Local value addition in tanzanite, gemstones a step in branding ladder

14Nov 2018
Editor
DAR ES SALAAM
Financial Times
Local value addition in tanzanite, gemstones a step in branding ladder

TANZANITE auctions are now being held at the source, in Mirerani mining area which has now been cordoned off with a wall constructed by the military, as a step to curb smuggling of the gemstone that made other countries, not Tanzania, the major suppliers on the world market.

A number of reports maintained a few months after the wall was raised and sale of raw tanzanite halted, that plenty of smuggling was still taking place. No updates have been heard lately.

While this export ban is maintained, auctions have yielded mixed results as buyers usually want raw tanzanite so that they process it in figures and shapes of their own designs, often in tandem with using other minerals, like diamonds. It is this aspect which constitutes the final product linked with tanzanite, that jewellery isn’t necessary tanzanite alone but a tanzanite core and a diamond surrounding, in various shapes and sizes. It is a top level branding business monopoly.

Looking at a series of advertised tanzanite-diamond production in part linked with tanzanite auctions as seen from rapidly taken internet checks, what is noticed is that the material is just part of the product, while the crucial part is the design and branding. In that case these global brand designers and marketers of those products have not changed their basic needs from the mineral source in Tanzania, that they want it basically as raw material. If it will be processed into something it may to an extent reduce their work but is unlikely to alter the product or destination.

In that context value addition is a positive for Tanzania to obtain greater earnings from the mineral but structurally it doesn’t alter its vertical position in the market, as tanzanite isn’t sold as a stone but as a specific object. It is similar to any other product, that there is no toothpaste being sold but types of toothpaste and their standing in the market, which isn’t easy to breach, peer inside or compete. This has for decades been the case for the world diamond market, that many countries, and not poor ones like Tanzania but Russia and others attempted to steer clear of the De Beers marketing monopoly, failed. After years in the wilderness they threw in the towel.

A look at how the market operates shows that the path is challenging to try and bring some order into tanzanite production, processing and marketing, as the local vision is that the final product is made at Mirerani and the world picks it from there. This obviously isn’t the case, as the gemstone is merely a basic raw material that these companies need to make jewellery of a particular sort, for a specific market, via a range of products by variations of mineral content (tanzanite, diamond portions), quality and price. All these aspects are well beyond the reach of anything at Mirerani.

In that case there is need for a change not of mentality or strategy but simply of focus, in the sense that the basic orientation that selling raw tanzanite and with porous ways into the mining area and out of it is negative can’t be faulted. What is at issue rather is what precisely does the local processing propose to do, and whether an inadequate or exaggerated view may penalize the Treasury in the sense of expenses we could do without. That is an aspect that merits research.

When for instance it is or it can be established that what is produced at Mirerani after processing is still a raw material, an improved version but still raw for purposes of product design, branding and marketing, does this alter the perception of what is being done there? In ordinary rules of commerce, enhancing the value of a produce reduces its competitive ability, that pricing will not cover the full cost of processing because it is the same raw material, but somewhat improved. Is there a chance that the costing of processing is not fully met when it comes to finished product price during auctions, or is it likely that the prices can be dictated at Mirerani due to monopoly?

It is also possible that what the policy planners figuring out processing of tanzanite wished for is actually selling finished products, but that is way out of reach, for a rapid glance at the products being advertised or marketed has a mineral combination flavour.

A company dealing with high end tanzanite products would make the final product here only if it also acquired Mwadui Diamond Mines as the other basic raw material, which is similarly out of reach. But why would the processing be done at this distance whereas the raw material is easy to ferry off by airplane? It is entirely possible to improve our share of tanzanite value after processing, but we need to keep our sights low and not figure the world tanzanite market as centred in Tanzania; far from it.