Southern Africa diamond polishers struggle against Asia

By James Macharia

CAPE TOWN, Feb 4 (Reuters) - The odds are stacked against building a successful diamond polishing industry in southern Africa to compete with bigger and cheaper manufacturers in China and India, a leading diamond consultant said on Monday.

Chaim Even-Zahar, principal of diamond consultancy Tacy Ltd. said even though he supported a strategy driven by southern Africa governments to develop local diamond polishing - beneficiation - it was uneconomic unless costs were cut.

He said southern African countries pay about $100 per carat in wages to polishers, whilst the cutting and polishing houses in India and China pay much less, around $20.

"There is no economic rationale, it won't work," Even-Zahar said of the beneficiation strategy."

"If you cannot process it at a cost effective rate, we have a problem," he told a mining conference in Cape Town.

South Africa, the world's No. 1 producer of precious metals, Namibia and Botswana, the world's top producer of diamonds by value, want to cut unemployment in their mineral-rich nations by reversing the trend where all the major polishing centres are based in countries that don't produce diamonds.

Even-Zahar said: "The beneficiation strategy has a 50/50 percent chance of success, but it needs to be re-assessed."

Some big diamond producers have in the past criticised beneficiation as unviable, but have changed their tune in the face of determination by governments to promote the scheme.