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Tracking the provenance and lifecycle of a product is a natural and necessary evolution in our industry

28 may 2018

marcus_ter_haar_xx.jpgA senior executive with a demonstrated history of working globally at management and board levels, Marcus ter Haar has been the Managing Director at Okavango Diamond Company (ODC), Botswana for about 10 months now, prior to which he held the position of Deputy Managing Director for more than 5 years. Before joining ODC, he did a stint as Head of Sales & Marketing with DTC, with responsibility to deliver diamond sales to Botswana based diamond cutters and polishers and define strategies for Botswana diamond beneficiation.

With a PLD from Harvard Business School; MA International Relations from Reading University and a BA Economics & Politics from University of East Anglia, Marcus has also acquired adequate experience in Governance, Risk, Business Planning, Management, and Business development in various positions over the years.

Marcus is also volunteering for more than 9 years now as the Secretary and Board Trustee at Khama Charitable Trust, which is a donor and fund-raising organisation supporting the upliftment of women and children in marginalised sections of Botswana Society.

In an interview with Rough&Polished, Marcus ter Haar speaks on all you wanted to know about ODC and more…

Some excerpts:

Though most of our readers may be aware of Okavango Diamond Company (ODC), please walk us through from the company's journey from 2013 till date?

Okavango Diamond Company’s (ODC) true inception on paper was actually in 2012. It was then that the former Managing Director Toby Frears invited a small team of executives to build the company from the ground up. At that stage, the company was working from a small leased office and we only had a strategy document to work from. In the first few months, our time was spent equipping our facility, hiring the first round of employees and putting in place all the systems, processes and policies which would eventually allow us to launch our first sale in 2013. At the launch event, we only had 50 customers registered. Since then the company has grown from strength to strength and today we have 2 sales channels (Spot Auction and Term Auction) over 500 registered customers and are selling in the region of $550 million of Botswana diamonds every year. Our focus until now has been to ensure that we win the trust and respect of our customers and the wider diamond community, to be recognised as a credible and progressive global rough diamond trading company.

In the last few years with the establishment of a number of new diamond mining houses, the mining and the wholesale rough trading segment of the pipeline has become far more competitive. This is a healthy development because it has led to a realignment in the balance of power towards rough buyers who now have multiple sources and purchasing opportunities around the world. It has always been important for us to, therefore, ensure that attention was paid to building a company with good standing and one which our customers can trust. It is also a gentle warning to all direct source suppliers that we must be highly customer-centric if we are to earn the respect and loyalty of the mid-stream.

Can you give us an idea of the product range of ODC? What is the marketing pattern of the company and in which trading centres do you operate? What benefit and convenience does ODC get in each centre? Please elaborate.

ODC sells 15% of the full range of Debswana production. We have built our sales lots based on generic and recognisable market assortments in a way which allows us to offer scale and consistency to a diverse group of customers. We sell in excess of 100 lots every 5 weeks and these represent all categories from the smaller cheaper ranges to the large iconic and rarer single stones. The Botswana production profile allows ODC to service a very wide selection of buying preferences and we are fortunate to have access to a healthy selection, the large, high value, high-quality stones which Botswana is becoming increasingly well known for.

ODC has chosen to sell by two core methods, which are the ‘Spot Auction’ and the ‘Term Auction’ what is known more commonly as ‘Term’. The Spot Auction is a regular 5 weekly event at which ODC markets its portion of the full range of Debswana production available. Occasionally we also expose our goods to other countries and currently, these two markets are only Israel and India. The goods we show in each of these Bourses are a broad reflection of the buying preferences of our customers in those centres. In Israel, for example, it is typically the larger gem ranges which appeal to the local buyers. All goods, however, are ultimately returned to Botswana for Auction sale and export.

ODC currently purchases up to 15% of Debswana production and our Term Auction offering is limited to the smaller cheaper goods where we have sufficient volumes of diamonds to sell on both the Auction and Term platforms. We have been doing our best to react to customer needs and will continue to refine our Term sales to try and sell more goods through this channel as several customers have expressed interest in committed supply in additional ranges of goods.

Help us with approximate details of the quality/volume of goods that are generally traded during each sale in each centre. Do you decide on the quality/volume, etc., after prior market /demand study? How does it work with your company?

ODC Sales are all conducted online and hosted in Botswana. The goods are then sold and shipped from Botswana to our global customer base. It is important to us to ensure our customers receive a regular feed of goods. Where possible we will try and make everything in our intake available for sale to our customers given that they have been demonstrating healthy demand for our product.

In terms of where our diamonds are exported so far in 2018 within our top 3 destinations is UAE currently representing our biggest share with 34% of our diamonds followed by India at 33% of all exports and finally Belgium at 24%. We operate a fully open market system, so nothing is predetermined before ODC auctions and the customers will determine what prices diamonds are sold for and where they are sent for processing.

Can you give us more details on The Spot Auction & Term Auction of your company? How does it work and how is it beneficial for the buyers? Do you provide information about the assortments/prices etc. in advance to prospective buyers? Please give more info.

We chose an auction model because it remains for us the most transparent, efficient and fair sales process in the market and instills a sense of confidence among those participating. The Auction also empowers our customers through the level of visibility and information we share throughout the viewing and auction process.

Our Spot auctions are held every 5 weeks. In advance of the auction, all our customers are invited to view our production in Botswana. The auction is held over the course of approximately 2 hours and the full range of production is made available to bid against.

We also offer information and analysis on the make-up of the lots on offer for even greater levels of transparency.

The idea of using Blockchain technology in the diamond industry is picking up of late, to maintain digital record transfers as well as decentralize the register that shows the journey from rough to polished. What's your thoughts on the need for 'Blockchain' for the industry, especially during these difficult times?

The idea of tracking the provenance and lifecycle of a product is a natural and necessary evolution in our industry if we are to win the hearts and minds of consumers both now and in the future. The underlying philosophy is that individuals want to have trust and pride in the products they buy, and we are still fighting to reverse many of the negative legacy perceptions of diamonds which still, unfortunately, exist amongst our consumers. Any means to re-establish confidence can only be seen as a positive step forward.

The entire industry will be driven to guarantee provenance over time simply as a result of diamonds needing to keep up with consumer trends. There are many exciting ideas being piloted as we speak such as GIA Mine to Market Programme and various other blockchain frameworks but there are also seemingly further developments which are required in the Blockchain space to guarantee a totally watertight system. I have every confidence that the pace of innovation in this space will soon overcome any doubts people may have in the current Blockchain systems being piloted.

Dubai is growing by leaps and bounds as re-export hub for its gems, looking to even outdo the leader-hub Antwerp. How fruitful has it been for ODC in its business by partnering with Dubai?

Dubai must be acknowledged for all they have achieved in such a short period of time. There are certainly benefits to doing business in Dubai and we have seen the city develop significantly as a financial and trade hub over the years, especially in the context of diamond trading. ODC has witnessed a growth in our rough exports to Dubai over the last year to 18 months and will continue to monitor this trend and other developments in the future.

ODC is reported to have posted a 4 percent jump in sales to $567 mn, selling 3.41 mn carats in 2017, the highest since 2013. What's your expectation for 2018, given the slowdown in some consumer markets?

It has always been exceptionally difficult to accurately predict the performance of the diamond market owing to the volatility that the sector has experienced consistently in the last few years. For that reason, we are focused more on a short to medium term view of the market. We currently find ourselves in a period of healthy demand for rough albeit if the rough can be found at the right prices. This is a slight deviation away from the typical trend of slowing demand around this time which seems to reflect a hunger for rough which has been sustained post the typical first-quarter rally in the market.

Since 2016, in business terms, how effective was ODC displaying diamonds for viewing in the SNZ (at the Bharat Diamond Bourse) in Mumbai, India? Would ODC consider direct sales if India's 'Tax structure' was rectified to facilitate mining companies?

It is important for ODC to remain relevant to buyers all over the world and it is for that reason that we undertake viewings in Mumbai from time to time. It has been very useful for us not only from the perspective of generating customer registrations but also exposing our product to other buyers in the market. Currently, ODC has no plans to change its current model of selling goods directly from Botswana.

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