RAPAPORT... Established in 1963, Malca-Amit provides secure logistical solutions and full operational services for the diamond, jewelry and precious assets industry. Services include secure shipment, third-party logistics, hand carrying, trade show packages, and secure storage of valuable goods.
 Name: Nigel Paxman
From: London
Company: Malca-Amit Global Ltd - CEO
Rapaport News: Can you tell us what your background is, prior to joining Malca-Amit? When did you join Malca-Amit?
NP: In April 2002. I was named CEO in 2008.
Rapaport News: And prior to that, were you involved in the industry at all?
NP: Yes, indirectly. I was actually a Lloyd’s underwriter from 1986 until 2002 specializing in jeweler’s block, cash in transit, high-value cargo, banks, and fine art. Before becoming an underwriter at Lloyd’s, I was an insurance broker.
Rapaport News: What services does Malca-Amit provide?
NP: We are a complete secure logistics provider for the diamond, jewelry and high-valued commodities industries, providing secure door-to-door transportation which includes: shipping valuables, armored vehicle transportation to and from airports, storage of high-value assets, third-party logistics and so forth. Our services can be under full liability or limited liability—whichever the client chooses. We provide inspection services, so clients can use our facilities. We provide show logistics, including arranging insurance at shows. We provide a whole spectrum of services to the diamond and jewelry industry, which is our core business, as well as a basket of services for the commodities businesses that principally consist of precious metals—gold, silver, platinum, etc.
Rapaport News: In a way, the company is a unique view of the industry. You’re in the industry, but you aren’t trading goods. You are a service provider. You became CEO at an interesting time—in 2008—what sort of changes have you seen in the industry in your tenure of the past 5-10 years?
NP: Obviously, in 2008, the industry went through a traumatic time, affected by the global recession and even more so by the withdrawal of financing by the banks. When the banks went through difficulties in 2008, trading in the diamond and jewelry industry decreased dramatically. Firstly, companies weren't receiving the financial support from the banks and secondly, consumers had less disposable income. Those that did have the financial means to buy luxury goods felt it wasn't the time to be seen purchasing luxury goods. This impacted the entire industry, from the closure of diamond mines, to many manufacturers and retailers having to close their doors.
Although the industry has made a significant bounce-back since 2008, it has changed dramatically. Noticeably the issue of compliance is now part of the industry lexicon. Our whole industry has had to become more compliant. It had to become more aware of issues such as sanctions and money laundering.
In general, the luxury goods markets have been moving eastwards (the Chinese market most noticeably), although the U.S.A. and Europe have stabilized recently. Generally, the world is opening up. Russia has opened up—the old eastern bloc is becoming a bigger market place.
Obviously, India has grown in its capacity to manufacture. The new change for this year will be the movement of the sights from London to Botswana. This is a huge change for us logistically.
Rapaport News: Traditionally, there was a route diamonds would travel. They would go from the mines in Botswana to the London sight, to Antwerp and then to India. So if there are different routes now, how do places like Hong Kong and Dubai factor into the market? I’m interested in these trading hubs that have developed.
NP: If you’re talking about loose stones, a lot of trading is going on in Hong Kong, but then the goods are sent to be cut and polished in Mainland China. China is a large manufacturing center for the jewelry industry, with Hong Kong becoming a major hub for the Asian market. Hong Kong distributes through Asia, but a lot of it goes into China through the Shanghai Diamond Exchange. The Chinese have expanded enormously in retail. If you look at the big companies with branded names, not just European and American brands, but Asian brands as well—they have expanded significantly in China. Also, India has always been a large cutting and polishing region and is growing. Since 2009, India has been growing every year in cutting and polishing.
In regards to Dubai, there isn’t much manufacturing that goes on there. There is some retail, but it is a big trading area. This has the potential to change. It may change significantly after this year, when the sights move to Botswana with several companies noting they plan to take their sights straight from Botswana to Dubai. We will wait and see if that happens, but we are prepared as a company to move the goods wherever they are required. We are prepared and ready for all circumstances and chosen trade routes.
Rapaport News: So you are suggesting that there may be some manufacturing starting to take place in Dubai?
NP: No, not manufacturing. A lot of the sights now go to Antwerp or Israel, and the diamond dealers sort them and then trade them from Antwerp and Israel. That may change with more trading taking place in Dubai. That is what people are hinting at or suggesting at the moment. Whether that happens, we will have to wait and see.
Rapaport News: I mean, does it make better logistical sense to move the goods to Dubai?
NP: No.
Rapaport News: I don't understand why that would be a trend that people are expecting.
NP: I assume companies have their own business advantages wherever they are based.
Historically, the goods have come from the London sight, and then a large quantity goes to Antwerp and Israel. Some people are suggesting that the move to the sights in Botswana will be an opportunity for more companies to take the goods directly to Dubai. Whether that happens, I don't know.
Rapaport News: How much more difficult is it for a company like Malca-Amit? I mean, the sightholders are saying that they have to travel to Johannesburg and then to Gaborone. It's not an easy place to get to.
NP: No, because Gaborone has no direct flights to Europe at the moment.
Rapaport News: So is it the same logistical hurdle that you are facing?
NP: Absolutely. We will have to bring all of the goods from Gabarone via Johannesburg in order for them to connect to flights to Europe. Currently, Gaborone Airport cannot take the size of aircraft required for Europe. Actually, so it’s understood, it does not have anything to do with the runway, it is the hospital space in Gaborone. If they had a major aircraft, a 747, they do not have enough emergency hospital equipment to handle that kind of disaster.
Rapaport News: Really? That is incredible. I didn't know that. I thought it was just a question of the airline — you know, viability for an airline to fly to — that there wasn't the need for it.
NP: Well, there is also that. Because the sights are going to be held once a month; one week per month, roughly, it is extremely difficult for an airline to schedule flights one week a month. Another problem, however, is they just do not have enough hospital beds to cope with a major disaster.
Rapaport News: That's interesting. How long have you been in Botswana? When did Malca-Amit open its operation there?
NP: We opened in Botswana in 2009.
Rapaport News: Okay. So obviously, for the above-mentioned reasons, it is going to become a much more important aspect of your business?
NP: Yes. We already do shipments to/from Botswana. Several companies have had facilities in Botswana for several years already, with others moving operations (or part of their operations) to the country in anticipation of the relocation of the sights. As traffic increased so did our operations and services provided. When the Diamond Park was being built we had no hesitation in immediately taking space and creating a facility that could service our clients in a world-class standard. We are extremely proud of our facilities in Botswana.
Rapaport News: Have you had to expand your operation now?
NP: Yes, we are expanding. Over the past six months, we have expanded services and facilities and are ready for the movement of the sights at the end of this year.
Rapaport News: What about the state of the market in 2013? By the volume of goods that you are shipping, can you assess the health of the industry accordingly?
NP: How much we ship does not necessarily correlate to how strong the market is, but for the general business, it is an indication of the state of the market. If people are not selling or buying, they are not shipping. On the other hand, you can have diamonds that move more often, because they are not selling. People may be moving them around the world to try to sell them. Generally, I would say the market is slightly better than last year.
Rapaport News: How has the nature of shipping for the diamond and jewelry industry changed in recent years? Besides the geographical shifting around within the industry, have there been any significant changes in recent years in the way you are handling the business, physically speaking?
NP: I wouldn't say any significant change in the last 10 years, because it goes by valuable air cargo but we have witnessed a noticeable increase in the demand for couriers. We use our security personnel to actually hand carry the goods on the plane. This is because we are moving stones to regions where there is no valuable cargo handling provided by the airlines. If the airlines do not have physical, on-the-ground security vehicles or vaults at the airports, we will take the goods ourselves to ensure optimum security and coverage.
Rapaport News: Is that an issue in Gaborone?
NP: No. We can use the valuable cargo handling services in Gaborone. It is an issue particularly in some cities in China and Asia where the airlines have yet to set up their valuable cargo handling.
We always have to keep up with security. Criminals are becoming more sophisticated, so security has to become more sophisticated to stay ahead of the criminals. We are constantly updating our security, armored vehicles and technology to stay ahead.
The most significant thing that we have had to be aware of and to comply with is that of governmental policies. Governments are now much stricter, implementing laws on issues like sanctions, money laundering and compliance. Where once there was a gray area (though not illegal), now it is far more black and white.
There is a lot more tightening up of customs, sanctions and money laundering laws and regulations. The authorities are applying those laws in a much stricter manner, both on our clients and companies dealing with the movement of their high-value assets. Now we have C-TPAT approval, which are the U.S. security provisions for shipments of cargo. Companies must comply with stated standards and undergo reviews before being C-TPAT approved. Europe has a similar compliance requirement called A.E.O. (of which we have).
Rapaport News: What about the internet and use of technology? How has that affected your business and the way you operate? I would imagine in the logistics business that use of technology is highly important.
NP: Yes, it is huge. Technology provides portals to airline systems, so we can track shipments and bar-coding of parcels. It all helps tracking and security. IT products give us the ability to view our premises and control our premises from one central location, enabling us to monitor shipments, around the world and have real-time updates 24/7, 365 days a year. For example, in Hong Kong, we can view our trucks operating in London through an intricate and secure camera system in each and every vehicle. All of that is helping enormously with security.
Rapaport News: Is this shipping and logistics business within the industry a competitive space? What differentiates Malca-Amit from other companies?
NP: Yes, it is very competitive, and it is more competitive in some places than others. I know this is a cliché that all companies say, but I really do believe that the reason Malca-Amit has been successful and hopefully will continue to be successful is that we give great service to our clients. We are extremely client-focused. At Malca-Amit we are all about service—not just meeting expectations, but exceeding our clients' expectations.
Rapaport News: Where do you envision the company in 10 years’ time? Are you looking to expand into other areas? What is the strategic plan for the company?
NP: The jewelry industry is, and remains our core business. What we have and are doing is expanding the breadth of services we offer, as well as the regions we operate in. For example, our third-party logistical services, which are currently available in the U.S.A., will expand significantly and be provided in other regions.
As the world economy expands, so does our commodities and precious metals business (at a much quicker pace). Since this is a fairly new business for us—we've been in this market for the past three years - we believe there is significant room for expansion. In proportion, our commodities and precious metals business will expand, but it will never become our core business.
Rapaport News: What is your biggest challenge that you face as a company, at the moment and moving forward?
NP: The challenge is keeping up and making sure we provide our clients with a global stretch. We are very much a one-stop-shop service provider. We need to make sure that we are in all the geographical regions and provide an unsurpassed level of service for all our clients' needs. This means companies don't need to go to several service providers or different service providers in different regions.
Rapaport News: Is there any sort of message that you want to bring out that has not been touched upon? Anything you want to say to the diamond industry about Malca-Amit?
NP: The diamond industry is our core business. We are here to service industry needs. We believe in working hand-in-hand with our clients, to understand their requirements, where they are going and provide solutions that enable them to work faster, smoother and have absolute peace of mind with all their logistical needs.
We, like the industry, need to adapt in real time to the changes taking place in the industry. In fact, more importantly we need to adapt preemptively.
Many of the changes we noted earlier are creating issues. There are companies that may not have had to cope with such changes before, when they were dealing with Europe and the U.S.A. For instance, the procedures dealing with customs laws, sanctions and money laundering issues are changing and expanding. They also vary from region to region. The customs laws in some places are completely different from laws in place in Europe and the U.S.A.
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