India determined to keep upper hand in diamond cutting and polishing

We publish courtesy of Mineweb

Author: Shivom Seth

MUMBAI  –

The Chinese assault on the Indian diamond polishing business, a front opened up some months ago, has raised somewhat of an alarm in the Indian diamond industry. The Chinese have set eyes on the global diamond market and hope to dig their way into India’s 80% share of the world’s diamond cutting and polishing business.

Though the Chinese have officially denied any such move, Indian diamond cutters, most of whom are based in the State of Gujarat, to buttress their point, direct attention to the Chinese efforts to secure a line of supply of the uncut gems from the African continent, eliminating middlemen from Antwerp and Israel.

The Indian exporters are worried that if China succeeds, eventually it could upset their hold on the industry, BizCommunity.com reports. Indians say that China was returning the favour to the African nations by supplying free health aid and infrastructure works.
Liu Jianhua, Deputy Secretary-General of Diamond Branch, the Gems and Jewelry Trade Association of China, told the Global Times recently that there were definitely no such deals or actions between China and some African nations.

On a visit to Africa in January this year, Chinese commerce minister Chen Deming had said that China and African nations always treated each other equally and that years of aid provided by China for infrastructure construction in Africa had been conducted without any political or economic preconditions.

India’s worry

The Indian side has been actively campaigning with its own government, asking it to strike up deals similar to the ones by the Chinese government, in order to procure its own line of rough diamonds from the Congo and other African nations. The campaign is spearheaded by India’s Gem and Jewellery Export Promotion Council.

The size of the Indian gems and jewellery industry is expected to cross $31 billion in 2010-2011. Surat itself is expected to process $18 billion worth of the glittering gems this financial year. But these figures are not helping much to dispel the doomsday predictions in the industry, because of the Chinese assault.

The Indian side fears that if the Indian government does not wake up now, China may soon have the upper hand.

India spends $10 per carat on the polishing and cutting of diamonds, against China’s $17. Expectedly, India wants to retain this edge. But the fact that China itself is a major consumer of polished diamonds besides Hong Kong, US and India, is adding fuel to the onging fire. Polished diamond exports to the Chinese mainland and Hong Kong during the first quarter of 2010 equalled $727 million, 28% higher than the same period a year earlier, according to the Antwerp World Diamond Center.

The Indian diamond story has so far been one of grit and determination. From a mere $8 billion worth of exports in 1999-2000, the Indian gems and jewellery industry has captured about 80% of the global polished diamond share.

Vasant Mehta, chairman of the Gems and Jewellery Export Promotion Council said earlier this week that they expected gems and jewellery exports to cross $31 billion by the end of this fiscal year, coupled with a strong demand for polished diamonds to key export destinations. And everything does not seem to be lost for India.

The Indian government has responded to the efforts of its diamond industry and is now contemplating beating the Chinese at their own game. India and Africa have a long history of trade and commerce, and the Indian government hopes to leverage off this.
India may soon be able to source rough diamonds directly from Botswana, the largest diamond producer in the world, cutting out the middlemen. Earlier this year, Indian Vice President, Hamid Ansari, had also visited Botswana to lay the ground work to facilitate direct procurement of rough diamonds by Indian companies.

Both the nations also signed an agreement to the effect. It will be a couple of years though before the direct line between Botswana and India starts functioning. At present, Botswana’s diamond mining industry is dominated by ‘Debswana’, a  joint venture between De beers and the Botswana government, but if India’s efforts of opening up a direct line does bear fruit, it would fuel growth for the Indian diamond manufacturers in the future.

Setting up base

The Confederation of Indian Industry (CII)’s South Gujarat Zonal Council Chairman Aagam Sanghvi, is of the same opinion saying if the rough diamonds from Botswana came to India directly, it would assist in value addition. The CII is an organisation that caters to the business community.

Botswana is not the only country India has been eyeing. For some time now, India has been trying to procure rough diamonds from South Africa, Namibia and Angola.

Zimbabwe, for example, is believed to be sitting on one of the world’s largest diamond reserves that are estimated to be around 25% of the world’s total resources.

Both India and China are actively chasing that country for a stake in the pie. But the African country’s diamond sector has been mired in controversy over human rights issues in the diamond mines near the border with Mozambique, resulting in most buyers from Western countries ordering a boycott of stones from Zimbabwe.

Frequent political instability in other African nations like Seirra Leone and Ivory Coast do not make them viable options to nations like Botswana, which is Africa’s topmost miner of diamonds. Still, the Indian polishing industry is not averse in taking efforts to keep the supply line flowing smoothly with the other, lesser known African nations.
That is not to say that diamonds are not driving economic growth in the region. The diamond mining industry generates over 40% of Namibia’s annual export earnings and diamond revenues enable every child in Botswana to receive free education up to the age of 13.

Diamonds also account for 33% of the GDP of Botswana. Since diamonds were discovered in Botswana, GDP annual growth rate has averaged 7%. In addition, the revenue from diamonds is instrumental in the fight against the HIV/AIDS pandemic.
Keeping this in mind, the start of the year witnessed a rush among Surat-based companies to set up diamond cutting and polishing units in Africa, in order to secure assured supply of rough diamonds. Russia is another rough producing country where Indian companies have set up units.

“Earlier, Indian diamond companies were setting up manufacturing units only in South Africa,” said Aagam Sanghavi, director, Sanghavi Exports. “But many Indian companies are now eyeing operations in Botswana, Angola and other African countries that produce roughs.”

The director of Sanghavi Exports, which exports polished diamonds, said that this strategy would benefit not only the Indian companies, but also the African nations as their economies depend largely on diamonds.

Shrenuj & Company, whose main diamond cutting and manufacturing facility is in Surat, opened a diamond cutting factory in Botswana in May this year. “Opening a factory in a rough diamond producing country was an important objective to take forward our global manufacturing strategy,” said the company’s chairman, Shreyas Doshi.

As the next step, the company also plans to set up a jewellery manufacturing unit in Botswana.


Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s