Diamonds: Not forever

A response from De Beers

Published October 25, 2000 7:26PM (EDT)

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I am writing in response to an article by Susan Emerling. The article, while broad-ranging and ambitious in its scope, contains many inaccuracies and several misleading comments.

De Beers is certainly undertaking a period of profound change, a process that started well over two years ago. The central theme of the change has been for the company to shift away from its traditional role of market custodian to one of industry leadership. This process, which has generated a good deal of press coverage, has indirectly invited a degree of comment on the way De Beers might have conducted its business in the past.

The article's portrayal of De Beers as a cartel operating solely in its own interests is a misguided one. It is true that De Beers has, in the past, been responsible for marketing up to 80 percent of the world's rough diamond production. The aim of this marketing process was to provide a degree of stability in diamond prices and to avoid the potentially devastating effects of dramatic price fluctuations. This "co-operative" system operated to the benefit of producers, manufacturers and consumers alike. The majority of the diamonds purchased by De Beers come either from partnerships with producer nations, such as Botswana and Namibia, or direct contractual purchasing arrangements as is the case in Russia. De Beers owns mines only in South Africa.

Contrary to Emerling's suggestion, De Beers boxes sold at "sight" are not non-negotiable, are not purchased on an all-or-nothing basis and are prepared according to orders placed by the various sightholders. De Beers exercises no control over the diamonds once they have been sold at sight, with the manufacture and retail of diamond jewelry carried out by experts with far more specialized skills and knowledge in these areas. The idea that the company controls everything from the stones' removal from the ground to their delivery into the hands of jewelers' is fanciful at best.

In the context of conflict diamonds, De Beers has been rigorous in applying both the spirit and the letter of "Best Practice Principles." This policy aims to ensure consumer confidence in De Beers and the gem diamond industry by setting out a strict code of industry ethics and established principles of business practice. This was conceived well before the issue of conflict diamonds was receiving its current degree of coverage.

Far from being a source of "discomfort," as Emerling suggests, it is De Beers' corporate responsibility to lead the way in the campaign to banish conflict diamonds from the world market. The legitimate industry has acted with unity of purpose and conviction and has already achieved notable results in this regard through its close collaboration with the United Nations and relevant governments throughout the world.

De Beers' efforts to find solutions to the issue of conflict diamonds are far from cynical attempts to occupy any moral high ground in order to create a "marketing virtue" from humanitarian disaster. It is also erroneous and irresponsible to suggest that De Beers is seeking to distance itself from the rest of the industry by becoming a "clearinghouse" for untainted diamonds. The issue has been, and must continue to be, addressed by all members of the industry. However, it is the company's duty to ensure our own house is in order by adhering to best practice principles in all areas. Not to do so would be to fail not only the consumer and the industry but also those affected by the conflicts in Sierra Leone and Angola.

Contrary to Emerling's claims, closest substantiated quantification of conflict diamonds (U.N., industry and independent sources) puts them at no more than four percent of world rough diamond supply -- not 15 percent. The value of these diamonds in terms of world production is largely insignificant, a fact that would seem to undermine her misguided assumption that De Beers would seek to prevent these diamonds from arriving on the open market in order to protect its market share. In fact it is De Beers' hope that the measures currently being implemented will allow the legitimate governments of Sierra Leone and Angola to be able to access their abundant natural resources for the benefit of their respective populations. In responsible hands, the revenue generated from diamond sales has the potential to be a major driving force for prosperity and development in both countries.

On the subject of De Beers' relationship with certain producer nations, Emerling is inaccurate and somewhat behind the times. De Beers only has a contract with one Russian producer (Alrosa). This relationship dates back to July 1990 and is currently in a very good state of health. In Australia, Argyle began marketing its stones through its own system over four years ago and not, as might be inferred from the article, as a recent result of being emboldened by some "weakness in De Beers' fagade."

Finally, it is unfortunate that this article was used to cast doubts on the moral virtue of the late Harry Oppenheimer. H.F.O.'s commitment to a non-racial democracy in South Africa has been well documented as have his progressive, liberal politics. H.F.O. was a tremendous businessman but above all a businessman who was true to his belief that business should not only be profitable but should provide real benefits for the countries in which they operate. As Nelson Mandela said in an eloquent tribute: "His support for democratic and philanthropic causes was in my experience always without hesitation and reserve. His contribution to building a partnership between Big Business and the new democratic government in that first period of democratic rule can never be appreciated too much."

De Beers is committed to achieving standards of excellence throughout its business and also to ensuring that this excellence is translated into tangible benefits in the countries in which it operates. Yours faithfully,

-- Tim Weekes, De Beers

The writer responds:

I contacted De Beers' publicly listed U.S. public relations representative and they refused to confirm or deny that De Beers was their client or to give me any information or an alternate contact.

-- Susan Emerling

By Letters to the Editor

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