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 ReportThe 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