RAPAPORT... The fact that the sale of the Letseng Legacy, the world’s eighteenth-largest diamond, was held in Antwerp is seen as a reassuring sign of the city’s continued dominance as a world diamond center. Although the Antwerp World Diamond Centre (AWDC) was doing all it could to make sure the stone would be offered for sale in Antwerp, it didn’t have any real say in the decision. The fact is that if it had not been more profitable for the sellers to come to Antwerp, they would have gone elsewhere.
Gem Diamonds recovered the 493-carat Letseng Legacy in September 2007 at its Letseng le Terai Mine, which has produced three of the world’s 20 largest diamonds. Gem Diamonds owns 70 percent of the mine in partnership with the Lesotho government.
If not in Antwerp, where else?Clifford Elphick, chief executive officer (CEO) of Gem Diamonds, explained the decision to sell in Antwerp. “We’ve been assessing carefully the opportunity to sell our diamonds in the best place for us, that is, the place where we could get the most profit out of our stone.”
“Antwerp is where we had to sell the stone,” added Ralechate Lincoln Mokose, Lesotho’s Minister of Forestry and Land Reclamation. “This time, 31 companies examined it, that is 50 percent more than last time [when the Lesotho Promise was sold in Antwerp in October 2006], and we’ve received a dozen bids, which is very good. A large part of the proceeds will go to our national fund for education and it’s our intention to come back very soon with new big stones, not to mention, of course, the smaller ones.”
Infrastructure is KeyThe key element in Gem Diamonds’ choice of Antwerp is its infrastructure. It is an infrastructure that has been famous for so long that the Antwerp community feels it is often overlooked and not exploited as much as it should be in promoting the city as a diamond center.
That advantage is not lost on Roger Davis, chairman of Gem Diamonds. “We are here because it’s where our clients are. Had we chosen any other diamond center, 90 percent of the bids would have come from Antwerp-based companies anyway.” Elphick continued: “We’ve come here because we want to make it as easy as possible for the Ehuds, Dilips, Johnnies or Kaushiks to buy the stone with peace of mind. Antwerp is the only place where they can at the same time — or within a few minutes — look at the stone, ask their banker to come over and glance at it and call for their chief polisher and ask for his advice. Similarly, the insurance company is around the corner and ten minutes after the sale’s complete, the stone can be in the polishing facility.”
Supporting the Social PlanAnother not-so-spectacular aspect of Antwerp’s identity crisis is the small, minor arguments that at the end of the day are shaping up Antwerp’s political, economical and social model for the next decade.
In the wake of their legal challenge to Supplier of Choice (SOC) II, the new leadership of the Belgium Polished Diamond Dealers Association (BVGD) has decided to file a class action suit contesting the Social Plan and its tax. The Social Plan is part of the 11-point agreement signed in 2006 by the AWDC and the Belgian government. The agreement, designed to provide for and assure the future of the Antwerp diamond center, provides for a 0.03 percent tax to be levied on all rough and polished trade.
Philip Claes, spokesman of the AWDC, explained that the Social Plan is meant to reduce the compulsory social contribution of the diamond manufacturers, thus promoting employment in the Belgian diamond industry and, on the other hand, to help the industry workers socially, for example, by insuring them in case of hospitalization.
Previously, rough imports were tapped for the tax; now the entire trade is affected. The amount raised by the tax is estimated at somewhere in excess of $7 million annually.
The BVGD claims that there’s ground for taking legal action against the plan as unconstitutional. Furthermore, said the BVGD, “we remain convinced, as we were in 2002, that subsidies are an inherent waste of money because it amounts to taking funds from sound companies and throwing it into economically nonviable ones. Market and economic laws are the only forces that will keep companies healthy and profitable.” In fact, diamantaires feel that the levy comes at an inappropriate time and doesn’t take into account the structural weakening of the diamond polishing force in Belgium.
The subscription phase to the BVGD class action is open for a period of two months and will close on January 12, 2008. It’s expected that between 30 and 50 diamond companies will participate and join in the suit.
The AWDC, as a signatory to the original agreement that created the tax, didn’t take a position on the suit. Stephane Fischler, an industry representative, urged the BVGD board “to come to its senses. I’m convinced that they will act responsibly and fullfill the commitments they — as well as all of us — made when signing the agreement with the government last year.”
The Marketplace• 1 to 2 points are moving steadily.
• 3 to 5 points are a little slower.
• 5 to 8 points in full cuts are doing better.
• 6 to 10 points are steady.
• 20 and 25 points are doing okay, except in the piqué areas.
• Clean goods in 30, 40, and 50 in I-K to 3-grainers are doing well. For the rest, people will buy just what they need and avoid unnecessary stock.
• 4 grainers are moving well.
Article from the Rapaport Magazine - December 2007. To subscribe click here.