With diamond roughs likely to become scarce in the coming years, a growing number of Indian diamond companies are setting up gem cutting & polishing units in nations producing roughs, particularly in Africa.

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In fact, there is a rush among Surat-based companies to set up diamond cutting & polishing units in Africa in order to secure assured supply of rough diamonds. Russia is another rough producing country where Indian companies have set up units.

“Earlier, Indian diamond companies were setting up manufacturing units only in South Africa,” said Aagam Sanghavi, director, Sanghavi Exports. “But many of our companies are now also eyeing operations in Botswana, Angola and other African countries which produce rough.” Sanghavi Exports is a leading exporter of polished diamonds. Sanghavi further said that this strategy will benefit not only the Indian companies but also the African nations as their economies depend largely on diamonds.Experts say that no significant rough diamond discoveries have been made in the past 20 years. This situation has prompted De Beers, the world’s largest diamond mining company, to restrict output from next year. This could result in acute shortage of roughs, particularly if other mining companies also adopt a similar strategy.

Shrenuj & Company, whose main diamond cutting & manufacturing facility is in Surat, opened a diamond cutting factory in Botswana last week. “Opening a factory in a rough diamond producing country was an important objective in our global manufacturing strategy,” said the company’s CMD, Shreyas Doshi. “As the next step, we also plan to set up a jewellery manufacturing unit in Botswana.”

Industry sources said prominent Indian diamond companies which have already started operations in Africa include Suashish Diamonds, Mahendra Brothers, KGK, Asian Star and Karp, among others. Sources said other companies too have similar plans.

“The trend is definitely becoming stronger, as a number of Indian diamond companies have started operations at some place in Africa or in other mining countries,” said KK Sharma, executive director, Indian Diamond Institute.Industry experts said that Africa accounts for more than 60% of the global rough diamond production. Botswana is the world’s top producer of rough diamonds in value terms, while South Africa ranks fourth. Angola, Democratic Republic of Congo and Namibia are also among the top 10 rough producing countries.

“When Africa is the leading producer of rough diamonds, and there is uncertainty about future rough availability from other sources, it is natural to expect diamond cutting & polishing companies to make a beeline for setting up units there,” said an industry expert.

This is even as the union government has initiated steps to start direct supply of rough diamonds from Africa to cutting factories in Surat, and avoiding middlemen in Antwerp and Israel.

India’s share in diamond cutting is expected to fall from the current 57% to 49% by the year 2015, while the share of mining countries is expected to go up to 9%.

Other African countries such as Zimbabwe, Ivory Coast, Ghana and Sierra Leone also produce rough diamonds, but they are marred by political instability, and are unlikely to attract companies in the near future.

The fact that rough producing nations want to maximise returns from their resources by moving up the value chain is also fuelling the trend.

“Rough producing countries are no longer satisfied with mining diamonds and selling them,” said Kiran Shah, a diamond trader in Surat. “They want to earn better profits by also polishing the stones. This is where our companies can help them in return for assured rough supply.”