per carat, whereas in Zimbabwe, where the bulk of production is alluvial, it is $52 per carat.

The massive development of Zimbabwe’s natural diamond resources, which would ensure that they will continue to generate growth and development over the long term, requires international cooperation and investment.  Such is the nature of our industry today and the business world in general.

But there should be no shortage of interested parties. Zimbabwe offers the prospect of substantial and continuing rough diamond production in a market, where over the next two decades demand is forecast to out pace supply.

Bain & Co. has estimated that demand for polished diamonds will expand by 6.4 percent in terms of value annually over the next decade, while rough diamond supply from known sources will only grow at a compound annual rate of 2 percent.  This makes for an irresistible business prospect, which is good news for Zimbabwe.

It is imperative, therefore, that the dialog that was nurtured with the Kimberley Process continue, and the agreements that were reached are strictly abided by. Zimbabwe’s future as an important producer will be enhanced if it is seen to be an active participant in the campaign to ensure that diamonds are not a source of conflict, but rather a source of growth, development and prosperity.

In the modern business environment, economic independence is not the opposite of economic interdependence.  Indeed, none of us can succeed without the support and cooperation of the other.  Our fortunes are interlinked, as are our interests and our chances for success.

But the stakes are not always quite the same. Throughout much of the world, diamonds are considered luxury products, which are good to have, but not essential. However, in a number of countries, Zimbabwe among them, the diamond industry is an essential business sector. What this means is that the producing countries must remain keenly aware of the sentiments and concerns in all the related markets, because the prospect of losing their confidence could be most severe.

This does not mean that you should be subservient to the consumer markets, nor does it mean that your national considerations should not be afforded equal respect. The days in which terms could be dictated to Africans by a handful of individuals, companies or governments are long over.

Today, Africa is not subservient to the diamond pipeline; it is the pipeline’s driving force. This continent no longer can be considered a place whose primary role is to produce raw materials that are processed and sold elsewhere.

The recent transfer of De Beers’ diamond trading headquarters from London to Gaborone was an event of historic significance, for it shifted the decision-making capacity in the rough diamond business from Europe to Africa.    

I strongly believe that the Kimberley Process, and the types of discussions that we had with Zimbabwe, contributed to the remarkable change that has taken place in recent years. Just as I feel that the African producers became more closely aware of consumer sentiments in the developed markets, I believe that participants from consuming countries came to understand and respect the expectations that Africans have regarding their natural resources.

Chinua Achebe, the great Nigerian writer, once said,  “People go to Africa and confirm what they already have in their heads, and so they fail to see what is there in front of them.”

Well, what we see today is a region that is more empowered and better equipped to grasp the future

In fact, I believe that we no longer can regard Africa as only a region where diamonds are produced. Africa’s economy is growing faster than the economies of all other continents. About a third of the 54 African countries are seeing annual GDP growth of more than 6 percent, and that means that it is becoming a consumer force in its own right. According to the Harvard Business Review, by 2020 about half of African households will have discretionary spending power.

And the growing degree of affluence can be expected to continue. According to the same study, the African workforce will swell by 163 million just this decade and by 2035 will be larger than China’s. By 2050 Africa will account for about 25 percent of the world’s workers. And because the average age is low, they will be supporting fewer of the older generation than will their peers in other parts of the world.

In short, if economic development is well managed, the future is bright indeed. Twenty-five years ago, who would have predicted that China would be the world’s second-largest consuming economy? Twenty-five years from now, Africa could be the new China.

And what constitutes well-managed economic development? In global economy it involves the building of infrastructure and a well-educated and motivated workforce, the creation of an economic environment that is conducive to foreign investment and the expansion of trade relations in the region and world. In the context of the diamond business, it also involves compliance with the Kimberley Process and the implementation of all necessary measures to reduce reputational risk.

In recent years, I have been very actively involved the establishment of both physical and business infrastructures for the industry in Latin America, which, like Africa, is establishing itself as a region of tremendous economic potential.

Although it is a very significant producer of gold, silver and colored gemstones, Latin America not blessed to the same degree with diamond resources as you are in this part of the world.

It also has lacked a properly structured trading center, which is what we are building in Panama, which is today home to the Panama Diamond Exchange, the region’s only diamond bourse that both recognized by and is a member of the World Federation of Diamond Bourses.

The project involves the construction of a $200 million trading complex in Panama City, called the Panama Gem & Jewelry Center, which will serve as the gateway to Latin America and the trading hub for industry professionals from Mexico in the north to the southern tip of South America. As part of the process, I worked together with the Panamanian government in its becoming a member of the Kimberley Process, which is of course an absolute prerequisite in the business today.

In Panama, we set up the diamond exchange as the foundation of the new regional trading center. It is a body that helps facilitate and regulate the trade, and, when accepted as member the World Federation of Diamond Bourses, provides members of the worldwide industry a physical venue in which they feel comfortable doing business.

I know that the Zimbabwe government has been considering setting up a diamond exchange in this country. It is a move that I recommend be considered very seriously.

There was a time, not that long ago, when the world’s diamond markets did not extend far beyond Western Europe and North America. Today they are global, and the two most exciting prospective regions are most probably Africa and Latin America.   I am most proud to be associated with both of them and to have played a role in their development.
 

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