Diamond producers rich below ground but so poor above

You would think that someone ought to be able to tell you why diamonds are so reliably valuable. But they can't. Not even the brightest luminaries of the diamond industry can tell you.

Our relationship with shiny objects is very odd.

I learnt this week that a diamond is the world's most reliable means of storing wealth, if you take into account its almost continual rise in value for hundreds of years.

It is even better at preserving its value than precious metals such as gold, silver or platinum. Primarily because a diamond is not subject to the rigours of the open market in quite the same way as any other commodity, thanks largely to over a century of supply control by De Beers.

There was a famous diamond price bubble that burst in the 1980s but it was all over in three weeks and the casualties were few. There was another correction at the start of the most recent financial crisis, but that too was quickly and neatly sorted out.

So if you put your money into diamonds, theoretically, you can expect it to be worth at least the same as the day you invested no matter when you, or your children, or their children, want to cash in.

You would think, then, that someone ought to be able to tell you why diamonds are so reliably valuable. But they can't. Not even the greatest luminaries of the diamond industry can tell you with any degree of credibility.

Some of those leading lights, the brightest among them in fact, gathered in Dubai this week for the first Dubai Diamond Conference.

I asked as many of them as I could why diamonds were so valuable. The best answers I got, the only answers I got in fact, ranged from "they are very shiny" to "they are very hard". It is an irony indeed that something prized for its absolute transparency is notable for such opacity when it comes to value. The reason we store so much value in diamonds is a mystery.

Diamonds are also among the most divisive of objects.

So much blood has been spilt in the diamond-producing countries of western and southern Africa that the term "blood diamond" is entrenched in our vernacular.

Today, however, the diamond industry claims to have all but eradicated these conflict stones from the market with a governance mechanism called the Kimberly Process, essentially a means of attaching a certificate of sound provenance to every diamond sold on the legal market.

But the Kimberly Process, despite its achievements, is no panacea for the inequality that divides the diamond trade into two distinct groups - the producers who are among the poorest people on earth and the consumers who are among the wealthiest.

Ahmed bin Sulayem, the executive chairman of the Dubai Multi Commodities Centre and host of this week's conference, put this imbalance into sharp relief on Monday evening as we walked into the gala dinner held to celebrate the event on the Palm Jumeirah.

He mused aloud how it could be that the diamond-producing nations of Africa could have so much wealth beneath the ground and so much poverty above it.

Varda Shine, the chief executive of De Beers Diamond Trading Company, underscored his point earlier in the day as she showed slide after slide detailing the growing numbers of middle-class consumers around the world with enough disposable income to buy increasing numbers of diamonds.

In the decades to come these wealthy diamond buyers will be found across China, India, Indonesia and Russia, she said. Almost no diamond-producing nations of Africa were represented on her slides. South Africa was the exception with a tiny 2 per cent sliver on the pie chart of future wealth.

But the balance of power in the diamond trade is beginning to shift this year as Ms Shine's company is moving operations from London to Gaborone in Botswana, a diamond producer of increasing importance.

Botswana is using this important power shift as a springboard that it hopes will transform its economy by 2021.

Today the country is mainly involved in the exploration, mining and sorting of diamonds, but the plan seeks to develop the gemstone value chain to include cutting, polishing, jewellery manufacture and retailing.

If the plan succeeds it is hoped that the current annual GDP per capita of a little more than US$7,000 (Dh25,711) will rise above the poverty line within a decade.

If the other nations on the so-called new silk route of diamond producers follow suit - the likes of Zimbabwe, Angola, Namibia, Congo and others - perhaps one day their people's prospects will shine as brightly and prove as durable as the mysteriously valuable stones beneath their soil.