By Charles Wyndham.
 
It was amusing, well I thought so, to read all the furore about Beyonce having mimed the national anthem at the inauguration of President Obama.
 
I thought that the whole point about Beyonce was to look at her and what she sang was of relative unimportance.
 
Anyway, I, of course did look at her performance on YouTube and, unsurprisingly, it was enjoyable looking at her, also, her rendition of The Spangled Banner, mimed or not, was fun.
 
There are few national anthems that strike a cord and I have always been rather surprised at what a great one America has, though I still think that South Africa’s is the pick of the bunch.
 
Both compare most favourably to the boorish tune, as usually rendered, we have here in England for which the only real recommendation is that it and the words are suitably simple for even the most boorish of English football louts to bellow it out, if they are still standing.
 
That said, if you happened to listen to Beethoven’s ‘Wellington’s Victory March’ you would come across a wonderful rendition of our national anthem.
 
‘Miming’ is quite an interesting analogy to what is going on in our industry.
 
There is no doubt that we are on the cusp of some considerable change and yet much of the behaviour or discussion continues to mime to the tunes of yore.
 
A key change appears to be the producers focus on getting top dollar for their goods.
 
Alrosa has palpably been focusing more on getting better prices, and one only has to look at the difference that the BHP tender system has brought to the party to see just what a difference it can make in money terms.
 
Monsieur Mellier of De Beers has, I am told, made this point quite clear to a recent deputation of leading banks that lend to the industry when they apparently asked that the DTC give some oxygen in the pricing for the clients.
 
Mellier’s reported refusal represents quite a change to what one might call one of the unwritten rules of the game where DTC and banks kept each other informed of the market and certainly, in my experience now a very long time ago, would actually respond positively.
 
That is not to say that I think that Mellier’s response is negative at all, indeed the opposite, however when changing the rules it is important to think through the consequences fully.
 
The fact is that most if not all Sightholders have had a very rough year or two.
 
Much of this is in my opinion brought upon themselves by their inability to change the fundamentals of their business and instead clinging to the old model.
 
For whatever reasons, they have been losing money hand over fist, which makes the Banks’ deputation hardly surprising as they are the ones who are  left holding the baby.
 
But focusing on the producer at the moment, if a producer is seeking top dollar, which I think they should, then there has to be a realisation that all the absurd accoutrements foisted on their clients are no longer possible.
 
The absurdity of De Beers Supplier of Choice Strategy set out in 2000 under the guidance of Bain, has really come home to roost.
 
Forcing clients into areas outside their core competencies has failed and in particular it has not resulted in an improved performance of polished in relation to either rough diamonds or other luxury goods.
 
It has been a disaster, which makes the rumour that I heard going around that Gareth  Penny might be returning to De Beers really quite funny.
 
Focusing on top dollar will in time ensure that the diamonds get sold to those companies that use them best, but the margins in using diamonds as opposed to mining them and to a lesser extent retailing them are not sufficient for major marketing campaigns or ‘trophy’ cutting factories.
 
De Beers will be scoring an own goal if it tries to make its clients pay for its own operating inefficiencies and lack of profit, just as governments must realise that they cannot have their cake and eat it by demanding cutting factories in their countries  where costs are inevitably much higher than the main cutting centres of India in particular and also China, at the same time as wanting maximum returns from their mines.
 
If governments want these factories for political purposes then they have got to find ways of making them going concerns without providing subsidised rough which then only relapses into the failures of the old model.
 
We all know that De Beers fought tooth and nail to manage at a minimum level the manufacturing in Southern Africa and in particular in Botswana.
 
It feared that a thriving cutting industry would undermine its discretionary power and, even more importantly, expose the differential between what it was paying for the diamonds and true market price.
 
Governments, or most governments, have come to believe that being in the diamond business is a licence to print money at their expense, which rather begs the question as to why they have allowed this state of affairs to arise.
 
Yes, it is true that for much of the time this in part has been true, but it certainly is not the case now and local cutting has become about the surest way of losing money apart from standing under a shower and tearing up $100 bills.
 
Whilst ‘top dollar’ will expunge nepotism and cronyism over time, it will not pay for all the bells and whistles so beloved of those that profit (or used to profit) from the current system.
 
The  real problem at the moment and for quite a long time is that the cake is simply not growing and as such relatively it is shrinking and will continue to do so until the glass ceiling on polished prices is shattered.
 
Till that glass ceiling is shattered reality is that producers are going to have to get real about their expectations and above all allow profit down the chain, or at least sell in a transparent way for top dollar without incumbent costs, such as inevitably a less efficient factory which if they want they must find a way to subsidise.
 
The chain is now one that is unlikely to be flooded with cheap money, the implications for this are even more potentially harrowing, and will force all players to look at the direct commercial results of any business rather than playing the old long game of cosying up to the providers of rough.
 
In the meantime, best all mime to ‘Don’t worry, Be happy’.