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Guillotine at Xmas

By Charles Wyndham.

We are heading into that festive season again.

Festive for some, personally, I find the over exuberance all a bit baffling. Great when I was five or had five year olds, but for adults to actually or figuratively be prancing around wearing funny hats has always struck me as a bit odd.

Still at least it, or much of it, is pretty harmless; and, indeed, our industry benefits from this vortex of self-indulgent consumerism.

So here we are in a traditionally fallow time of the year, waiting for the outcome of Season’s generosity or lack of it.

Whatever hopes there are for the polished market, the rough market is most definitely not in a festive mood.

In part, some of this malaise might be an inevitable reaction to the market getting or trying to get used to changing dynamics.

I read in an article that someone kindly sent me, entitled ‘A Tale of Two Cities’. I did ask who wrote it and where it was published, but did not get a response to the question, so maybe the sender did it himself.

Anyway, the article was making the point about the growing importance of Russia and the relative decline of De Beers or more specifically Gaborone as the new head quarters for De Beers’ sales.

New management in Alrosa has, I read, transformed the company, removing the question marks over how actually transparent their sales system was.

This the article contrasted with the move by De Beers to Gaborone, suggesting that the choice (not that I am sure it is fair to use say De Beers had any choice) of Gaborone, as a bit of backwater highlighted the diverging fortunes between the two selling organisations.

If the new management of Alrosa is bringing the company out into a transparent world, that can only be bad news for those few that so obviously profited from the previous opaqueness, for the industry in general it can only be good news.

Getting to Gaborone is certainly more fiddly for most customers than travelling to London, or Moscow, but frankly so what?

It is simply astonishing that Botswana has taken so long to use its position to generate more local activity.

The recent sales by the Okavango Diamond Company in Gaborone holds the promise to make the whole sales process by De Beers much more transparent and less ‘clubby’, which can only be good news.

Whether Russia represents a few per cent more or less than the production from Botswana is again irrelevant, as the order of any difference is frankly neither here nor there. 

The fact is that De Beers with Botswana, Namibia, Canada and South Africa still controls significantly more than Alrosa, even if it buys the Grib mine.

All in all, this beating of chests is pretty pointless. Surely the important thing is if these two major producers are realistic and transparent in their pricing, this in time is going to help the rough market.

Part of the problem with the market at the moment is the pull back by the banks.

When I read in the Bombay Business Standard that Winsome Diamonds owes around a billion dollars to the banks, who are concerned that to date only one million has been repaid, it is hardly surprising that credit is a bit more difficult to come across.

I wonder how many other such tales, though hopefully involving less earth shattering numbers, might be lurking beneath the surface.

Perhaps some should be practicing how many knots they can knit before the guillotine comes down.