Carnage in diamond cutting industry

Despair: More diamond companies continue to lay off workers
Despair: More diamond companies continue to lay off workers

The massive retrenchments in the domestic diamond cutting and polishing industry continues unabated as companies reel from the effects of high rough prices and lack of liquidity.

According to information reaching BusinessWeek, another local cutting and polishing company, Diacore has retrenched 50 employees taking the total number of affected workers in the industry to around 1,000 in the past year.

At its peak, the industry employed about 3,700 workers. Companies that have recently retrenched include Moti Ganz (100), Leo Schachter (100), Eurostar (100), Shrenuj (90) Safdico (30), Zebra (50), Dalumni, Tiffany’s (50) while Teemane (400) and DMB closed shop. Diacore diamond polishing company, which has been operating in Botswana for seven years, employed about 130 people before trimming down the workforce to 80 employees.

In an interview with BusinessWeek, Diacore Managing Director Kfir Teichman admitted that there have been retrenchments within his organisation, but dismissing reports of any plans to shut down their operations.

“Yes, we are retrenching. We do not have any plans to shut down our operations and we are financially stable. That is all I can say to you,” he said.  Employees within the company said even the ones that survived the axe are uncertain of  their futures, as they have been told to stay at home and wait for calls from management.

“I got my package when I was retrenched two weeks ago, unlike those who have been told to just stay at home because they are not even sure if they will get their monthly salaries,” said a retrenched worker who spoke on condition of anonymity.  Industry sources say from the 21 cutting and polishing in Botswana, more than half of them have temporarily stalled operations and sent their staff home.

“Companies are currently not buying the overpriced rough diamonds from De Beers so there is no work for employees to do. About 12 companies are currently not working although they continue to pay staff. The companies are just trying to minimise their losses because they cannot buy the highly priced rough and cut and polish it for a loss.  Any sightholders that are buying De Beers rough are actually just exporting it without cutting and polishing,” said a CEO with a local sightholder, who declined to be named.

Due to depressed polishing prices set against high rough prices, cutting and polishing companies globally are currently facing difficulties with the local industry’s situation, exacerbated by the comparatively higher labour costs.

At the last sight held in Gaborone, De Beers recorded its lowest sales since the 2008 financial crisis as sightholders stated that polishing rough diamonds at current rough and polished prices is unprofitable. The De Beers July sight closed with an estimated value of $200 million with the amount of goods left on the table estimated to have exceeded 65 percent of the initial sight value.  According to Rapaport News estimates, the size of this year’s July sight is the lowest amount for De Beers’ sixth sight of the year going as far back as the global financial crisis in 2008.

Industry sources said rough diamond prices have appreciated by 65% in the last three years, while the polished diamond prices are either stagnant or reduced by 15 to 20 per cent.

In an earlier interview, the Botswana Diamond Manufactures Association (BDMA) Executive Director Pauline Paledi told BusinessWeek that polished prices are in a very difficult phase, noting that international manufacturing centres are very competitive and centres such as Botswana find it more difficult to remain competitive.

Paledi, however, assured that as a body representing the diamond manufacturers, it is their wish to find a solution. De Beers has cut its production target for the year due to the slower demand.

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