Long ago at the 1860s, diamonds were discovered on the banks of the Orange River of South Africa.

 

That discovery started a diamond rush, and the establishment of De Beers' foothold on diamond mining, transformed the industry, helping to develop diamonds as a viable commercial product for more than just the world's elite.

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At one point in time, almost all of the world's diamond mining activity took place in South Africa. While the nation is still an important producer of diamonds, its role has diminished.

 

Today South Africa is the world's fourth largest diamond producer by value, according to Kimberley Process statistics.

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The reasons for the industry's decline in South Africa are numerous and complex. The State Diamond Trader (SDT) is a government-owned company that has the option to purchase up to 10 percent of the run-of-mine diamond production by value from local producers. The goal of its establishment was to provide a guaranteed source of rough diamonds to local cutters. It was hoped that new companies would enter the manufacturing market knowing that there was secure and ongoing source of raw materials.

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However, the legislation aimed at supporting the SDT may actually have hurt it instead. The rules stipulate that SDT must purchase run-of-mine production, meaning they receive all ranges of qualities, colors, and sizes. This is contrary to how most diamond polishing companies operate, where they tend to specialize in a narrow range of rough manufacturing to develop niche skills in a certain area. By purchasing the full range of rough diamonds, only some can be cut profitably. The rest are cut at a loss.