Diamond beneficiation faces challenges

HARARE - Zimbabwe cut and polished a mere 0,1 percent out of a targeted 10 percent of the total diamonds produced last year, President Robert Mugabe said.

The country produced 8,5 million carats in 2011, according to statistics from the Kimberly Process.

The revealing figures dampen government’s efforts to realise more from its minerals, particularly diamonds.

It introduced a quota system, which stipulates that 10 percent of all locally produced diamonds are to be cut and polished locally.

“Measures to address this anomaly are being put in place in addition to exploring avenues to encourage investment in this area,” Mugabe told the recently-ended diamond conference in Victoria Falls, adding that his government remained committed to promoting local beneficiation and value addition on Zimbabwean diamonds.

Experts say cutting and polishing add around 50 percent to the value of rough stones. The global value chain of the diamond industry includes exploration, mining, sorting, polishing, dealing, jewellery manufacturing, and ultimately retail. Zimbabwe is able to conduct the first three stages, but must focus on mastering the other four.

Zimbabwe is among the world’s mineral rich countries, with the second-largest known platinum reserves globally after South Africa.

The southern African nation is, however, getting a hugely discounted price for its diamonds on the international market due to restrictive measures imposed on Mugabe and his inner circle.

Mugabe called for fair play in the marketing of Zimbabwe’s Marange diamonds.

According to expert reports, Zimbabwe’s diamond production could double the current global output and easily contribute by 2015, 25 percent of the world’s supply and 30 percent by volume.

“Such predictions are evidently premised on the great potential inherent in the geological coverage of the diamond resources of the country,” Mugabe said.

Vipul Shah, Gem and Jewellery Export Promotion Council of India chairperson also told the conference Zimbabwe’s operable Marange diamond mines have the potential to produce nearly 110 to 160 million diamond carats per year.

India is one of the major diamond markets in the world and is also a significant buyer of Zimbabwe’s gems.

Market watchers have warned that unless the country puts in place a comprehensive value addition strategy, its minerals will continue to benefit other nations.

Garikai Chengu, a researcher at Harvard University’s Faculty of Arts and Sciences said under the status quo, Zimbabwe will sell its diamonds at approximately $370 per carat, only for the Israelis and Belgians of the world to cut, polish, process and sell Zimbabwean diamonds at $2 000 per carat.

“However, if Zimbabwe was to focus on indigenous diamond beneficiation the current stockpile, worth an estimated $1,7 billion, would indeed be worth in excess of $10 billion,” he said.

Chengu said beneficiation will allow the nation to be vertically integrated with each stage of the global value chain such that each stage occurs within its borders.

“Such integration is crucial because the mark-up value of diamonds increases exponentially as they pass through the links of the global value chain. The world market for rough diamonds is currently valued at $19 billion annually, while the retail diamond jewellery industry is estimated to be $90 billion.

Stephane Fischler, president of the Antwerp World Diamond Centre said as a result of little competition, Zimbabwe diamonds are not fully exposed to the international market, and as such fail to guarantee the best price and optimal return.

“We believe that, if the goods from Zimbabwe and more specifically from the Marange area could be traded in Antwerp, fair and optimal market prices would be obtained, increasing the Zimbabwe government revenue and allowing the local communities to reap the full benefits of their country’s resources,” he told delegates at the conference. - Eric Chiriga

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