Market NewsCommentSicilian Vespers

Sicilian Vespers

By Charles Wyndham.

On Easter Monday in Palermo, 1282 at the Church of the Holy Spirit ( where else you may ask) some ‘overfamiliar’ behaviour by some Frenchmen to local ladies, resulted in knives being drawn and used to the extent that by nightfall 2,000 French were dead.

This event is known as The Sicilian Vespers.

It was not some spontaneous act but was carefully planned by the Emperor in Constantinople and the King of Aragon to destroy French schemes, backed by the Pope in Rome, to take back Constantinople and destroy the Orthodox Church and bring all under the control of Rome.

The curious thing about Sicily, colonised by the Greeks, then the Byzantines before the Muslims who lost out to the Normans, was its multiculturalism, where Christian and Muslim courts worked side by side.

I get more and more a feeling that much of the troubles facing our industry come from this motivation which changed this laissez faire approach in Sicily so long ago to trying to shoe horn everyone into preconceived ideas or demands.

The rigid insistence of telling companies what was best for them has been one of the root causes for the miserable failure of De Beers / DTC Supplier of Choice strategy.

This failure is not only in relation to Supplier of Choice but also in regards to the break down of the company’s relationships in Africa.

The company completely failed to see, let alone accept, that it could no longer cling to the same business model be it towards the producers, its clients or even the consumer.

Its new strategy was claimed to be a new model but, however glitzy the presentations and oratory, it had nothing to do with that rather than doing what it could to maintain the key points , as they saw it, in the previous model.

As written before is there any major company which has conducted successfully implemented a major strategic review without a change in its most senior management?

In the case of the DTC, to call it a strategy may be permissible if rather imaginative but to call it a new strategy is fooling no one.

De Beers has publicly renounced its monopoly position and set its targets, those ghastly BHAG’s (Big Hairy Audacious Goal).

The fact is that despite its market share falling dramatically its power over its clients increased and BHAG has come to mean, ‘Bloody Hell All Gone’.

What has changed, most reluctantly on the part of De Beers, is that it is the producers who are starting to take control, and in that sense there really is a start to the collapse in the monopoly power of De Beers as the decision making becomes fragmented between various producers, and in effect its discretionary power of distribution is undermined.

All this ‘Leaders in Africa’ is as wonderful a case of self delusion as one could hope to see, and to an outsider asking people to go all the way to Sun City to see it simply adds to the grandeur of the delusion.

My fear is that the producers may cling onto the worst genes of the previous regime and in their own ways become as or more dogmatic about how business must be done, clinging to emotional dogmas as much as any Vesper.

It is this dirigiste approach, the lack of laissez faire that carries risks of increasing the woes of an industry as it enters choppy economic waters.

Producers should be looking to get the maximum economic return for their raw material and as Professor Stiglitz argued, use that to spread the risk in other ventures.

To the industry that means that producers should not be content with getting ‘fair market prices’. What is ‘fair’ meant to mean?

Too often if not always, ‘fair’ actually means that some get the goods cheaper than others would be prepared to pay if they were given the opportunity but unfortunately for them they do not belong to the club or have some inside track.

‘Fair’ is to get an advantage with the quid pro quo often being to set up operations which all know are more efficiently done elsewhere.

‘Fair’ does not seem to be trying to provide a genuine advantage in or out of the industry by encouraging excellence in specific areas where additional real profits are made, too often it is simply ‘follow my leader’ with an obsession of putting bums on seats.

Just as nonsensical as much of this political push for simple numbers, it is just as dogmatic to argue that no cutting can take place or that real added skills cannot be encouraged; equally as it is to dismiss some support to give local cutting a chance, but it is clearly counter productive if it is by getting rough cheaper or allowing inefficient capacity to have a free ride.

Those that dogmatically argue, as did De Beers for so many years, against local cutting are clearly doing so from a defensive stance, and the self righteous conversion does not necessarily mean that all being proposed now is right just as what they did argue before the conversion was right either.

The pressure for this quick fix in countries of very high unemployment is understandable but that does not necessarily make it sensible in the medium to long term to blindly follow this mantra.

What is encouraging from Botswana in the new President’s speech and his subsequent early actions is that there appears to be a real desire to move away from a nanny state, and allow a much more laissez faire approach.

This is especially forceful as Botswana has without doubt to date had the most rational approach to its diamonds but one that has, I believe, been too timid in breaking the old mould decisively.

To do so would reduce the risk of dashed expectations which always carry risks of their own Sicilian Vespers.

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