If there was one thing that knocked Cecil Rhode’s company out of the monopoly over diamond trade, it was the power of Jain family business. And some anti-trust legislation.
In 2008, De Beers, a company which controlled between 80-90 percent of global diamond trade in the 1980’s pleaded guilty of price-fixing in a U.S. court. Since the fall of the Soviet Union, the world’s diamond traders had been fighting for their right to exist outside of the De Beers cartel. With De Beer’s ability to purchase raw diamonds limited, the Jains of Gujarat swept in for the kill.
Today, India is the undisputed centre of global diamond trade. 95 percent of the world’s diamonds are exported from India, courtesy a vast diamond polishing and cutting industry in Gujarat, whose prices undercut all else. A raw diamond sourced in Lesotho could find its way to a merchant in Delhi, then be transported by the Jain’s historic Angadia network to the polishers of Surat – and finally be sent to Antwerp, the world’s diamond market of choice.
Antwerp, the biggest city in Belgium’s Northern Flanders province, had long been the jewel of the diamond market. Everyone from sovereigns to dictators could be found buying and selling precious gems. And it was, for centuries, an orthodox Jewish community that served this market.
Now, that community has been replaced by an orthodox Jain community, instead. The Jains started moving to Antwerp in the 1960s, after a slowdown in the Indian market following the war with China. Like the Jews, they brought with them a strong sense of business astuteness as well as the network of family business.
But where the Jews of Antwerp relied on local labour, the Jains ‘outsourced’ raw diamond to India. When it comes to polishing small diamonds – a labour-intensive feat – nobody could compete with the polishers of Surat. And the Jain family network ensured that it operated every bit as flawlessly as the diamond.
It starts with ownership. Traditionally, diamond merchants don’t encourage outsiders to run the business. Family marriages are the name of the game, and while this can be restrictive for the young would-be scions of a diamond empire, it keeps an element of trust that is hard to replace.
By moving up the value-chain over the years, the Jains built a diamond empire in Belgium. And a list of Indian companies in the country shows the chain-reaction their business has brought.
But the future won’t be in Antwerp for long. For years, business has been shifting to Dubai – and the Indians with it.
Regulations and blood diamonds
Diamond mining has historically been a messy and humans-rights-crushing affair. In the early 2000’s, a growing international outcry emerged against ‘blood diamonds’ – diamonds mined in African countries suffering from civil wars. Often utilizing children, the mining and sale of these diamonds fuelled further conflicts.
The Kimberly Process Certification Scheme (KPCS) was set up in 2003, to get its stamp, signatories had to able to prove exactly where they got their diamonds from. While companies like De Beers initially stumbled at this, the working of an international supply chain soon resolved the difficulty.
Dubai, an unregulated hub of trade, emerged as the natural destination for unaccountable diamonds – where they could be certified and sold to the world.
In India, this is where the Angadias came into play. Low-key, transporters of valuable goods off and on the books, they’re famed for taking public transport – and being the go-to couriers of Jain businessmen. Surat, with its workforce of 500,000 employed in polishing and cutting, became the place where diamonds went to ‘forget their past‘.
India isn’t the only weak link in the chain when it comes to blood diamonds. The Kimberley Process has come under many criticisms for its many loopholes. But regulations in India have been tightening as well.
2016’s demonetization saw the Angadias barred from accepting cash payments. Switching to digital breaks not only a tradition of informally accounted business but also presents the challenge of transparency. The secretive diamond industry is increasingly expected to open up its books. And as always, technology has come up with an answer.
Blockchain, a system of financial transaction that leaves a public, un-tamperable ledger for every step of the process, has been adopted by some firms involved in the diamond trade. It’s a clean way of ensuring accountability in the diamond trade. As as the KPCS works on a project to incorporate blockchain, Surat’s traders may have to follow suit.
How India’s most astute diamond traders will deal with these challenges will spell the future for India’s gems and diamond industry, which contribute up to seven percent of GDP. Surat alone handles $13.2 billion worth of business. The impact of demonetization and technologically-driven transparency may force the orthodox into becoming unorthodox.
But the scene from Antwerp remains optimistic. Europe’s biggest Jain temple sits in the city, located in one of the city’s most expensive localities. Sticking to their customs, the Jains have held to tradition – abhorring alcohol, meat and the general degradation of their way of life. Times may change, but old and proven business values live forever.
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