We cannot lose consumer trust in diamonds

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De Beers CEO Philippe Mellier on maintaining positive relationships.

By Philippe Mellier.

Relationships run deep through the diamond industry and have done ever since the 15th century, when the first diamond betrothal ring was given by Archduke Maximilian of Austria to Mary of Burgundy.

And today, diamonds continue to represent the ultimate relationship – the enduring emotional bonds of marriage. However, for us, diamonds also represent our relationship with you and the ties that bind together the people [in our industry].

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To my mind there are three fundamentally important relationships that allowed us to achieve so much in 2013 and that will enable us to go on to further success in the year ahead. Firstly, I would like to pay tribute to the outstanding relationship between Botswana and De Beers. We have been partners for more than 40 years and over that time our relationship has been praised internationally as a leading example of a successful public-private partnership.

And the relocation of De Beers’ international Sightholder sales activity last year saw the relationship elevated to an entirely new level. Botswana has grown from being a primary producer with a maturing manufacturing sector in to one of the world’s key rough diamond trading destinations. Not only does this bring increased economic activity and a regular influx of successful entrepreneurs to Gaborone, but it also sends a message to the global business community that Botswana is so much more than the world’s leading diamond producing country.

The second relationship I would like to talk about is that between Sightholders and De Beers Of course, this will be the final Sight for someone who has been central to every Sightholder relationship, and before we go any further I would like to take this opportunity to raise a toast to Varda Shine and say a huge thank you for thirty years of outstanding service – not just to De Beers; not just to the Sightholder community; and not just to the people of Botswana and De Beers’ other producing country partners; but to the entire diamond world Varda has left an indelible mark on the industry and it is undoubtedly a much better place because of her influence.

As we all know, a lot of Varda’s time over the last two years has been taken up with the relocation project and obviously it has been time very well spent Southern Africa has become the new centre of gravity for the diamond trade and the relationship between Sightholders and De Beers has been fundamental to this shift Of course, this relationship has been at the forefront of many of the key developments in the history of diamonds, whether it is catalysing growth in beneficiation or growing consumer demand for diamond jewellery in new consumer markets.

And once again, the transfer of De Beers’ international Sightholder sales operations to Botswana has demonstrated not only our belief in Botswana, but also the ability of this relationship to lead and deliver important and lasting change in the diamond industry. But as the world changes, the most successful relationships are those that have an ability to evolve, adapt and grow.

We have therefore looked at a variety of new ways to strengthen our relationship with Sightholders in the next contract. We have listened to Sightholders’ views on how best to do this and will focus on simplifying the process where possible, giving Sightholders greater flexibility and making Sightholder status even more meaningful. We are proud to bring the Sightholder and De Beers brand names closer together with our new Sightholder signature and to reinforce its importance by ensuring that only the most financially sound and transparent businesses qualify to use it.

All of this is focused on strengthening the key relationships – between Botswana, De Beers and Sightholders – that drive the success of diamonds And of course this is the focus of the relocation to Botswana. The move of De Beers’ international Sightholder sales activities to Gaborone was integral to De Beers – and by extension Sightholders – accessing long-term supply from the world’s leading source of rough diamonds, while providing the nation of Botswana with a wonderful platform to drive economic development and diversification.

None of us could have achieved these era-defining successes without the support of the other parties and our relationships can go from strength to strength as a result of this.

The third and final relationship I would like to talk about tonight is that between the diamond industry and its consumers. It is this relationship that ultimately drives all of our prospects so it is worth taking a couple of minutes to consider how it is likely to develop in the year ahead.

Of course, any strong relationship has its foundations in trust and honesty, and anything that has the potential to undermine these foundations must be taken seriously. The recent reports of dishonest elements of the industry trading in undisclosed synthetics represent a significant risk in 2014 and it is imperative that we all take the necessary steps to protect our businesses.

However, we believe that a key benefit of your relationship with De Beers is that we will continue to support you with the necessary guidance and tools to help you maintain the integrity of your business reputation. A consumer’s desire for diamonds is the only true source of value in the industry. We must therefore lead by example, take all reasonable steps to mitigate risks in this area and show that we are not prepared to allow consumer trust in diamonds to ebb away as a result of the actions of an unethical minority.

And securing consumer trust in diamonds becomes even more important when we consider the positive economic prospects in the year ahead. There are good signs coming from the US economy with early reports of solid growth in retail sales over 2013, and the jewellery industry being one of the leading performers. Consumers are expressing improved confidence in both economic and job prospects and investors are increasingly moving away from the safest investments and returning to stock markets, which further supports the picture of growing economic confidence. But question marks still hang over the consequences of shifts in US monetary policy and its impact on the global economy.

Looking east to China, there are also healthy signs. The outlook for industry sales over Chinese New Year is positive and expectations are for a continuation of strong economic growth, at around the same level as that seen in 2013. The Chinese government’s policy of refocusing the economy so that growth is generated by consumer spending rather than state investment should be of benefit to the diamond industry over time, but we will need to keep a watch on how this transformation is managed.

Meanwhile, India, the other engine of growth for consumer sales of diamond jewellery in recent years, experienced a more challenging domestic market in 2013. Although there are some ongoing concerns about inflation and currency volatility, improvements in the agricultural sector could trigger an upswing in domestic demand and the economy can be expected to pick up further after the elections in May. There is also better news on economic prospects in Europe and Japan, with the Eurozone starting to see a rise in industrial production and Japan’s economy benefitting from its monetary and fiscal stimulus programme. In short, things are looking up.

So, in 2014 let us build on the firm foundations we have established, continue to invest in the outstanding relationships that have brought us so far and ensure we keep on working together for our mutual benefit. With Sightholders at the centre of the De Beers business and Botswana at the centre of the diamond world, we approach a year alive with possibilities. If we continue to nurture the relationships on which our success is based then we will also make sure that diamonds remain the symbol at the centre of the consumer’s universe.

De Beers Group chief executive Philippe Mellier delivered the above speech at a dinner in Gaborone on January 21 2014, addressing senior representatives from the government of the Republic of Botswana, De Beers Sightholders and leading figures of the Gaborone business community.
 

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