Promoters of synthetic diamonds often argue that if all diamonds are grown in a lab, that would eliminate blood diamonds. The problem with that logic, which is recognized by most NGOs active on this issue, is that it would wipe out the market for good diamonds, too. As most of the industry is well aware—even if most of the outside world is not—diamond mining has turned Botswana into one of the most prosperous and stable nations in Africa. The movie Blood Diamond caused considerable anxiety in that country, as its economy is largely dependent upon diamond revenue. (Diamond-related revenues constitute at least a third of its GDP.)
The other claim that synthetic diamonds proponents make is that they would loosen De Beers’ stranglehold on the industry. (Those claims are based on outdated notions, but that is a subject for another blog: this one.) Of course, De Beers has a rather successful synthetic diamond division—Element Six. It produces diamonds for industrial, rather than gem, uses, and De Beers has repeatedly said that E6 does not intend to enter the synthetic gem market.
With synthetic diamonds still a minor part of the overall industry, there’s no reason to doubt that. De Beers is a diamond miner, and lab-grown diamonds are a threat to its business model.
But if they ever do become more than a real factor in the business, De Beers might be tempted to reverse its plans. It might even feel it has to. For one, it could advertise them in a way that is less hostile to mined stones. (Right now most lab-grown producers bring up the conflict and environmental issues.) It could also institute procedures to ensure disclosure, about which some lab-grown producers have professed ambivalence. De Beers’ entering the synthetic market could, at least in theory, help protect the natural diamond market.
And of course it would be a formidable player. De Beers not only knows how to mass-produce synthetic diamonds, it’s actually done it (which not every company making noise in this sector can say). It has a research institute that understands the science behind, and has produced, synthetic gems; and it understands the diamond market and, most importantly, diamond marketing. Company officials have even said privately, “We could do synthetics better than anyone.”
But what would that mean for the diamond-dependent countries—especially Botswana, which owns 15 percent of De Beers? To that country, synthetic diamonds are not just a threat to a business model, but to its economy; not many nations want to see a third of its GDP go down the drain. A local NGO called Botswana Institute for Development Policy Analysis (BIDPA) recently looked at this in the paper entitled, “Synthetic Gem Quality Diamonds and Their Potential Impact on the Botswana Economy.”
The projected impact for Botswana is, needless to say, not good. The report expresses fears that widespread acceptance of synthetics could cause overall diamonds prices to fall, and misrepresentation could hurt consumer confidence in naturals. But it includes an interesting nugget about De Beers’ and Botswana’s recent contract negotiations; not surprisingly, whether De Beers would ever enter the synthetic market came up:
…The government of Botswana sought assurance that De Beers would not enter the synthetic quality gem market.
And De Beers did not provide such assurance.
[Instead] there was an agreement on synthetics, which provided that, in the event that De Beers enters the gem quality synthetic market, it will market these gems in a 75-25 percent joint venture with the government of Botswana.
Still, the NGO concluded, while such a deal would somewhat mitigate the loss of its mining revenue, it might not even come close to what the country is generating now.
(De Beers spokeswoman Lynette Gould told me in response: “We haven’t yet seen a copy of the BIDPA report but, of course, the terms of the agreement with the [Government of the Republic of Botswana] are obviously confidential. Having said that, we have no plans to enter the synthetic gem market.”)
Mass production of synthetic diamonds still seems to be a long way off, but it’s telling that smart minds in Botswana and at De Beers are strategizing how to handle it. We could be seeing the beginnings of a new world taking shape.