Alan Mair Manufacturing Jewellers (AMMJ) MD Alan Mair believes that the rising gold price has had a huge impact on jewellery manu- facturers over the past three to four years.

“Over this period, the gold price has increased by 20% to 25% every year. When the price rises, the bottom-end entry-level prices for gold jewellery increase as well and many companies fall out of the market as it costs them more to make the jewellery, which is simply not sustainable. “This has resulted in a dras- tic decrease in the number of jewellery manufacturers in the country,” he explains.

The company used to produce a large volume of small sleeper earrings in a year; however, owing to the high gold price, the manufacturing volumes of sleepers has dropped by about 66%, as a result of the 50% rise in the retail price since 2008.

It may appear that jewellery manufacturers make good profits, but the gold from which the sleepers are made has increased in price; further, the fee charged by jewellery manufacturers to make a piece of jewellery cannot be increased accordingly.

If the gold price doubles, the company’s working capital demands are increased, which impacts negatively on the sector, he explains.

Meanwhile, Mair states that the retailers that buy the jewellery work on a percentage mark- up, which makes them more price resistant.

“There has been a huge decrease in gold jewellery sales volumes and, as a result, jewellery manufacturers continuously need to reinvent themselves to survive.”

The market has reacted to the gold price change as well, he says. The latest consumer trend indicates that gold is now most commonly used for wedding and engagement rings and there has been an increase in demand for fashion jewellery made from other metals, he explains.

Further, Mair notes that silver jewellery is becoming more fashionable as it is far less expensive than a comparable gold piece of jewellery. The lower gold price was previously the main driver of gold jewellery sales and, as the price has risen, jewellers and consumers worldwide have bought less gold.

However, Mair believes that gold jewellery will never fade, as it has a lot of sentimental value and always has a selling value.

Gold jewellery can act as a long-term investment. While it does not pay dividends, there is no other hard-wearing product that can be worn everyday for ten years and can still be sold for more than it cost, he points out.

Jewellery Manufacturing Regulations

Mair points out that an increase in the number of regulations is further restraining and restricting growth in the jewellery manu- facturing industry.

This will have a detrimental impact as talented individuals are being prohibited from starting their own jewellery manufacturing companies as permits are needed to keep gold and they cannot manufacture at home. This results in the individual having to find a space to rent, which they may not be able to afford, says Mair.

This results in lost business opportunities and job creation potential. Owing to the difficulty of starting a jewellery manufacturing company, Mair believes that this may lead to the eventual decrease in established jewellery manufacturers through the sale or closure of their businesses.

In turn, this may result in a small number of South African jewellery manufacturers left in the country and importers would have to support demand.

If the country wants to grow employment, it needs to make it easier for people to establish their own businesses. The jewellery manufacturing industry has the potential to sub- stantially contribute to employment but the industry needs support, concludes Mair.

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