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Manufacturing should be in line with market demand

02 may 2017

ernie_blom_xx.jpgErnie Blom, the President of the World Federation of Diamond Bourses (WFDB) for the third term, has served on a range of industry bodies as an executive as well as chairman for many years, including Chairman, Diamond Dealers Club of South Africa; Chairman, Rough Diamond Dealers Association; Chairman, Master Diamond Cutters Association; Chairman, Jewellery Council of South Africa, South African Diamond Board; and is a Special Diplomatic Advisor to the Belgium government on trade with Africa.

An astute businessman, Ernie Blom, President, WFDB, is a third generation diamantaire with his grandfather having entered the industry in the 1800s. Currently, Ernie's son is with him in business as fourth generation heir. Prior to entering the business arena, Ernie became a shop steward at 23 with the trade union South African Diamond Workers Union (SADWU). He rose through the ranks to become the youngest vice-president and a strike leader in the mid-1970s.

Here, in an interview with Rough & Polished, Ernie Blom speaks on various issue currently plaguing the global diamond industry.

Excerpts:

During the Finance Seminar at the Presidents' Meeting in Mumbai, many issues were put forth by the industry as well as the lending banks. But, barring a few banks, most of the banks expressed genuine concern at the state of the diamond industry. Your thoughts?

We did, indeed, discuss many critical issues at the Presidents Meeting. It was also important that we discussed alternative forms of financing for the diamond trade. Our aim is to take this issue forward with task force charged while doing so. We do not want the issue and the potential solutions to slip away out of focus.

The global rough market is reported quite strong and stable at present. How does this reflect on the future polished market? Do you see a sustained growth or will it falter in response to price volatility/market forces?

A strong rough market can be seen as a positive sign that there is demand for goods and that manufacturers are restocking. However, there is often a concern that manufacturers may be purchasing only in order to keep their plants going without strong demand for polished goods further down the pipeline.

On the issue of volatility, this is always a problem because there is so much political and economic uncertainty. But the diamond trade has learned to operate in a prudent way and I hope that is continuing to be the case.

At certain intervals, the Indian diamond industry especially has seen a glut of rough diamonds in the market, which eventually increases stock inventory. Buying for price speculation results as a costly effort, negatively affecting liquidity in the market. Is there a way out of this situation? Your views?

As I have said in the past, our industry members must act in an intelligent and measured manner. Creating an overhang of goods is no good for anyone. It goes without saying that speculation is highly damaging and should not be practised. We believe that manufacturing should be in line with market demand.

Despite steps taken to detect lab-grown diamonds, mixing them with natural stones is still a major issue. Looks like the steps taken currently by the bourses are not strong enough to deter unscrupulous people from doing or repeating the act. A more stringent punishment should be meted out if the diamond industry has to survive; and also to ensure consumer confidence in diamonds. Your views?

The WFDB and its member bourses are monitoring this issue very strongly. We have zero tolerance for this criminal behaviour which is quite simply fraud. People deliberately seeking to gain a financial advantage by passing off lab-grown stones as natural diamonds are behaving illegally.

We take an extremely strong stance on this because the effect on consumer confidence could be disastrous. Many of the diamond bourses have been supplied with machines that can identify synthetic goods.

The WFDB has the power to ban people found to be behaving illegally in one diamond exchange from trading at all of the WFDB's 30 member bourses.

Much has been debated about generic marketing activities over the years. The Diamond Producers Association (DPA) is trying to do its bit, but are we on track to reach the target consumer effectively? Contradictory reports are seen in the media in terms of Millennials' love for diamonds. How serious is the demand situation at present, considering the diamond industry's future is at stake?

Clearly, the next great consumer market is the Millennial generation of 18 to 35-year-olds. Unfortunately, they have had little exposure to diamond jewellery because there has been no generic diamond jewellery marketing for almost a decade.

I believe the DPA is on the right track in concentrating on this segment of the market which is quite cynical about life and what it regards as outdated conventions. It will require a lot of work to ensure that these younger people get the message and to enable them to connect with diamonds. This can certainly be achieved.

Whoever you are and whatever your age, diamonds are still a beautiful object and a store of value as well as symbolising long-term commitment. We are looking forward to the DPA joining hands with the World Diamond Mark and working together to boost consumer demand for diamond jewellery.

The Young Diamantaires Project that was launched last year gave immense confidence to the global diamond industry. While the industry looks towards the Young Diamantaires to take the industry forward, it would be interesting to have a preview of the initiatives that is being planned? Any clues?

As you mention, the Young Diamantaires program had an immediate impact. It was launched less than a year ago in Dubai at the World Diamond Congress, and at its first formal meeting at the September Diamond and Jewellery Show, there was an overwhelming turnout.

In the meantime, the membership of the group is continuously growing. We heard from Rami Baron, the Chairman of the WFDB's Promotion Committee, at the Presidents Meeting in Mumbai in February about how the group is expanding. There is ongoing communication between scores of Young Diamantaires members on WhatsApp about industry issues. In the new 'sharing economy', this is exactly the kind of group that can make a difference to our trade and help take it forward by providing assistance to each other for the good of the industry as a whole.

Like any other industry, the diamond and jewellery industry too is scrutinised and sometimes pulled up by the authorities/regulators globally. The matter gets ugly at times, more because of the unique ways the diamond industry works. Any suggestions on how to establish a much better reputation with the regulators/authorities?

The WFDB, as the world's leading diamond industry organisation, has been in ongoing talks with various bodies. This includes the Financial Action Task Force, for example. We are very proactive in making sure that the industry's voice is heard to ensure that outside bodies and consumers are aware of the steps we are taking and that we are very aware of the need for self-regulation.

We believe that this is important because there are organisations, such as the U.S. State Department, the European Union and Interpol, which are not aware of the emphasis we put on ethical trading, and fighting conflict diamonds and money laundering. It is critical that we have an input and that they are aware of our work.

Wrapping up, with 2017 being the 70th Anniversary of the WFDB, when will the celebrations be held? What programmes /events have been put together for the celebrations? A few words please about the establishment of the WFDB and its progress to date.

We have several celebratory events being held this year. We also aim to produce a book to mark our 70th anniversary.

The WFDB was founded following the Second World War at a time of great uncertainty. The European continent had been destroyed, with enormous damage to infrastructure. Its economies were shattered and international trade had become a laborious and difficult enterprise with slow communications.

In 1947, the World Federation of Diamond Bourses was born. One of the major reasons for the establishment of the WFDB came from America where leaders of the industry saw it as a way of creating a body to speak with a single voice in negotiations with De Beers and other important diamond industry firms and organizations.

The newly formed WFDB met in Antwerp’s Diamantclub on July 5, 1947. The first meeting was attended by just the Antwerpsche Diamantkring CVBA, the Beurs Voor Diamanthandel CVBA, the Diamantclub Van Antwerpen CVBA, the Vrije Diamanthandel NV, the Diamond Dealers Club, Inc., New York, the Diamond Trade and Precious Stone Association of America, Inc. (at that time called the Diamond Center), New York, The London Diamond Club Ltd, and the Vereniging Beurs Voor Den Diamanthandel, Amsterdam.

Today, the WFDB represents around 20,000 members of the diamond industry around the globe via its 30 affiliated bourses members. It's extraordinary to think that around 95 percent of the diamonds traded worldwide are handled by WFDB members. In addition, we now have associate members such as ABN Amro Bank and the GJEPC which recognise the importance of being part of the world's major diamond business body.

Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished

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