De Beers challenged over exports

CAPE TOWN - South African MPs are considering whether to call De Beers to give evidence to the financial watchdog committee on public accounts on how it came suddenly to export huge numbers of uncut diamonds shortly before apartheid officially ended and the new democratic government came to power.

Similary, ANC MP Pierre Gerber referred to what happened in Namibia

just before its independence, when uncut diamonds were exported to

be stockpiled in London, in what the MP called "a scorched earth

policy".

The committee was told on Tuesday that the export of uncut

diamonds each year amounted to about R1,8 billion, but that in 1992

there was a sudden spike to R4,67 billion.

 

But the Diamond Board said it had not been able to discover a

copy of any agreement allowing the export of diamond without

payment of the export levy.

 

It had no copy in its files, according to Abbey Chikane, who

chairs the board.

 

And when the board wrote to De Beers asking for the company's

copy, all it received was a copy of a board resolution on the

subject.

 

The chairman of the committee, Themba Godi, asked: "Where is the

agreement that allowed De Beers to loot the diamonds out of the

country?" The committee will consider the possibility of legal

action against the company to recover the unpaid levies.

 

The levies arise from clauses in the Diamond Act that require

that gems be first offered to local polishers or cutters before

being exported.

 

Offering the diamonds locally allows the diamonds to be exported

free of the 15 per cent levy.

 

But Catinka Smit of the litigation department of the SA Revenue

Service told the committee that the law was very imprecisely

drawn.

 

It did not, for example, specify in what way or how often the

diamonds should be offered locally.

 

Nor did it prescribe what form an agreement to export should

take.

 

It could even be a simple oral agreement, she said.

 

The director-general of minerals and energy, Sandile Nogxina,

told MPs that the imprecision of the act encouraged the government

to draw up a new bill that would tighten up the law.

 

That bill, which was first to be called the Beneficiation Bill,

has now taken the form of the Diamond Export Levy Bill before

parliament.

 

The bill lays down specific terms under which uncut diamonds

should be offered to local cutters and polishers.

 

De Beers spokesperson Tom Tweedy said uncut diamonds were

exported when an equivalent amount of diamonds were imported, and

when the diamonds themselves were not of sufficient quality or size

to make it worthwhile cutting them here.

 

"Local cutters are more expensive than those in India or

Asia."

 

He later said: "De Beers keeps a record of its agreements and we

are happy to assist the board should it require copies of

agreements that we have."

 

An agreement in section 59 of the Diamond Act "has been an

evergreen agreement, which is reviewed annually by passing a

resolution, unless there are material changes in any of the terms

or technical details".

 

This had happened last year, when particular types of diamond

were added to a section that deals with specials, which are

diamonds of a colour, size or type of a higher value reserved for

South African diamond cutters and not exported."

 

Business Report

 

The committee was told on Tuesday that the export of uncut diamonds

each year amounted to about R1,8 billion, but that in 1992 there

was a sudden spike to R4,67 billion.But the Diamond Board said it

had not been able to discover a copy of any agreement allowing the

export of diamond without payment of the export levy.It had no copy

in its files, according to Abbey Chikane, who chairs the board.And

when the board wrote to De Beers asking for the company's copy, all

it received was a copy of a board resolution on the subject.The

chairman of the committee, Themba Godi, asked: "Where is the

agreement that allowed De Beers to loot the diamonds out of the

country?" The committee will consider the possibility of legal

action against the company to recover the unpaid levies.The levies

arise from clauses in the Diamond Act that require that gems be

first offered to local polishers or cutters before being

exported.Offering the diamonds locally allows the diamonds to be

exported free of the 15 per cent levy.But Catinka Smit of the

litigation department of the SA Revenue Service told the committee

that the law was very imprecisely drawn.It did not, for example,

specify in what way or how often the diamonds should be offered

locally.Nor did it prescribe what form an agreement to export

should take.It could even be a simple oral agreement, she said.The

director-general of minerals and energy, Sandile Nogxina, told MPs

that the imprecision of the act encouraged the government to draw

up a new bill that would tighten up the law.That bill, which was

first to be called the Beneficiation Bill, has now taken the form

of the Diamond Export Levy Bill before parliament.The bill lays

down specific terms under which uncut diamonds should be offered to

local cutters and polishers.De Beers spokesperson Tom Tweedy said

uncut diamonds were exported when an equivalent amount of diamonds

were imported, and when the diamonds themselves were not of

sufficient quality or size to make it worthwhile cutting them

here."Local cutters are more expensive than those in India or

Asia."He later said: "De Beers keeps a record of its agreements and

we are happy to assist the board should it require copies of

agreements that we have."An agreement in section 59 of the Diamond

Act "has been an evergreen agreement, which is reviewed annually by

passing a resolution, unless there are material changes in any of

the terms or technical details".This had happened last year, when

particular types of diamond were added to a section that deals with

specials, which are diamonds of a colour, size or type of a higher

value reserved for South African diamond cutters and not

exported."Business Report

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