By Pierre Delval
Africa is undoubtedly one of the largest reserves of diamonds in the world. Beyond Australia, Canada or Russia, the international sector of finance knows that the Democratic Republic of Congo, Botswana, and South Africa together hold hundreds of millions of carats in their soil. In addition to these three flagship countries, there is Sierra Leone, Lesotho, Angola, Namibia, Ghana and Zimbabwe. Unfortunately, by denial or not, all these countries ignore that their soil, so rich in time, will be worth almost nothing tomorrow if nothing is done today to save it. Explanations.
Such wealth should have long sheltered these countries from need. Yes, but here it is, the mining communities are far from profiting from the riches of their basements, and even less the countries that host them. Very clearly, the diamond sector is characterized by its opacity and by large leaks of money. Hundreds of millions of US $ from the production of these precious minerals are diverted each year via financial arrangements. Some criminologists even speak of US $ 2 billion of rough stones sold under the coat to finish, cut, in the most beautiful jewelry in the world.
The differences are thus colossal between the value of diamonds, declared or not, and that at which the gems are sold on the international market. If the legal exploitation of diamonds is not bad in itself – since it should contribute to the development of many suffering countries – it often maintains in spite of itself this “blood diamonds” market which finances armed conflicts, sometimes certain cells terrorists, and prevent fiscal transparency and the institutionalization of production. The identity of the people who actually control the more or less legal companies in the diamond sector is obviously known, but kept secret by widespread corruption and preciously hidden behind multiple limited companies registered in tax havens.
All this suspicion around the diamond obviously tarnishes the image of this fascinating stone. Its value, for twenty years, has suffered and crumbled over the scandals. Nothing, however, really stands in the way of these practices. If diamond crime continues, another threat further contributes to the collapse of the value of diamonds. De Beers, a South African diamond conglomerate, master of the market for many years, recently flooded all the places in the world with “lightboxes”, these synthetic gems capable of democratizing the jewelry sector. Straight out of laboratories, these « cultured stones » from an artificial mixture of carbon and transition metals under very high pressure and temperature, look like they are mistaken for natural ones.
The only notable difference is its price, ten times cheaper than a mineral diamond. Officially, De Beers presents itself as the white knight of the world diamond market. Thanks to synthetic stones, the gem trade is more transparent and respectful of nature. In reality, far from these marketing considerations, the South African company has felt the tide. The less stringent sales conditions, following a global overstock of precious stones, were supposed to offset the difficult economic context of volatile stock markets and successive trade tensions between the United States and China. With supply and demand no longer there, De Beers quickly realized that it was time to fold the canvas. The figures were confirmed in 2019. The South African producer and trader shows a 17% drop in turnover in the first half. Its Russian competitor Alrosa is experiencing the same difficulties.
Synthetic stone then becomes a strategic alternative capable both of meeting the expectations of international institutions in terms of good governance on the world gemstone market and of maintaining a turnover, strongly impacted by the global overstock of natural diamonds. The result was not long in coming. Mines around the world are closing one after the other or slowing their extraction. For African producers, the situation becomes catastrophic. For the world market, the price of natural diamond is collapsing and its image of safe haven is exploding. Worse still, synthetic diamonds are an inexhaustible source of inspiration for criminal organizations, which see this product as a new eldorado for the online trade in villainous counterfeits. A final plague could give the final blow to the most fragile producer states. The economic consequences of the COVID-19 pandemic catalyze the more worrying situation of the gemstone trade. In March 2020, demand for rough and polished diamonds showed a sharp decline. February’s uncertainty was followed by severe restrictions, even border closings and quarantine measures across the world. Russia’s Alrosa, the world’s leader in diamond mining, has seen production drop by almost 50%. African farmers obviously suffer the same effects.
Paradoxically, COVID-19 could also be a major opportunity for those who know how to exploit it. As the world’s stock markets are in crisis and the barrel of oil collapses to its lowest level, gold is playing its role as a safe haven more than ever. Diversifying investments, especially towards precious metals, is an excellent way to combine prudence and security. However, investing only in gold, platinum or silver can also create a risk of fluctuation in value over time, even if it remains a strong shield against episodes of risk aversion. For individuals or companies, it should therefore be sought to find new safe havens capable of offsetting the more traditional ones. As for the States, borrowing implies solid guarantees. Financial certainties being what they are today, it is worth innovating. It is in this precise context that the mineral diamond can still be successful. Traced, authenticated, classified, certified and transformed into a fiduciary value, the natural diamond becomes a new guarantee tool for central banks and the African Development Bank.
Constrained by strict rules specific to fiduciary instruments, the diamond trust would become a versatile instrument serving two main objectives: to save on the one hand the mining wealth of African States, guaranteeing in part their solvency and therefore their development, and revalue on the other hand the mineral diamond, essential to maintain the transmissibility of the heritage value of jewelry. But most of all, the diamond trust would become a real bulwark against all forms of crimes which serve the unique value of the natural product, and therefore would contribute to the hardening of the criminal laws in the matter and to a more effective fight against corruption and the organized crime. The plate of natural diamonds, constituting a true fiduciary tool and protected by the States which would impose their mark of authority, would in fact become a major stake for the future of Africa. This technical-legal environment favorable to precious stones must lead African States to review their objectives in terms of upgrading their mineral wealth. In such a context, the central and national banks of the producing countries have all the cards in their hands to save the mineral diamond and guarantee the loans, essential for the revival of the economy. Very concrete solutions exist. The MoneXdiam project is the most brilliant example. The ball is now in the court of banking institutions.