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Gaetano Cavalieri: As they say, never waste a good crisis

07 march 2022

gaetano_cavalieri_xx.pngDr. Gaetano Cavalieri has served for more than 20 years as president of CIBJO, the World Jewellery Confederation.

Uniting national jewellery and gemstone associations from more than 40 countries, including Russia, and many of the industry’s major corporations and international associations, CIBJO is the industry’s oldest international organization, having been established in 1926.

In 2006, the CIBJO was the only organization granted the official status of a consultant to the UN Economic and Social Council on the development of the global jewelry industry.

Gaetano Cavalieri kindly agreed to answer questions from Rough&Polished related to the most pressing topic for the world community today – the COVID-19 coronavirus.

What will be the main topics of the CIBJO General Assembly in Vicenza?

GAETANO CAVALIERI: It is important to note that the General Assembly meeting in Vicenza on March 17 is actually the culminating session of the 2021 CIBJO Congress, which took place virtually in November.

We were keen on conducting at least one of the sessions as an in-person event, so that our members could meet physically, after what for many is more than two years.

Thus, because it is associated with the congress, there are a series of items of the General Assembly agenda that are related to the congress itself, including reviews of the discussions that took place in the various CIBJO commissions and committees, and issues related to the governance of CIBJO.

In addition to that, however, we have a number of special events planned, including a focus on the development of the homegrown jewellery industry in Africa, the expansion of CIBJO’s role to cover the watch industry as well, a rebranding of CIBJO, our ongoing educational program for the jewellery industry and more.

How does COVID-19 impact the diamond industry?

On balance, despite the quite precipitous dip that was experienced during the second and third quarters of 2020, the COVID-19 period has proven the resilience of the industry, and the sustained public confidence in the products we sell. Indeed, one could argue that the initial slowdown, which of course was accompanied by the moratorium on rough diamond purchases by the Indian industry and the deliberate reduction in sales by the mining companies, had the effect of returning a healthier balance in the pipeline.

But it’s absurd to credit a health crisis for a more healthy market, but what the COVID-19 crisis clearly did was provide a warning light to an overheated industry, and some time to institute a series of moves that reduced the overhand of rough and helped return greater profitability. As they say, never waste a good crisis.

Will the diamond market face obstacles on the way toward stabilization?

Fundamentally, our situation is good, but we should realize that certain of the conditions that enabled us to recover so quickly from the initial COVID lockdowns were temporary.

We clearly benefited from consumers looking to use disposable income during the period and finding that their choice among the array of luxury products and services was more limited, given the unusual circumstances. For the past several years, jewellery in general and diamond jewellery in particular has competed with the travel and tourism sectors, but they have been very badly impacted by the pandemic, and we picked up the slack.

That will not last, however, and people will begin traveling again. We will need to work hard to attract the consumers’ business.

Do you expect the situation with the diamond supplies will remain tough?

COVID-19 has caused a series of disruptions in almost all supply chains, brought on by a series of interconnected events, including logistic backlogs, staff shortages and more. To the degree that these have affected diamond supplies, one will expect them to be alleviated with time.

What we should be cognizant of is the fact that the disruption caused by the pandemic may last longer in many of the mining regions, where vaccination rates are significantly lower.

Don’t you think the lab-grown diamonds present a real danger to the natural ones in the midterm perspective?

I think we have to rid ourselves of the mindset that natural and laboratory-grown diamonds threaten each other. They are different jewellery product categories, and they only pose a reputational threat when they are deliberately or inadvertently confused with one another.

Laboratory-grown diamonds are now a fixture in our industry, just like pearls and coloured gemstones, which also can be produced synthetically. They are priced differently, have a different value proposition, and generally are purchased for different reasons.

We should be spending less time considering threats, and more on how we may use a larger and more diversified product range to increase the number of consumers we appeal to.

What could you say about the main trends in jewellery trade?

Each of the following long-term trends is worthy of a long discussion by itself, so I will just list them right now: (1) the growing digitization and use of developing technologies like artificial intelligence and virtual reality, which create a range of opportunities, in terms of e-commerce and marketing, as well as planning and decision making; (2) consumer demand for greater sustainability and traceability in our supply chains; (3) the continuing rise of China, which in the space of a decade or so will be the world’s largest economy and consumer market; and (4) the growth of a more affluent middle class in regions that were once off our radar, like Sub-Saharan Africa.

Do you share the view that banks are stepping away from the diamond sector because of its perceived association with money laundering and terrorist financing?

There clearly is an issue and not one that is entirely of our making.

By their nature, diamonds will always pose a perceivable risk – not because of anything that we necessarily are doing, but because they are fungible, easily transportable and high in value. Those are their physical characteristics, and they are not going to change.

So, the question is whether the banks consider it worth their while to serve the diamond industry, knowledgeable that they have to remain within the regulatory framework imposed by Basel IV. From their perspective, it’s a question of potential revenue, and here we are hamstrung by our size. I would argue that the oil and pharmaceutical industries pose a considerably greater risk than do diamonds, but they are also much larger than us, and the banks cannot afford to ignore them.

So, we can work toward nurturing a number of amenable banks, collaborating with them to develop mechanisms that mitigate risk, like responsible supply chain due diligence, or the use of blockchain-enabled traceability systems. But at the same time, we need to encourage the development of alternative financing facilities. We also need to change the paradigm by which the midstream of the industry, where profit margins are the tightest, carry the most responsibility for financing all other players.

Alex Shishlo for Rough&Polished