Interview: Willie Nagel

Willie Nagel, of Diamond Brokers W Nagel, founded the company in 1952 and was appointed a De Beers broker a few years later. A prominent industry figure and well-known face on the international scene, he initiated the current System of Warranties leading to the Kimberley Process and has been honored by several governments for his contribution to international and business affairs.

IDEX Magazine: How did you first become involved in the diamond business?

Willie Nagel: When I first came to England in 1946 I was studying law in London and at Cambridge, and was later called to the Bar at Lincoln’s Inn – but I soon realized that I could not rely on my accent being appreciated in a Court of Law – despite numerous elocution lessons! My late father, Abraham David, was a real entrepreneur, a man with prescience to foresee the future development of the polished diamond industry in the then Palestine, and he established the second polishing factory there in 1942. So while studying for my degree I also started to work as a broker on the London diamond market.

From the beginning I made successful connections with the diamond community in London. As a consequence of this work and the relationships I established, De Beers appointed me as their broker in 1959. Ever since then I have been putting my efforts into furthering the interests of my clients and at the same time the best interests of the diamond industry as a whole – amongst those who matter, business-wise and politically.

IDEX Magazine: What are some of the biggest changes you’ve witnessed in the course of your professional life?

Willie Nagel: The biggest changes have probably occurred with the introduction by De Beers of the Supplier of Choice (SOC) strategy when the company ceded its virtual monopoly on the supply of rough diamonds to the trade and encouraged the diamantaires to market their goods and run their own businesses in a professional manner no longer safeguarded by the custodianship of De Beers. As we all know, the advent of SoC heralded a new outlook in the diamond business, and firms have had to come to terms with this new reality.

IDEX Magazine: What was the process that led you to suggest the warranties system to the British government in the first place? What was the initial reception to the idea? How were you involved with the launching of the final form of the Kimberley Process?

Willie Nagel: In the year 2000 when wars were raging in Africa, the western world was becoming aware of the involvement of diamonds in some of these conflicts. There was talk of a possible ban on imported diamonds to the States, similar to the one already existing on the importation of natural fur. My personal acquaintance with Robin Cook, the Foreign Secretary at the time, allowed me to raise the matter with him, together with Stephen Byers, the then Trade and Industry Secretary, as to how I thought best to solve the actual problem.

Robin Cook directed me to Peter Hain who was at that time Minister of State for Africa. Although he was at the beginning negative about the trade in general, he became more objective after I explained the workings of the industry. In March 2000 the U.S State Department dispatched a high powered team of four for a meeting in London with a similar team of four from the Foreign Office, appointed by Peter Hain for consultations on this topic. Peter Hain invited me to explain my ideas and help this Anglo/U.S. Committee reach a credible solution. Some American members of the team had even suggested they accept a proposal from an American scientist to invent a machine that would be able to detect the origin of each diamond and the estimated cost would be in the hundreds of millions of dollars. I was naturally skeptical about the invention and instead put forward my idea of a chain of warranties. It was in fact a very simple idea: any diamond firm, small or big, through the pipeline, should ensure the provenance of their goods by issuing a warranty that the goods that they sell are not coming from any of the conflict areas. I made it quite clear that in the event of goods being found to be wrongly certified, large fines and other sanctions must be imposed on that particular firm. The system could not be effective without the possibility of sanctions in case of non-performance.

I also believed that this was not enough and that governments of all states importing or exporting diamonds should establish efficient monitoring units and issue proper certificates of clearance. The members of the delegation were impressed by this and Peter Hain accepted the proposal with passion. He managed to persuade the US and Canadian governments to this point of view. De Beers was the first to accept the suggestion of a chain of warranties and this was followed over time by others. Some governments refused to cooperate initially but eventually countries worldwide got together in Kimberley to agree on the national monitoring system which became known as the Kimberley Process.

Although it is estimated that only 4 percent of the diamond trade was involved in illegal smuggling during the late 1990s, it was enough to cause great damage not only to the industry but to diamond producing countries as well. Now, of course, it is virtually eliminated.

IDEX Magazine: There are some in the industry who believe that the Kimberley Process doesn’t really work and that its effectiveness cannot be truly guaranteed. What is your opinion?

Willie Nagel: It has been correctly said that the Kimberley Process is “not a perfect construct.” From my experience no man’s creation is perfect. Nevertheless, given the complex nature of the trade and the diamond pipeline itself from the source to consumer, it has been a tremendous success. Of course, we as an industry have to continue to be always vigilant and fulfill our commitments to the Kimberley Process – through the System of Warranties – and give firm support for the excellent work done on behalf of all of us by the World Diamond Council. Eli Izhakoff, Rory More O’Ferall, Cecilia Gardner, Matt Runcie, Shmuel Schnitzer and other stalwarts of the industry all need to be applauded. In a TV debate with the representative of Global Witness, Andy Coxon of De Beers and I argued that the industry continues to be vigilant and Global Witness agreed that the process has been efficiently implemented.

Nicky Oppenheimer has often been a lone voice in the industry with his condemnation of ‘unethical’ business practices. To protect the reputation of the industry and the image of diamonds we must all be involved. We must not think that the problem has gone away or that we can go back to the old days of doing nothing. 

To counter those who say that self regulation and the monitoring system is inadequate, we must all comply with the requirement to have our warranties audited and support the NGO’s continuous call for more effective inspections. The Kimberley Process not only needs to be effective, it must be seen to be effective.

The Kimberley Process is also a blueprint for other industries experiencing pressures of one kind or another. For instance, Lord Robertson, the former head of NATO, has only [recently] called for the defense industry to clean itself up and adopt standards on ethical behavior similar to the Kimberley Process in the diamond industry.

Many of the concerns that are raised regarding the industry today – that of low wages, poor working conditions and other unethical practices – must still be tackled, as is being done through ensuring Best Practice Principles. These matters however should not be misunderstood, as they sometimes are, as criticisms of the Kimberley Process, which was never designed to combat these other vital issues. As I have often said, conflict-free diamonds do not necessarily mean ‘ethical’ diamonds. It is to this wider concern that our industry must turn its full attention to ensure that we do not become tainted by association.

IDEX Magazine: What is your opinion on the viability and feasibility of beneficiation in southern Africa?

Willie Nagel: Of course I understand the political pressures that drive the governments of diamond producing countries to try to maximize the returns they receive from their natural resources. Creating employment and reducing poverty is essential for these countries to develop to their full potential. So I can also understand the pressures that producers such as De Beers are under to help address these political realities through ‘beneficiation’. I think De Beers is to be admired for its commitment to Africa, despite the conflicting interests which they face.

Nonetheless, I am inclined to the view that market realities – particularly with regard to labor costs – will usually determine the success or otherwise of any business endeavor. For many years the wisdom was that Africa could not compete with India and China but, as with so many of the other changes in our business in recent times, maybe the new thinking will prove the old wisdom wrong.

Naturally enough, I worry about how this trend towards manufacturing in the producing countries themselves will affect the traditional cutting centres. As always, the best diamantaires have already grasped the new opportunities by setting up their own factories in Southern Africa, so no doubt there will be advantages to outweigh any downside. I would say that the jury is still out on beneficiation but, as to the future, my advice is: do not put all the eggs in one basket. Now, with the weakness in the States and the strength in the Gulf and the eastern markets, it is a particularly prudent adage.