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Major Countries/Regions in the Global Value Chain
Countries around the world specialize in different parts of the global value chain. The locations where diamonds are found and mined are not necessarily where they are ultimately sorted, cut, and polished. In fact, very few countries are vertically integrated. Instead, diamonds are often mined in one place, exported to another to be cut and polished, then to another to be manufactured, and finally to another for retail and consumption. Many diamond producing countries are trying to move up the global value chain to engage in higher value-added activities. Outlined below are some of the important countries and what they are doing in terms of specific links of the global value chain.
Exploration
African countries have had a long history of diamond exploration and subsequent exploitation of its diamond mines. 31% of all exploration investment was dedicated to Africa in 2002, whereas in 2003 it was only 22% due to exploration ventures in other countries. DeBeers exploration in Africa constitutes 32% of its exploration investments.1 Canada is the newest country in exploration investment. 36% of exploration investment was dedicated to Canada in 2002, and this number rose to 51% in 2003. DeBeers devotes about 40% of its exploration investment to finding kimberlite pipes in Canada.2
Production
Estimated world rough diamond (gem and industrial) production, 2003.
Source: Mining Review Africa 3
In 2003 world production of diamonds was 140 million carats, producing $8.9 million up from $7.7 million the prior year. This was largely due to worldwide increases in production in Canada (where it doubled), Democratic Republic of Congo, Botswana, and South Africa.4 African countries constitute a majority of global diamond production, with Botswana, the Democratic Republic of Congo, South Africa, and Angola holding the largest market shares within the continent.5 This production serves as major and indeed crucial components of revenue for many of these countries. For example, in 2002, 36% of Botswana’s GDP was from diamond production, and 82% of its value of exports were from diamonds. Therefore, Botswana's economy relies heavily on the success of the industry.5 Botswana had the second largest production mass of diamonds with 21.7% of the world market share in 2003.6In 2005, 26% of the total diamond production value was in Botswana.7 Over the past decade, Botswana has attempted to upgrade to higher levels of the global value chain. While it has suceeded in terminating some unfar contracts, it appears that Botswana, like many African countries, does not have the infrastructure to maintain higher-level diamond industry activities. Much of the problem lies in conflict diamonds, which are discussed in the Social and Political section. In 2003, the Democratic Republic of Congo held 17.9% of world mass diamond production. Because of the Kimberley Process, its production valuation began to rise, and in 2005, the DRC had an 8% world market share.8 South Africa, which had been a major diamond producer because of DeBeers continues to have a stronghold in production. Its value in 2003 was $950 million, producing 9.1% of the mass of diamonds, and in 2005 it held 10% of the production market share.9
Angola is another country that relies on the diamond industry for industrial growth. The diamond industry is its second most important export, next to oil. The average income from the industry from 2000 to 2004 was $700 million per year.10 Angola had 9% of the global production market share in value in 2005.11Although these African countries have proven prosperous in the diamond industry, discoveries in places like Canada may eventually cause them to lose some of their production market shares.
Canada is the newest player in the diamond production link of the value chain . With 8.0% of production mass and $1,300 million in production value in 2003, in the last decade Canada has thrived and has earned a great deal for its investors. In 2003, Canada production nearly doubled, mostly due to the opening and immediate prosperity of the Diavik Mine.12 In 2005, Canada rose to 12% of the market value.13 Australia, likewise, is seeing success. Australia produces the greatest mass of diamonds, with 22.1% of the market share in 2003.14 However, much of these diamonds are low quality and cannot be worked. Hence, while they are showing potential, the Australian market share (in terms of gobal production) is even now relatively low.
Russia is another major country in diamond production, thanks to its Alrosa mine. In 2003, Russia produced 13.6% of diamond mass, valued at $1,640 million.15 In 2005, Russia had 19% of the market share of production in terms of value.16
Cutting, Polishing, and Manufacturing
Cutting and polishing occurs in a few main centers including Antwerp, Mumbai, New York City, China, Thailand, and Johannesburg.17 22% of industry cutting and polishing happens in India, with 96% of the overall industry workforce.18 However, many countries that produce diamonds are attempting to upgrade to add value locally. For example, South Africa is trying to ugrade through cutting, polishing and later manufacturing, instead of outsourcing these higher value added services to London. Russia has already upgraded, via companies like Leviev, enabling it to be vertically integrated with each stage of the global value chain able to occur within its borders.19
Retail and Consumption
Diamond jewelry is highly valued in developed countries. In 2003 diamond jewelry sales increased 6.7%, with the United States consumption up by 6.1% and growth in other markets such as Japan, United Kingdom, and China. Currently the diamond jewelry market shares are as follows: US (55%), Japan (15%), Europe (10%), Asia Pacific (5%), Asia Arabic (5%), other (10%).20