- Younger consumers suspect the real gems are tainted with blood from the war
- But Botswana could benefit from the disruption caused by the war, albeit briefly
The diamond industry is closely watching the movement of the market towards synthetic diamonds. This is the case as younger consumers gradually gravitate towards man-made products and away from real rough gemstones which they now deem blood diamonds because of the Russian invasion of Ukraine. This war is also affecting supply of smaller stones in the market and has highlighted geopolitical challenges among the top priorities of the industry.
Speaking at the Investing in African Mining Indaba in Cape Town South Africa last week, the CEO of a diamond mining research institute called Veracity Worldwide, Steven Fox, said synthetics are now starting to get considered by younger people and warned that the world may start to shift towards them.
Fox added that the diamond industry has already begun to suffer as it has been battling this trend for some time. “Young consumers now associate Russian diamonds with blood diamonds compared to lab-grown diamonds that claim to be more ethical,” Fox noted.
He said the diamond polishing industry could also take a hit because of the uncertainty of availability of certain gems in the market, especially smaller carat diamonds. This, Fox added, is a challenge for African countries seeking to expand their participation in the polished diamond space. “The real shift to watch is market movement towards lab-grown diamonds rather than market share within the natural diamond space,” he said.
Operations of the diamond industry also face a threat of disruption because of supply chain challenges caused by the war. Fox emphasised that this could affect political stability across Africa which could affect operations of the industry.
He stated that Russia’s invasion of Ukraine has triggered an increased focus on geo-political factors because of global commodity and supply changes that are causing panic for investors and businesses. These now top the risks to business but are also not easy to solve. Fox believes it is because there is no indication of how and when the war in Russia will end. “This is difficult to plan for, understand and navigate,” he said.
Even so, he encouraged the mining industry to dramatically manage their supply chains, financial transactions and expectations for certain end markets as a result. These too though will birth new challenges for businesses, such as understanding current social and government challenges, as well as stakeholder factors contributing to the current operating climate.
Meanwhile, the Managing Director of Okavango Diamond Company (ODC), Mmetla Masire, told The Botswana Gazette on the sidelines of the Indaba that ODC will benefit temporarily from the war while smaller stones supplied by Russia remain unavailable. Botswana could piggyback of this disruption caused by the war by supplying the stones.
“In the short-term, we believe our sales will be stable, maybe even improved, because of a shortage of smaller stones from Russia,” Masire said. “In the long run, however, this is not a good thing for the market because synthetics could quickly capture that space.”