February 16, 2020
Home  »  Magazine  »  Business  » Diamonds »  Sparkling Trade

Sparkling Trade

Migrant Gujaratis take over the world's largest diamond bourse

Sparkling Trade
THEY came, they traded, they conquered. That's the story of some 300 migrant Gujarati families from Surat and Bombay, who, within a short span of 15 years, have come to control 50 per cent of the diamond business in Antwerp, the world's largest diamond trading centre, ending the overwhelming five-century-old Jewish domination of the trade in this Belgian port town.

With over 200 Indian offices, and 15 to 20 new ones being set up each year, the bustling Pelikanstraat and the famous square mile in the heart of Antwerp, where the world's diamond capital is housed, has come to wear a different look. Distinctly linked with Hasidic Jews in their hats and flowing beards till the early '80s, today the diamond trade is as commonly associated with the 'foreign' banter of cellphone  carrying Gujarati diamond traders in their $1,000 suits and their silk sari-clad wives driving the latest Lexus, Mercedes and BMW models.

Eighty per cent of the world's rough diamonds and 65 per cent of all polished diamonds are traded here, generating an annual turnover of $16 billion, half of which is on account of the Gujaratis. Says Peter Meeus, director of Beurs Voor Diamanthandel, one of the four diamond exchanges in Antwerp: "150 of our 2,000 members are Indians who have come to control around 50 per cent of the business within a mere decade-and-a-half." Adds Chetan Choksi, a third generation diamond merchant who moved to Antwerp 12 years ago: "The Indian community in Antwerp is diligent and there is unity among us. Most of us being first generation immigrants, we have worked hard to establish ourselves." Choksi's company, Diminco NV, has a $150-million annual turnover and boasts of being the biggest "importer of polished diamonds from India since the past five years". Every year, these Gujaratis ship $2 billion worth of diamonds, predominantly small stones, to India for cutting and polishing which are then re-imported for sale on the world market.

Says Choksi: "Future prospects for Indian diamond traders are bright because of the global nature of our manufacturing and marketing. Our success has not been resented by other communities as we have strong business ties with the Jews and others. We have been warmly welcomed by the local (Jewish) community. They are extremely cooperative and there is no head-on competition with them as they operate in a very different market segment."

In Antwerp, diamond transactions are governed by traditional rules: deals are clinched with a handshake and the Yiddish greeting, Mazel U' Bracha (luck and prosperity). Having given his word of honour, the buyer must pay within 90 days of the handshake, failing which the bourses, which have jurisdictional powers over their members, resort to stern action and sometimes even suspend membership. Indian merchants have made the best of this tradition and enjoy a good reputation.

The ability of skilled Indian artisans to cut and polish even the smallest stones, coupled with cheap labour costs, is the backbone of the success of the Indian trade in diamonds and has helped it cash in on the vast market for small, low value diamonds and also kept it off a collision course with the Jewish community, which deals in bigger, high-value diamonds. And though there has been little reason for heartburn on this account, Indians do attract the odd sneer for having changed the character of the trade, the bulk of whose volume comprises small stones.

Says Meeus: "I'm sorry to say this, but with extremely low labour costs in India and the ability to repeatedly cut and polish, Indians can literally make diamonds out of shit." His sentiments are probably a reaction to the fact that seven out of 10 diamonds in the world are cut and polished in India, which account for 45 per cent of the value share of net world diamond exports in 1994-95.

Indian diamond merchants, in fact, figure among the biggest in the world. Five of the top seven sight-holders in the world are Indians—sight-holders are individuals or companies invited by the South African diamond conglomerate, De Beers, which controls 90 per cent of the global trade of roughs, through its central selling organisation at London's Charterhouse Street, to buy directly and distribute to the rest of the world. Of the 160 sight-holders in the world, 40 are Indians.

Among this privileged club of sight-holders is Antwerp's elusive 'Diamond King' Vijay Shah, who moved to Antwerp from Bombay in 1974 to trade in rough and cut stones on the free market and who in 1994 was made a Knight of the Order of Leopold by the King of Belgium. According to a local journal, Bulletin , "Vijay Shah employs about 150 people in Antwerp alone and owns merchant offices, factories and jewellery shops in Bombay, New York, Israel, London, Australia, Hong Kong, Jakarta and Bangkok. The Shah group produces a whole range of cut diamonds—big stones in Antwerp, medium ones in Bangkok, smaller stones in Bombay. If that were not enough, he owns shares in a west African mine."

While a few prominent Indian firms were present in Antwerp in the '50s, the spurt came in the '80s, leading to the creation of a sizeable diamond business community. In fact, it is such a well-knit community that India's long-time consul general in Antwerp, Paul Meeus, boasts of "personally knowing each of the 300 families", and of having attended their weddings and family ceremonies. As a result, Antwerp has become the cultural hub for all expatriate Indians in Belgium. The Antwerp Indian Association regularly organises cultural programmes, religious festivals like Diwali and sports tournaments. Says Brussels-based language student Payal Kohli: "To be in Antwerp on Diwali is like being in India. Sweets, lights, fireworks, you just name it and they have it."

INDIAN diamond traders essentially began as support branches of their parent firms in India. They help meet the rough diamond need of the cutting and polishing industry back home. Unlike the original sellers of diamonds in London, they even extend credit for the rough diamond requirement of the domestic industry and absorb the bulk of the Indian polished diamonds for sale in the global market. Such has been the volume of diamond business between Antwerp and India that the State Bank of India opened a branch in Antwerp, "essentially to cater to the needs of ethnic Indian diamond merchants". According to T.M.N. Singh, SBI's CEO in Antwerp, diamond finance has been the mainstay of the branch and its operations have been successful.

Says Singh: "The SBI basically provides finance to major dealers for acquisition of roughs from London, finances the trade against its general receivables and handles, on their behalf, the import and export of diamond parcels and the collection and remittances of proceeds. Exports of diamonds, gems and jewellery from India are roughly worth $3,900 million annually and imports are about $3,000 million. Through its Bombay and Antwerp offices, SBI handles around 25 per cent of the business."

Having consolidated their position after staging one of the friendliest and most profitable coups, the close-knit, vegetarian, Gujarati Jain community has begun setting up high value processing units for large diamonds in Thailand, Malaysia, Korea, and Sri Lanka and is poised to use Antwerp as a springboard to diversify into food processing, import of food, textiles, handicrafts as also retail banking, computer software, heat-resistant bricks and much more. Vijay Shah even finances Hindi films.

Why did they bypass India when setting up high-value processing units? First, explains Choksi, because De Beers wants a broad-based diamond industry spread over the globe. Says Choksi: "There are one million workers in the diamond industry in India as against 50,000 in the rest of the world who process high-value diamonds. Besides, it is a capital-intensive industry with minimal value addition. And since the labour in Thailand, Malaysia and Korea is highly skilled, that segment of the business has gone there. Low labour costs are not the only criteria for success in the high value market segment." H.R. Mehta, chairman of the Bombay-based Gem and Jewellery Export Promotion Council, disagrees: "In the past two years, India has successfully processed large diamonds using sophisticated technology and I believe that NRIs will be lured to set up base in India as one of the largest markets for high-value gemstones. We hope India will be offered high-value diamonds, once De Beers is convinced of India's capability in the overall interest of the industry."

The second reason, says fellow merchant Subodh T. Shah, is the fear of Indian labour unions. "Dealing with labour unions is a major problem in India as you cannot sack even a single inefficient worker. This is a major disincentive," he adds.

Nevertheless, over the past decade, the Indian diamond industry has come close to regaining its lost supremacy. From ancient times till the end of the 18th century, the world's diamonds came from India until its mines were exhausted and the first diamond was found in South Africa in 1866. While India is no longer a major supplier of uncut stone, it is the world's biggest processor. And as they grow from strength to strength, Indian diamond traders in Antwerp and elsewhere are nursing the dream of re-establishing their supremacy in the trade, this time, like their stones, forever.

Next Story >>
Google + Linkedin Whatsapp

Read More in:

The Latest Issue

Outlook Videos