Maravi

(ISRAEL DIAMOND INSTITUTE 2010) Chaim Even-Zohar: 'Kosher' Zimbabwean Diamond Exports in Industry's Best Interests

COMMENT - Interesting observations from this 2010 interview, and what is really going on in Zimbabwe:

my estimate that within 2-3 years we may get 25-30 million carats a year from Zimbabwe, at a time when the entire world, without Zimbabwe, sees production leveling off around 110-120 million carats.

And...

In neighboring Mozambique, in Manica, just 20 minutes from the Zimbabwean border, in a little place in the middle of nowhere - all of a sudden you see a housing boom, brought about by hundreds of Lebanese living there … Lebanese who are very closely associated with Hezbollah and other organizations like that.

We cannot afford, as the diamond industry, not just Israel, but as the diamond industry, that a major supply channel gets in the hands of these kinds of criminals, and maybe, terrorists.

Chaim Even-Zohar: 'Kosher' Zimbabwean Diamond Exports in Industry's Best Interests
05.09.10 / World
Chaim Even Zohar

Diamond industry analyst Chaim Even-Zohar granted the Israel Diamond Institute an interview to discuss some of the most important issues facing the diamond industry today: Zimbabwe and its status in the international diamond sector, the direction of De Beers following the recently announced departure of Gareth Penny, and also the United States appeals court recent rejection of a nearly $300 million class action settlements concerning the company’s antitrust issues.

De Beers

What change of direction might De Beers make following Gareth Penny's departure?

It's speculation because we don’t know. We don’t know what the shareholders really want. I would assume De Beers will concentrate on its core business which is mining, I will assume that they want to find better mining properties. If I look at the intended sale of the Finsch Mine – the Finsch Mine has become 'marginally profitable' –they want to spend their money where they can be hugely profitable. So I think that we'll see a company that wants to make good margins, or fantastic margins from mining and will drop anything that doesn’t give them the margins. Selling off will give them money in order to invest in other properties.

Who may take the helm at De Beers following Gareth Penny?

I do know that chairman Nicky Oppenheimer has instructed an executive search company to look externally for the right candidate, and I'm aware that there is quite an interest in that position, because it is a very interesting job. It has also not been excluded that the appointment would come from within.

The key issue here is what the shareholders really want. We see that De Beers is going through serious changes. We see that they are selling off a lot of mining assets - at the moment the Finsch Mine and also the Namaqualand properties are for sale - and it is really unclear what direction De Beers is going.

Gareth has finished what he set out to do - he consolidated the financial strength of De Beers, and he has done ruthless cutting of costs; He has led De Beers through the most serious crisis we've had since World War II and his work is done. De Beers is moving to the next chapter. The next chapter is not going to be written by the CEO, it will be written by the shareholders, and here there are a lot of question marks, but I guess we’ll find out very soon, because the current interim management is meant to be for the shortest possible time – they don’t expect a long transition, so we'll know soon. It's exciting.

A US court recently rejected De Beers' nearly $300 million class action settlement over the company’s antitrust issues. What implications does this decision have?

In the American legal system no decision is ever final. There are appeals, and there are other reconsiderations and there is always going back, so let's not think that the whole thing is off and the money will go back to De Beers and that's it.

The most immediate impact on De Beers is the Forevermark. The Forevermark is De Beers own proprietary mark that has been successfully launched in Asia, Hong Kong, China and the Far East, and it is De Beers’ own mark - its own product. That's a bit problematic now, and they will have to delay the launch of Forevermark in the United States. De Beers has invested huge amounts of money and resources and other things in the development of the Forevermark. So if you ask what are the consequences, or the immediate consequence that would be first of all the Forevermark.

The second immediate consequence is that the whole issue of De Beers being legal or not legal etc stays on the table. Now, it's really not a cartel any more. It's selling its own output, its market share is declining, I would say almost by the day, but it's still a dominant company because it's still a large mining company. But the decision is not good, not good for the image. I think that De Beers would have preferred the whole thing to be settled. Give it time and it probably will be.

Zimbabwe

What do you think of the recent agreement made over Zimbabwe diamond exports?

I find it difficult to say much because, as you know, I was the WDC representative in the review mission that has just come back from Zimbabwe; the review mission has not made its report yet and has not made all its conclusions.

In a more general way I can say that we have not had any serious complaints, or any complaints actually, about human rights abuses or police brutality. Law and order has returned to the territories, to the Marange area, and the personal safety and security of people is much better, and the military has totally withdrawn from the three large mining concessions, and the concessions themselves, Mbada, Canadile and even Anjin which is going to start only in December but it's building up its infrastructure, they are all world class, fully compliant mines.

The whole problem with the Kimberley Process is that it's a political process and there is also the difficulty of the mission that it is not driven by the industry but primarily by governments and governments have different interests than industries. I'm not saying that in any sad, negative way - that's the reality.

If the same rules that the Kimberley Process applies to Zimbabwe would apply to other countries in Africa you would see a different picture. Yes, there is smuggling, but there is smuggling in Congo, Angola, Sierra Leone, Guinea – wherever you want. And yes there are illegal diggings in alluvial areas in Zimbabwe, but if I compare it to other countries where you have such a huge illegal smuggling sector and almost no official exports, then sometimes you feel discomfort that there may be one rule for certain countries and another rule for other countries.

Having said that, there is no doubt that Zimbabwe has a problematic government, but then other countries have problematic governments. Certain governments are more problematic than others, no doubt about it.

Why do you thing there is such preoccupation with Zimbabwe?

You know, we have a precedent. We saw that Venezuela wasn’t compliant, and couldn’t care less and decided to suspend itself from the Kimberley Process. All the output of Venezuela has been smuggled out and is getting into the markets. Nobody really cares because it's insignificant.

Zimbabwe is gradually emerging as a major diamond producer and it has now at least a handful of operating mines including River Ranch and Murowa and three mines in the Marange area, but there will be more. They have identified some 60 concession areas; they have 50 applications of investors that want to invest and it is my estimate that within 2-3 years we may get 25-30 million carats a year from Zimbabwe, at a time when the entire world, without Zimbabwe, sees production leveling off around 110-120 million carats. So the impact is huge. Yes the values are low but there are higher than Argyle, MIBA and the Congo, and at the recent tenders the values reached about $50 average.

The impact on the diamond industry is tremendous. We have calculated that from 2-3 mines alone we'll see 250,000 jobs in India, because the goods are very labor-intensive, large goods but labor-intensive.

Zimbabwe will have an impact on everything – on unemployment in the industry, on marketing, on the kind of goods in the market and on prices. It is in the overriding interest of the industry - and that is the most important thing I can say about Zimbabwe - to have regular, robust, legally transparent exports from Zimbabwe. The goods will come out of the ground one way or the other. If we don’t make it possible for Zimbabwe to export legally with KP certificates, those goods will reach us illegally. You'll have all kinds of criminals drawn into the process.

In neighboring Mozambique, in Manica, just 20 minutes from the Zimbabwean border, in a little place in the middle of nowhere - all of a sudden you see a housing boom, brought about by hundreds of Lebanese living there … Lebanese who are very closely associated with Hezbollah and other organizations like that.

We cannot afford, as the diamond industry, not just Israel, but as the diamond industry, that a major supply channel gets in the hands of these kinds of criminals, and maybe, terrorists. That is why we have to do everything to make sure Zimbabwe stays part of the Kimberley system and that its exports will be done openly, transparently and in a way that also the respectable large companies, or the respectable middle size and small companies will be the buyers, and not to force all kinds of outside parties to become the buyers of those goods. Its complicated.

Zimbabwe is considered a pariah state - probably for good reasons, but I'm looking at the best interest of the diamond industry and I thing that really sums it up.

Thank you, Chaim Even-Zohar

By: Michelle Moshelian

Labels: DEBEERS, DIAMONDS, ISRAEL, KIMBERLEY PROCESS, NEOCOLONIALISM

posted by MrK @ 5:07 PM