De Beers' Penny: Make stores compelling

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De Beers' Penny: Make stores compelling

Urges industry to consider currency change

By Michelle Graff

February 12, 2008

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Tel Aviv, Israel—De Beers Group Managing Director Gareth Penny said on Monday that retailers' poor store environments, particularly among major U.S. chains, are one of the main problems confronting the diamond industry today.

He also called for the diamond industry to begin using a currency other than the U.S. dollar, which is now weak worldwide, as its base for trading.

Calling out U.S. majors specifically for having "uncompelling selling environments," Penny said that while there are other problems in the diamond pipeline, the "rubber hits the road" at the retail level, where storeowners are not creating stores that make consumers want to shop.

Penny was one of the speakers on the first day of the Third International Rough Diamond Conference, being held at the Dan Panorama Hotel in Tel Aviv on Monday and Tuesday.

In his speech, he outlined all the challenges the diamond industry is facing, as well as the successes it has had in the past five to 10 years.

In addition to highlighting retail issues and a weak dollar, Penny also said there has not been any significant, new discoveries of major diamond mines since 1990; costs, such as oil prices, continue to rise; the negative effects of the electricity crisis in South Africa; the weak overall U.S. economy; decreasing liquidity and rising bank debt; commoditization and price competition; the diamond industry's reputation and increasing competition from other luxury goods, such as expensive vacations and electronics.

Penny also said the industry's achievements in recent years are that supply has increased; safety at mines has improved; technology continues to advance; demand is growing specifically in China and India; De Beers now has partnerships with "civil society," with 74 countries now involved in the Kimberley Process; the emergence of brands and greater transparency and accountability in the industry, of which the Kimberley Process is an example.

Other highlights of the first day of the diamond conference included:

* Penny, as well as Israeli Diamond Institute Chairman and International Diamond Manufacturers Association (IDMA) Vice President Moti Ganz and IDMA President Jeffrey Fischer called for the diamond industry as a whole to pull together to market diamonds. Ganz specifically said producers should set aside 3 percent of their budgets for marketing.

* Several speakers mentioned the emergence of African governments in ensuring that their country's rough-diamond supply is benefiting its people. But, in one of the last speeches of the day, Kalaa Mpinga of Mwana Africa pointed out that nobody had addressed the problem of artisanal mining. Artisanal mining, he said, produces about 2 million carats of diamonds a year in countries such as the Democratic Republic of Congo, but does nothing to help the extreme poverty in that country.

"We can't really resolve issues like conflict diamonds until we resolve issues like this," he said.

Prior to the speeches, the day began with the reopening and dedication of the newly redesigned Harry Oppenheimer Diamond Museum.

The conference continues today in Tel Aviv.

Scheduled speakers include billionaire diamantaire Lev Leviev, Diamond Trading Co. Managing Director Varda Shine, Diamond Administration of China Director General Li Mu and a delegation from Africa including Samuel Sam-Sumama, vice president of Sierra Leone, and Eugene Shannon, minister of lands, mines and energy in Liberia.

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