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EGL South Africa Determined to Defend its Reputation

Q&A with Alan Robert Lowe, Managing Director of EGL South Africa
Jul 10, 2015 7:53 AM   By Avi Krawitz
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RAPAPORT... Alan Lowe leads the operations of EGL South Africa which has two gemological laboratories in that country. He is managing director and a minority owner, while the estate of the late Guy Margel, founder of the EGL brand, owns the majority stake. While EGL South Africa maintains it has upheld its own consistent grading standards, its grading reports continue be banned on RapNet – Rapaport Trading Network, due to its association with EGL International, which closed earlier this year following Rapaport’s Honest Grading campaign. Rapaport News recently spoke with Lowe about efforts to unify standards across the various EGL labs and the industry:

Rapaport News: What is the history and current structure of EGL South Africa?

AL: EGL South Africa opened in 1980 to service the local diamond polishing industry. The estate of Guy Margel, who founded the global EGL brand, owns a majority stake in our operation and I own a minority share. Today, we have a lab in Johannesburg and Cape Town, and EGL India operates under a license from EGL South Africa.

EGL South Africa is branded as a stand-alone business. We’re known as EGL South Africa and our grading reports are recognized around the world as EGL South Africa.

That’s not to be confused with other EGL labs around the world. The estate has interests in Israel’s EGL Platinum, EGL Hong Kong and EGL Belgium, among others; EGL International was closed earlier this year in the aftermath of the over-grading scandal. EGL USA is run independently of the estate.

Rapaport News: What’s the estate doing to ensure there is a unification of grading standards across EGL labs?

AL: The estate has appointed Menahem Sevdermish as its global manager to ensure that there is a consistent standard of grading throughout the network. That’s an ongoing process between Menachem and the estate, and EGL South Africa is cooperating with that process.

Rapaport News: Are there significant differences in grading between the various EGL labs today?

AL: I don’t believe there is. I put a color set together for EGL Antwerp and that set has been sent to Menahem. He’s confident that the set is strict and I’m very confident that the standards we have at EGL South Africa will match any standards around the world.

Rapaport News: Are you using the same terminology as Gemological Institute of America (GIA) and do your standards meet GIA standards?

AL: The short answer is “yes”. The GIA doesn’t have SI3 clarity while we, and many other labs, do. Color grading is the same with the exception of the dark Capes. I am confident that EGL South Africa is very much on par with GIA standards, and in some cases we’re stricter. Many in the trade will testify to that.

Rapaport News: What quality controls do you have in place to ensure consistent grading across your labs?

AL: Firstly, every diamond that is sent to EGL South Africa goes through stringent tests to make sure that it is natural or if it shows indication of treatment.

Secondly, every stone is looked at by a minimum of three people for color and clarity. It is a matter of human judgment and there are various factors that affect the way graders grade on any particular day in all labs. So we have a system whereby if we don’t agree on a grade, it goes back into the system and I, or another of our top managers, makes the final judgment call.

Obviously, our clients will query from time to time. Our lab is subject to voluntary arbitration through the Diamond Dealers Club of South Africa (DDC). If there is a query and we don’t agree, we take the stone to three or four DDC executive members and ask for their opinion. Whatever the outcome, I’m happy to subject myself to audits and the judgment of my peers.

Rapaport News: What’s been the aftermath for EGL South Africa from EGL being taken off RapNet and other measures during the EGL International episode?

AL: There’s no doubt that being removed from RapNet had an impact from a reputational point of view in South Africa. I’m not sure what volume of stones are listed on RapNet from South Africa. I don’t think it’s a huge amount. However, the trade was talking about it and the disillusionment with EGL International and the overall brand without a doubt affected our clients.

Our clients are very happy with us and our level of grading but the problem is that they have tourists coming into South Africa to buy diamonds who’ve heard the negativity about EGL.

I maintain that we have to stop that negativity and the sooner we address the issue head on, the better. The best way to do that is for us to be measured. I don’t have any problem with anyone coming into our lab to see what we do and look at our stones.

Rapaport News: On the other hand, did you not feel that the situation at EGL needed to be addressed? In the long run, won’t the shake up benefit EGL South Africa?

AL: I agree with that completely and I agreed with the message that Martin [Rapaport] had about EGL International.

Rapaport News: Is there a resulting misperception about EGL South Africa?

AL: It needs to be known that we’re a legitimate lab that grades according to international standards as set out by the World Federation of Diamond Bourses (WFDB), and we have done so for 34 years. We’re a long-standing member of the diamond community in South Africa and I find it sad that we got caught up in the whole controversy. It’s damaging to all the hard work that my staff have put in over many years.

Rapaport News: What are the biggest challenges facing the laboratories today?

AL: I think the biggest challenge for any international laboratory – one that has different labs around the world -- is to maintain a consistent standard between the labs within its network.

For example, EGL South Africa strives to maintain a consistent standard between its labs in Johannesburg, Cape Town and India. This is the main reason that I travel between these centers so often and why I move my staff up and down on a regular basis.

Rapaport News: Variations in grading standards affect consumer confidence, as does undisclosed synthetics and treatments. What can the labs do to address these issues?

AL: With the challenges facing the labs with treatments and synthetics, there should be a meeting of minds in terms of technology and research findings. It doesn’t really matter whether the GIA, or International Gemological Institute (IGI) or EGL finds an undisclosed synthetic stone or treatment. What matters is that it can be detected adequately by the labs. That’s not just a business decision and the information should be shared.

I believe it would be useful for the labs to sit and talk generally about grading standards. I don’t think that the legitimate labs are far apart from one another, but I think there is some tweaking that needs to be done.

Rapaport News: Has there been an increase in discoveries of undisclosed synthetics and treatments of goods?

AL: To a degree, yes, and it’s certainly around. But it’s not a constant and it goes in waves.

Rapaport News: Did EGL South Africa find instances of the color treatment that the GIA and later IGI reported?

AL: No. We immediately put measures in place to look out for the treatment but I don’t think any of us can be completely sure what it is that was not disclosed. There’s still uncertainty about exactly what the treatment was. So I’m not going to speculate on what that is until we have scientific facts as to what it is.

Rapaport News: Is there a market in which EGL is strong in terms of consumer demand?

AL: We’re obviously strong in South Africa and we do a lot of work in the local market. Diamonds with our grading reports are also exported to China, Taiwan, and some to the U.S.

Rapaport News: How is the South Africa market in terms of manufacturing and trading levels?

AL: It’s very quiet right now, as it is internationally, partly because it’s a vacation period here and in Europe. So I think we’re going to have a very quiet time until around the end of August.

In addition, sadly, there’s very little manufacturing done in South Africa anymore.

Rapaport News: Does that correlate with the number of stones being sent to your labs?

AL: It will over time. We’ve actively changed the way we market our services and have gone directly to jewelry manufacturers and retailers. We can’t rely on diamond manufacturing anymore because the factories are not here. So in addition to loose diamonds, we grade jewelry pieces and colored gemstones. Our colored gemstone business is pretty busy.

Rapaport News: What’s next for EGL South Africa?

AL: To maintain our level of grading standards is critical. The golden rule about running a laboratory is that consistency is everything. If a diamond gets a D color today, it has to get a D color tomorrow and a D color five years from now. If you don’t have consistency you don’t have consumer confidence, it’s that simple. So we will continue to work every day to maintain that.

We will also be looking at other markets to penetrate, both in South Africa and abroad. Primarily, we intend to expand our network within southern Africa.

We also do a fair amount of training in South Africa through our gemological schools in Johannesburg and Cape Town and we have plans to expand our training within South Africa and abroad.

Finally, we want to uphold our reputation. EGL South Africa has worked very hard to build itself up to the reputation that we have. I want that to continue and see EGL South Africa grow and uphold its credible position in the market.

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Tags: Avi Krawitz, diamonds, EGL, EGL South Africa, GIA, IGI, Rapaport
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