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An interview with Erik A. Jens, CEO, ABN AMRO International
Diamond & Jewellery Clients
A D I AMOND
I NDUSTRY
BANKER ’ S V I EW
ON M I DSTREAM
I SSUES AND
SOLUT I ONS
CAN YOU BRIEFLY INTRODUCE YOURSELF AND YOUR
EXPERIENCE WITH THE DIAMOND INDUSTRY?
I joined ABN AMRO International Diamond
& Jewellery Clients, one of the major lenders to
the midstream over the last century, as the CEO
more than two years ago. My background is in
private banking and finance, particularly hedge
funds, so I entered the diamond industry with
a fresh perspective.
HOW HAVE YOU SEEN THE MIDSTREAM EVOLVE
SINCE YOU FIRST STARTED WORKING HERE?
I have seen the industry’s attitude to change evolve.
A couple of years ago, the midstream had a large
culture of blame: blaming miners for high prices,
retailers for stealing margins and bankers for
limited support. Recently, however, midstream
players have looked at themselves in the mirror, and
become self-critical in their practices. There appears
to be a readiness to embrace change from within,
in order to tackle the increasingly competitive
landscape. I believe this is a positive thing because
it means the industry is becoming more transparent
and sustainable.
Q
Q
LOOKING AHEAD
PRESSURE ON THE MIDSTREAM IS LIKELY TO LEAD TO
PROFESSIONALISATION AND CONSOLIDATION
Financing challenges are increasingly critical and
could intensify over the coming years. Rising inventory
costs, and diamond banks’ drive to constrain the
growth of their lending to the midstream, will mean
financing costs are unlikely to decrease, particularly
if the trend of low interest rates begins to change.
Additional financial scrutiny of the midstream
sector can therefore be expected. Leading banks in
the diamond sector have come to realise that they
have been taking equity-type risks in the diamond
midstream without getting the corresponding returns.
This is now changing and, as a result, borrowing costs
are going up while banks are asking their borrowers
to professionalise their capital management.
Overall, this trend is expected to affect the way the
industry operates. New lending standards will increase
the regulatory burden on the midstream, leading to
higher costs and operational complexity. One possible
consequence is that less well-established companies
may even exit the industry, leading to some level
of consolidation.
Over time, those firms that are able to add significant
value in the diamond cutting and polishing process
are more likely to be successful.
To succeed in today’s highly competitive midstream,
diamond businesses must develop strongly
differentiated, value-added propositions that set
them apart from their competition. Diamantaires
at all stages of the value chain have approached
this challenge in their own unique ways. Rough
dealers and preparers, such as Dianco, Diarough,
De Toledo and Fruchter Gad, have developed their
own unique, proprietary and bespoke assortments
which are carefully targeted and adapted to the
needs of specialist manufacturers.
Rough polishing has been the source of tremendous
innovation over the past decade, with Indian firms
such as K Girdharlal, Venus, Karp and Kiran leading
the way: their implementation of advanced IT and
laser technology has revolutionised the precision and
yield recovery of the cutting and polishing process.
For other firms, polished diamond distribution has
become the key to their differentiation. Sophisticated
internet-enabled stock management systems allow
businesses such as EZ Diamonds, YDI and Star Rays to
respond with speed and precision to their customers’
changing needs, often integrating seamlessly with a
customer’s own order management systems.