A Diamantaire’s Insight into an Ever-Changing Industry
Trends may come and go, but a diamond’s beauty and appeal are constant. While this gem has withstood the test of time, its industry is changing. With three decades in the diamond industry, veteran diamantaire Patrick Saada has experienced firsthand the changes and challenges affecting the business, specifically its midstream. Here, he provides insight into an evolving diamond industry, and what he sees for its future.
When did you first get into the diamond business?
I began my career in the diamond industry in 1991. I worked as a rough diamond trader for the Steinmetz Diamond Group in Belgium. I was promoted to company director in 1996, managing all aspects of the Antwerp office’s rough diamond sourcing and trading. I was with the Steinmetz Diamond Group for a total of 17 years, mastering the ins and outs of international sourcing, rough classification, manufacturing, and marketing before moving on to join BSGR’s OcteaLtd. In 2007.
Between 2008 and 2013, I served as the vice chairman of OcteaLtd. whose subsidiary, Koidu Holdings, is the most significant diamond mining and exploration company in Sierra Leone. I managed the development and growth of the company and its rough diamond marketing operations.
Then, in 2013, I left BSGR and Octeato establish my rough diamond sourcing and distribution company, Infinite Diam which I run with my son. I have also entered the diamond jewelry business, by creating GalDiam, an e-commerce platform whose apparent mission is to bring the end-consumer closer in the process by eliminating middlemen and markups.
What are the main changes that have affected the diamond industry over the last 25 years?
Over the years, I have witnessed several changes taking hold throughout the diamond pipeline. The following are some of the main ones:
First of all, the diamond business has changed dynamics. Meaning, that the players in the diamond supply pipeline have changed. Whereas once, diamond dealers and brokers played an essential role in rough diamond distribution, they are now being eliminated from the game. Without these middlemen, the pipeline has tried to become more cost-efficient. This is especially the case in today’s digitally interconnected world. With one click of a button, consumers can access supplies of rough or polished diamonds online directly from suppliers and manufacturers, not only bypass dealers but also retailers themselves.
Another change has been the geographic shift in manufacturing centers. The traditional centers of Israel and Belgium have all but closed in the face of the ever-expanding presence of Indian diamond factories. Not to mention that with government-backed diamond beneficiary initiatives in southern Africa, South Africa, and Botswana are diamond centers that, even with their challenges, will remain.
Over-liquidity is also a significant structural change and challenge for the midstream sector. More than 20 bankers today are lending $15 billion to the industry compared to 15 years ago when there were fewer than ten bankers lending some $4 to $5 billion. This over-liquidity has created an artificial demand and, consequently, an inflation of rough prices. This situation has considerably reduced the profitability of the sector.
I also see that natural diamonds will face growing competition from synthetic diamonds, which could affect global sales of natural diamonds and diamond jewelry. Currently, lab-grown diamonds compose 3% of overall diamond production, and their presence will only continue to expand at an exponential rate.
Out of all these issues, in my opinion, the biggest change has been the growing importance of compliance – and the costs associated with achieving it. Whether industry players are sourcing, purchasing, manufacturing or selling rough or polished diamonds, all of us are in the same boat: trying to stay afloat while operating in full transparency. This entails meeting the increasingly stringent and costly requirements of international regulatory and compliance rules.
This is no small thing, considering the costs involved in keeping up with international financial reporting standards, banking regulations, audits, stock valuations and other anti-money-laundering compliance rules. It’s no surprise, then, that many smaller diamond companies in the midstream have been faced with a choice to either consolidate with bigger companies to help handle the cost of being transparent and compliant, or to get out of the game entirely.
Despite the challenges and costs of compliance, all players are pushing for and supportive of these transparency efforts. After all, without having these yardsticks in place to measure compliance, the industry would lose consumer confidence. We know that we’re vulnerable to media and regulatory scrutiny – and we welcome it, especially as more and more polished sales are going digital. Internet sales of flawless diamonds only work if consumers can trust diamond suppliers, manufacturers, and retailers.
What do you see as the midstream’s biggest challenge today?
For those of us in the diamond industry’s midstream level of the pipeline, our greatest challenge today is adapting ourselves to the changes above to survive. This is burdensome, given the heavy costs that come with remaining transparent and compliant. However, as compliance is here to stay, we either need to accept it and grow with it or find a new business.
For me, the best way to adapt and to grow my midstream business, Infinite Diam, is to continue developing my jewelry manufacturing business, Gaudium, as a way to source, process and sell diamonds directly downstream.
Where do you see the business in the next ten years?
Considering that the entire global economy is moving toward streamlined efficiency, that mining companies have substantially reduced the amount of money spent on exploration for new natural diamond sources, and that the supply of synthetic diamonds to the market is increasing exponentially, the only conclusion I can draw is an inevitable shrinking of our business.
What has been your greatest professional success?
My greatest success in the diamond industry has been building and maintaining my reputation as a trustworthy businessman. I have spent the last 30 years earning, building and protecting my name in this industry.I am proud that the name Patrick Saada means something to my global clients and colleagues. In a world of increasing compliance and transparency, a trusted name and solid reputation is everything.