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Keeping global supply chains functioning vital – De Beers

11 may 2020

david_johnson_xx.jpgDiamond giant, De Beers has said that it is essential to keep global supply chains functioning in view of the substantial impact of Covid-19 on the industry.

Group spokesperson David Johnson told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that although the current situation was challenging for all parts of the value chain, there is need for shared solutions.

He was commenting on recent advise by the Gem & Jewellery Export Promotion Council (GJEPC) and other Indian trade bodies for the Asian country’s diamond sector to halt rough diamond imports for 30 days starting mid-May.

Meanwhile, De Beers said that all of its upstream operations have either returned to work or will do so in the near future, although they are all operating at reduced levels.

What is your comment on the possible ban on rough diamond imports in India?

While we understand that the current situation is challenging for all parts of the value chain, and that there is a desire to protect people from its impacts, we see this as a shared challenge that requires shared solutions. Keeping global supply chains functioning is vital, especially at a time like this, and preventing businesses from purchasing in the event that they have demand would be counterproductive. Meanwhile, there are many people in communities around our operations that rely on diamond revenue to support their health and wellbeing, just as there are in other parts of the world. We believe it is important for the industry to be able to function normally to ensure all those who rely on it can be supported as well as possible.

What is the level of impact caused by Covid-19 on the diamond sector?

COVID-19 is having a substantial impact on the diamond industry, just as it is on many industries around the world. The lockdowns in various parts of the globe are affecting all segments of the value chain, meaning that levels of trade have seen heavy reductions. However, we are now starting to see some markets move out of lockdown, and the indications from locations such as China are positive – consumer traffic and spending have returned more quickly than many people anticipated, and there has been good demand for diamonds. As the current crisis has also been one in which the value of meaningful personal connections has been amplified, we believe that diamonds will have a significant role to play in people’s lives as we emerge from the current challenges.

What is the current state of your upstream operations?

All of our upstream operations have now either returned to work or will do so in the near future, although they are all operating at reduced levels. De Beers Group recently published revised production guidance for 2020, noting that we will reduce production by seven million carats (from 32-34 million carats down to 25-27 million carats). This will remain subject to continuous review.

When do you expect to fully resume your operations?

At this stage it’s not possible to say precisely as there remain several variables that could affect the situation. We will continue to monitor the situation closely and respond as appropriate, with an ongoing focus on taking responsible, long-term decisions.

There are media reports that indicated that you allowed 100% deferrals at the fourth sight and buybacks of up to 30%. What is your comment on this?

We remain focused on providing flexibility for our customers during this challenging period, just as we have done during previous challenging periods. We recognise that our customers are also dealing with an extraordinary and unprecedented situation, so providing maximum flexibility in purchasing arrangements has been a key part of our approach.

Why did you decide to temporarily put on the back burner the application process for new sightholder contracts?

We understand that during the current situation it’s important for customers to be able to focus on their core business, so we have temporarily put the application process on hold.

When do you expect to resume this process?

We are continuing to monitor the situation closely and will let customers know in advance once we are set to reopen the application process.

What sort of changes are you considering for the new sightholder contracts?

The current Sightholder contract is due to come to an end in December 2020, so we will be moving into a new contract period from the start of 2021. As part of this, we have reviewed the approach during the current contract and are making adjustments to ensure the new contract evolves just as the external environment has. The new contract will see the introduction of different types of contracts for different types of customer (manufacturers, dealers and integrated retailers) so that we can best meet the needs of each business type.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished