By Charles WyndhamFebruary 2nd, 2015
2015 happens to be bicentenary of the battle of Waterloo and to celebrate this event a huge reenactment of the event is being planned by the French under the guidance of a Monsieur Frank Samson.
As Le Figaro has said, ‘The magic of the show… is intended to make us forget a defeat that seems today to have turned in favour of Napoleon’.
I have visited the site of the battle a few times over the decades, not least because two of my forebears happened to take part in the battle, and though both were wounded, both survived, which I suppose was pretty good news from my point of view.
I have to say that visiting the actual site, one would never have known that it was the French who had lost, indeed the contrary, so it comes as no particular surprise to me that the policy should be being continued with this planned reenactment.
Contrary to my lack of surprise, I am told that when Eric Jens of ABN AMRO Bank at their annual reception held in Antwerp last week announced that the bank would be seeking, amongst other things, confirmation from their clients clients of any outstanding balances at a particular moment in time, there was a gasp of surprise, if not horror.
To me the extraordinary thing about this is not that there was surprise that it was going to happen, but the fact that it has not happened.
When over forty years ago I was doing my accountancy articles it was standard practice in any audit to use a statistical sample of debtors and creditors to confirm outstanding balances directly to us, the accountants.
That this practice should have elicited such a squeal of surprise only confirms to me that in essence, certainly since I have been knocking around in the industry, nothing really fundamental has changed.
When I joined De Beers in 1975 they had a market share in excess of 80%.
However, as I have previously argued that despite a dramatic fall in market share in many ways De Beers’ dominance of the market has if anything increased.
The explosion in the number of manufacturers and a fragmentation of the supply chain has given producers even more control and though De Beers’ market share has fallen, it is still in a dominant position as it remains by far the largest producer and one whose share is certainly over a third of the market.
This to some extent explains how in such a weak market that we have been experiencing for some time, the phenomena that people seem ‘compelled’ to purchase rough, which they know is too expensive.
However one might wish to describe the situation, it cannot be described as an efficient market.
On the one hand, I have a presumption of empathy with the argument put forward by Monsieur Mellier that whatever the complaints about their pricing there is always a queue of companies wishing to buy their rough and therefore why should they not sell at that price.
Indeed, why should not a company sell its product at whatever price if people are prepared to pay that price?
But this clearly does not take into account the skewed dynamics that actually exists in the diamond industry and the fact that a company can continue to sell over a period of time at prices at which the buyers cannot make money would confirm that it is in a dominant position.
It is equally rather bizarre, as Monsieur Mellier is reported to have done, to be comparing the margins made in car dealerships with the diamond business.
However, what these comments do, be it those by De Beers and more to the point by ABN AMRO, is bring home the fact that if the diamond industry is going to progress, it has got to realize that it is not some prima donna to whom some of the more normal rules of business do not have to apply.
The curtain of opacity behind which the industry has thrived is slowly being pulled back, and amongst other things the belief that diamonds are not a commodity is being exposed for what it is, wishful, negative and very expensive thinking.
Horrors of Horrors, the real world is actually creeping into our world of diamonds.
By the way, I won’t mention that 2015 happens to be the 600th anniversary of the Battle of Agincourt.