As the diamond industry grapples with a depressed market and lab-grown stones, calls are mounting for South Africa to establish a diamond beneficiation fund to help local diamond cutters and polishers.
Speaking at the State Diamond Trader's South Africa Diamond Show launch in Johannesburg this week, Kgatliso Manake, chair of the Kimberley Diamond Jewellery Incubator, said the main struggle for aspiring entrepreneurs, especially those from previously disadvantaged backgrounds, was the lack of access to funding.
He called on the government, business and the industry to rally around a beneficiation fund of R100m to ensure that diamond and jewellery businesses have access to capital and markets.
Manake said the diamond industry was capital-intensive and R100m would be the minimum required to get the fund off the ground. He said it should be a joint effort involving the government, development funding institutions, commercial banks and mining houses.
“If we are not going to invest in a diamond beneficiation fund, then the diamond industry in South Africa will die a violent death. By having the diamond beneficiation fund, we will be intentional to ensure we grow the industry,” he said.
Abiel Mngomezulu, chair of the South African Diamond & Precious Metals Regulator, said the R400m junior exploration fund launched a year ago by the Industrial Development Corporation (IDC), the Council for Geoscience and the department of mineral & petroleum resources had paved the way for a similar fund in the diamond industry.
“We have a precursor already that can be studied and utilised. We have the junior mining exploration fund, which is sitting at the IDC ... we can learn from it. For example, the State Diamond Trader was started with funding from the IDC, nothing from the state. It was funded directly from the IDC and private banks. We don’t have to always rely on government — the government does not have funds — we have to be creative and look at other avenues where we can get funding,” he said.
State Diamond Trader COO Conrad van der Ross said the diamond beneficiation fund was in the discussion phase. “We have numerous documents in terms of funding, now it is bringing it all together — having all like-minded individuals and drawing up the submission - and we can get people to contribute towards it.”
Global inflation, lower demand from the US and the growth in lab-grown diamonds have impacted polished diamonds in South Africa
— Conrad van der Ross, State Diamond Trader COO
The State Diamond Trader, is a government entity established in 2007 to buy up to 10% of South Africa's production, sell rough diamonds and promote equitable access in the country. It aims to make South Africa the diamond hub of the world, even with India dominating the polishing and cutting market, by hosting the inaugural diamond show in Cape Town in February.
Van der Ross said South Africa had the skills for diamond manufacturing given that diamonds had been polished and cut for more than 90 years and had been mined for 150 years. The government's legislation to encourage value addition was proving to be a success.
“Technical skills exist in South Africa, manufacturing exists in South Africa, the quality of work in South Africa is on a par with the rest of the world. The reality of South African history is that you are a diamond producer, remain one, you have no history in manufacturing. The rest of the world said no it is not going to work, the State Diamond Trader will be around for a year, and we will close offices. That was said because our rough diamonds are better off being exported and growing other industries like Belgium that do not produce a single diamond,” van der Ross said.
The industry has reported a sharp decrease in production levels, with the South African Diamond & Precious Metals Regulator's 2023/24 annual report citing a tight market exacerbated by the Ukraine war. This resulted in diamond production falling by 46.54% in carats compared to 2023 due to lower output from De Beers Group and Petra Diamonds. The State Diamond Trader's diamond purchases decreased by 84.5% in carats in 2023/2024 compared to 2022/2023.
Van der Ross said global inflation, lower demand from the US and the growth in lab-grown diamonds had impacted polished diamonds in South Africa.
“Post-Covid we had brilliant demand all of a sudden. Everybody was making a profit, there were no geopolitical issues. This time around, we have inflation, we have economics, and we have geopolitical issues. The diamond has to take the pressure. It impacts us but we have to be ready to put initiatives in place for when there is an upswing. We are not at the tail end.”
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