Our relationship with shiny objects is very odd.
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.
jdoran@thenational.ae
A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
Tuesday's fixtures
Kyrgyzstan v Qatar, 5.45pm
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
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Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
Dhadak
Director: Shashank Khaitan
Starring: Janhvi Kapoor, Ishaan Khattar, Ashutosh Rana
Stars: 3
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind