“Blood diamonds” are once again threatening the reputation of the entire diamond industry, as diamonds from Zimbabwe are being allowed back on to the market.
In the late 90s, diamonds started to get a bad name due to their connections with conflicts around the world. Civil wars in Sierra Leone, Angola and Liberia were fuelled by the profits earned running mines with forced (slave) labour. With billions of dollars at stake, diamonds seemed to become the very cause of civil wars. In Angola, Private Military Companies (mercenaries) from South Africa such as the now-defunct group “Executive Outcomes” were rumoured to be fighting for diamond commissions (a scenario later dramatized in the Hollywood movie, “Blood Diamond”)
In an effort to save the industry’s reputation, world diamond producers and governments agreed to ban sales from conflict area and established the “Kimberly Process” to help make this happen. The Kimberly Process establishes a paper trail for each diamond, from the mine it is found at to the finger it eventually adorns, proving its origin and assuring the buyer that it is not a conflict diamond.
Since 2002, the Kimberly Process has helped take conflict diamonds off the market, reduce human rights abuses in developing countries and protect the reputation and value of diamonds.
All of these achievements are currently under threat. The chairman of the Kimberly Process Certification Scheme has unilaterally decided to allow sales from Zimbabwe’s Marange diamond fields. These fields have allegedly recently been the scene of the massacre of 200 civilians. Revenue from the fields – worth up to 15% of Zimbabwe’s GDP – will also help support a regime widely reviled for human rights abuses.
Diamonds are perhaps the ultimate branded good. Diamond producers make huge efforts to ensure their small, shiny rocks remain desirable. The supply of diamonds on to the market is controlled to ensure a rarity premium holds. Hundreds of millions of dollars are spent on advertising, creating new traditions such as the “diamond engagement ring” and “trinity” gifts. Huge defensive PR campaigns work to convince people that a man-made diamond is a “synthetic” and somehow less real or romantic than an identical stone plucked from the ground that costs five times more.
Diamonds rely on trust and reputation. If (when) this breaks down, diamonds, like second hand jewellery, become all but worthless.
It will be interesting to see how the largest diamond producers cope with this threat. Expect, first of all, a battle to preserve the image of the Kimberly Process. If order cannot be restored and Zimbabwe continues to be able to sell its diamonds with KP certification, expect a modest defence from producers. If consumer groups raise the pressure, many larger producers are likely to walk away from Kimberly and rely on their own defences.
Diamond mining giant De Beers has for years been developing defences to protect itself in a crisis such as this. Not only does De Beers operate its own branded retail outlets which it hopes will immunise itself from attack, De Beers has also been developing “Forevermark” (http://www.forevermark.com) the first attempt to produce “branded Diamonds”. Forevermark works as a kind of private Kimberly Process and a vintage mark all at once, giving a guarantee that diamonds are conflict-free and also that diamonds are of “the highest quality”. So, if you are going to propose, don’t pop the question and get caught short with some scatty, regular diamond – show you really love her by giving “Forevermark”.
Whether defences such as Forevermark will prove necessary or sufficient to uphold the value of diamonds, time will tell. In the meantime, all eyes remain on Kimberly Process chairman, Mr Yamba.
Will diamonds stay a girl’s best friend, or will they go the way of the mink stole?
No comments:
Post a Comment