Blog

Crumbs of Heresy

By Charles Wyndham.

The second full tender by Okavango Diamond Company in Gaborone has presumably come to an end.

I would hope that they review their decision not to publish the results and also if they do decide to publish, do so in as open a way, as they did when they announced the results of their trial tender.

However be that as it may, now that there have been two tenders, I have asked around a bit as to the reaction to the tenders.

The feedback that I have received has been overwhelmingly positive.

The presentation of the goods, the tender mechanism and how clients are handled, have all been commented upon most favourably.

In short, it would, at this early stage, appear to have been a rip roaring success, so much so that it raises some rather delicious possibilities.

The amount of time that I have over the years had to ‘defend’ the tender process from those that perceived it as the harbinger of Armageddon is too boring to think about.

To hear that there are some significant sightholders who are actually suggesting that it might not be a bad idea for all the Debswana production to be tendered left me with a frisson of surprise at this heresy.

One argument put forward is that in a tender scenario there would be no pressure to buy when you did not want to.

The sightholder system of De Beers selling every five weeks or so was developed for the benefits of the most efficient cash flow for the mines, not for the efficiency of any cutting factory, that was a raison d’être tagged on later.

The sightholders have in the past have been happy to rub along with this process as they made eye watering amounts of money.

The days of excessive premiums would appear to be over, in which case sightholders must be right to examine the advantages of being a DTC customer.

That one sightholder has recently publicly delisted himself from the DTC list of clients says a great deal.

It must be stressed that I do not know all the ins and outs as to why this particular sightholder decided to leave the DTC’s club, but it does show a surprising and pleasing independence of mind.

It might be prescient of him knowing that the days of milk and honey are over and if that is the case, why go through the hassle of being a client with all the form filling and expensive sycophantic gamesmanship?

Also, now that De Beers no longer sells Russian rough there are chunks of the diamond spectrum that are not heavily represented in their production profile.

Whatever the specific reasons, the fact that any sightholder has decided to walk away from the Club and do so publicly, says, I think, a great deal and is not something that anyone was forecasting, and, maybe there might be others that follow?

The sightholder system has in the past singularly failed the producers and now it is apparently failing the buyers and even De Beers itself, as it is a very costly mechanism, especially when it ended up with De Beers having no idea how to price its diamonds.

At long last we might be seeing the cracks that appear in the wall that has for so long blocked real change in our industry.

As Edmund Burke wrote, ‘A state without a means of change is a state without the means of its conservation.’

Building a credible tender system for Debswana’s production, will hopefully provide a means of change, which will firstly allow the country to rightfully achieve the highest price that anyone is willing to pay for its diamonds, bring transparency into the market, and, maybe even change the fortunes of De Beers, which have become moribund.

In the process even sightholders, or those sightholders who want to and who are competent enough might also benefit as the cake is allowed to grow, rather than everyone’s energy being wasted trying to make sure that no crumbs fall to anyone else.