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South African Diamond Cutters Turning Into Dinosaurs.
South Africa’s diamond cutting firms are shedding jobs as they grapple with squeezed margins in a sector the government hoped would expand and create more employment.
Diamond officials told Reuters today nearly a fifth of cutting and polishing jobs had been lost in Johannesburg, center of the industry in South Africa.
"We have been faced with huge retrenchments since January.
To date we have had retrenchments of around 400 members," said Shadrack Motloung, of the United Association of SA trade union, which represents diamond cutters.
That has brought employment in Johannesburg down to around 1 800 cutters, with around 600 cutting jobs elsewhere in the country where the situation is not as serious, he added.
The government is seeking to boost local diamond cutting as part of a wider strategy to reduce exports of raw materials from its mining industry and process them locally to boost jobs and economic growth.
A new diamond law passed last year, but not yet implemented, will create a state diamond trader to expand the supply of rough diamonds to new cutting and jewelery firms.
The head of a major diamond cutting factory in Johannesburg, who declined to be named, said there was a imbalance between the high price of rough diamonds and revenues from selling the finished product.
"In general there’s still good demand, the problem is that people are not prepared to pay. The rough prices in certain categories are very expensive, it’s just not profitable," he said.
His factory, one of the largest, has shrunk its workforce by natural attrition, but might have to start forced job losses if the business fails to improve.
"We still have to watch the situation, if things deteriorate we might have to take other measures to take care of the business," he told Reuters.
De Beers, the world’s largest diamond producer, warned in late July that higher interest rates, rising fuel prices and geopolitical instability would make it tough for its second half sales to match those of a year earlier.
In May, an official with De Beers marketing arm, the Diamond Trading Company (DTC) told Reuters a price rise for rough diamonds of just under 2% in February may have weakened sentiment among cutters and jewellery makers.
De Beers is 45% owned by mining group Anglo American.
The Johannesburg manager of the diamond cutting factory said he hoped De Beers would take some action to lower prices, but prices were unchanged at a sale last week.
"Maybe they can do something because prices are too high at the moment. Most people are unhappy," he said.
MacDonald Temane, chair of the South African Master Diamond Cutters Association, said a delay in putting in place the government’s new diamond law was not helping the industry.
"There’s really been a bit of a destabilising effect where there is uncertainty because implementation has not happened.
People don’t like uncertainty," he said.
A source in the mining ministry said there were many elements of the complex diamond law that had to be put into place, including input from the National Treasury on a proposed export duty. The law might be implemented by the end of year or early next year, he said.
These retrenchments and layoffs in the Diamond Cutting Industry in South Africa come as no surprise to me. It has already occurred in other major Diamond centers such as New York, Antwerp, and Israel. The high cost of diamond rough coupled with the non-commensurate sell prices of the polished diamonds combined with the cost of labor has made diamond manufacturing a money losing proposition. Major diamond cutting centers have now gravitated and taken root in India and China where the cost of labor is cheap and the labor force highly intelligent and motivated.
Here in New York, for example, the number of experienced and highly competent diamond cutters is but a fraction of what it was back in the 80's when I worked at the bench. The uncertainty of having consistent work/income is driving young people away from considering this noble profession.
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