Diamond houses keep fingers crossed after change of guard at De Beers

For decades, a quaint practice marks the secretive world of diamond trade. Every five weeks, elite diamond houses from all over the world assemble in a room in London, and behind the closed doors, each one of them is given a small box of rough stones by De Beers - the cartel known for its formidable clout and control on the supply of roughs. Every box contains a mix of good and not-so-good stones.

The buyers quietly pick the boxes and take flights back to Mumbai or Antwerp, where the stones are cut and polished by skilled craftsmen. No questions are asked. No one has a choice. But the visits to London will soon come to an end. A year from now, the diamond houses will have to send their men to Botswana - the African country that in the coming years may call the shots in the business.

For some Indian diamond firms - dominated by members of the closely-knit Palanpuri Jains who have established themselves as leading players by giving the old, Hasidic Jewish families of Manhattan and Tel Aviv a run for money - a shift to Botswana is just a change of location. But for many, it could be the rumblings of deeper changes in a trade that till now was controlled by a single family - the Oppenheimers of South Africa.

Last month, the family sold its 40% shareholding to mining giant Anglo American, an existing stakeholder whose holding in De Beers will now rise to 85%. The balance 15% is owned by the government of Botswana which has the option to raise it to 25%.

What are the concerns?

Besides being a significant minority stakeholder, Botswana is a key supplier of rough diamonds. The exit of the founder family, the understanding between the Botswana government and Anglo American, Botswana's rights to raise stake and its eagerness to generate more employment through new diamond factories in the country are raising concerns on what the future has in store for Indian diamond groups who today cut nine out of every 10 stones sold.

In Opera House and BKC, Mumbai's diamond districts, some of the questions cropping up are: Will the fixed price system (through which roughs are currently sold after appraisal by independent valuers) continue? Will Diamond Trading Company (DTC), the roughs distribution arm of De Beers, bring in new sightholders - the 90-odd chosen clients who are assured supply? Will the nature of the business change? How will it be like dealing with a government in Africa?

"I don't expect any surprises in the short term, but in the long term, I can't say," says Anoop Mehta, owner of Mohit Diamonds, a DTC sightholder, when ET asked him whether he expected a change in contract clauses or a shift from fixed price system. More and more diamond auctions (against the fixed price system) can alter the trade arithmetic. While some in the trade underplayed the imminent shift from London to Botswana, Mehta says it's a "major move" but a "change in the right direction".