Amongst the clauses of the new agreement between De Beers and government that were made public recently, is one that will be of critical importance for the recovery and future of the precious stones.
The two long-term partners have agreed to “co-invest in marketing initiatives to boost diamond demand”.
De Beers and government will annually agree on marketing investment to boost natural diamond sales, with their financial contributions determined by the proportion of their shares of Debswana’s supply.
While the specifics of this clause have not been disclosed, the arrangement refers to something De Beers frequently calls “demand creation,” a vague sounding principle, but one that underpins everything diamonds have done and will do in future for both Botswana and De Beers.
Other clauses relating to investing billions in expanding Jwaneng and Orapa, sharing allocations from Debswana, jointly exploring for new diamond discoveries across the globe and establishing a P10 billion Diamonds for Development Fund, are impossible without the nebulous and even unremarkable-sounding “demand creation”.
De Beers CEO, Al Cook, recently briefed an audience on “demand creation”.
“We really need to focus on creation of demand,” he told a diamond conference in Antwerp last November.
“Both supply and demand are important, but demand comes ahead because there’s no need to create something for which there’s no demand.”
While all studies into the long-term fundamentals of natural diamonds show that demand will outstrip supply, with no new major discoveries in recent decades or forecast soon, in the short to medium term, the industry is battling with oversupply.
Weakness in Chinese demand, previous uncertainties in the US economy, the ethical pushback against Russian diamonds and most importantly, the incursion of synthetics, have resulted in the build-up of significant inventory in the midstream and within producers such as De Beers.
Clearing that inventory and thus resuscitating production, will require demand creation.
Annually De Beers spends up to $120 million and more in marketing natural diamonds, with much of this invested in intensive campaigns focussed on the period between Thanksgiving in the US and the Chinese New Year, which represents the peak retail period for diamond jewellery.
Besides this, millions of dollars more are spent in research and forecasting of the shifting tastes and demographics in the market, as well as the geography of demand, to better focus the marketing dollars.
The unremarkable clause in the new agreement underlines what the industry calls category market, which involves diamond producers, retail jewellers and now, countries such as Botswana, linking up to promote natural diamonds. Industry leaders acknowledge that over the decades, individual companies instead prioritised marketing their specific brands or products, a focus that left the industry open to synthetics and other non-diamond jewellery.
Even before the demand creation clause in the new agreement, the Natural Diamond Council (NDC), the apex global body for marketing natural diamonds, approached producer nations, including Botswana, to financially contribute to a massive campaign to resuscitate demand for natural diamonds.
“Establishing a diamond mine is a 10, 20, or 30-year project and it is very expensive, but at the same time, a small part of that investment must be spent to make sure someone is a consumer of those diamonds,” David Kellie, NDC CEO told Mmegi.
“There’s no point to that 30-year investment if you are not investing in making sure the output is going somewhere and is profitable.
“That is a growing recognition and that is why 2025 will be a critical year for us.”
The Jewellers Association of America, founded in 1906, represents the important independent jewellers who, besides anchoring sales in the us, are responsible for intimate, paradigm-changing purchase decisions in the world’s largest market for diamonds.
President and CEO, David Bonaparte, recently said the Association would be stepping up its educational campaigns amongst members to enhance their understanding of the difference between naturals and synthetics.
Bonaparte said producers and companies need to finetune their marketing of natural stones as well.
“There needs to be a strong effort in marketing the difference between lab-growns and naturals that will prop up the naturals and that requires a lot of dollars,” he told a recent webinar monitored by Mmegi.
“It has to be done at an international level.
“The word for the year is education and making sure your consumer is educated on the facts and what the value is for the consumer.”
Bonaparte has already seen positive changes in the network of independent jewellers in America.
“Independents are starting to do more disclosure around lab-growns and naturals and they are realising that when they explain that difference, they see their sales in naturals increase especially in engagement rings which is the most special thing you can buy a stone for.
“We are providing education and material to independent retailers to help them explain this value and I think with that you see naturals begin to get back, while lab-growns get into their own category,” he said.
The efforts are supported by President Duma Boko, who recently spoke about the importance of marketing the story and real-world good done by diamonds for countries such as Botswana. Since ascending to the presidency, Boko has participated in several engagements where he has gone to bat for natural diamonds, the stone that built the country.
“We face an unstable market that at the moment is somewhat unresponsive,” he said at the recent signing of a new deal with De Beers in Gaborone.
“We face challenges of fake diamonds euphemistically called lab growns.
“The genuine article is the stone that we mine from the bowels of the Earth in Botswana that carries the history and story of our people.
“We must, from here, go out and tell the story of these diamonds, that they come from Botswana, a country of strong democratic institutions and a democratic culture.”
Minerals and Energy minister, Bogolo Kenewendo, said while there was an acknowledgment that the budget was facing headwinds, there was a commitment from Botswana and other diamond producing countries to contribute to marketing efforts.
While Botswana traditionally produces about two-thirds of De Beers’ annual production, the company also has mines in South Africa, Namibia and Canada.
“Every country has to contribute a certain percentage even to the NDC.
“I understand that times are tough but we have to ensure that the resurgence of the diamond market happens and we will be tapping into the coffers at all the business levels.
“We have also received proposals from the industry to participate in category marketing because they realise that for consumer demand to go up, we all have to contribute,” Kenewendo said at the De Beers’ signing.
It is an effort many agree is required in the natural diamond industry’s fight to not only recover but regain lost ground.
“The market projections are that we will start to see an uptick by July,” the minister said.
“By the end of the year, the projection is that there will be a better performance in the market that can hopefully pick some of the stockpiling in the downstream and some of the lag in the mid-stream.
“We are focussed on driving marketing to drain up some of the stockpiling in the market.
“Our challenge is to rebuild within the structural change that the industry is going through from the lab-growns to the slow growth in China.
“However, we saw a bit of positivity coming through from the US market in January and we hope it will continue to throughout the year.”
