Proposed SA diamond reform to brighten up local jewellers

CAPE TOWN – A proposal to limit exports of South African gemstones to increase the supply of diamonds to local jewellers would create jobs and boost industry, supporters claim, but others have warned it plays into the hands of smugglers.

A bill was introduced in the South African parliament on August 31 that would give the South African government powers to redirect a higher proportion of rough diamonds to local South African cutters and polishers. Even though South Africa is the fourth-largest producer of diamonds after Botswana, Russia and Canada, the value-added cutting and polishing processes are largely done outside of its borders.”This bill is long overdue,” said Herbert Mkhize, chief executive of the National Economic Development and Labour Council (NEDLAC), a body representing business, government and labour.He continued: “It will unleash the potential of SME’s (small and medium-sized enterprises) but, of course, big business will see it as a threat,” says Mkhize.A report commissioned by NEDLAC warned, however, that the South African diamond-cutting and polishing industry was uncompetitive compared with China, India and Israel.Others say that the greater regulation would increase the opportunities for smugglers who would find ways of selling the diamonds illicitly on international markets.The chief executive of De Beers, the world’s biggest diamond producer, told a mining conference last week that the bill would open the door to smugglers.”Any time you try to impose financial restrictions on the flow of diamonds they have traditionally tended to…be smuggled,” Jonathan Oppenheimer was quoted as saying by a local business newspaper.Supporters in the government claim that the enactment of the legislation would help to break down barriers for small jewellers because the supply of rough, or unpolished, diamonds has become so concentrated in the hands of De Beers.De Beers, 45 per cent-owned by South African mining giant Anglo American, is estimated to control around 70 per cent of worldwide rough diamond supplies, and has a highly centralised sales system whereby diamonds from all over the world are sold together in a “London Mix”.Parliamentary portfolio committee chairman on minerals and energy, Nathi Mthethwa, said: “This is an industry which has been made to be inaccessible to the emerging miners.”Up until now, the existing Diamonds Act, passed in 1986, made no provision for the supply of rough diamonds to local processors.Under proposals in the bill, diamond producers would have to send a percentage of their total rough diamond output to the State Diamond Trader.This public body would then value, sell and possibly transfer the diamonds to local “jewellery hubs” for cutting and polishing.The percentage would be determined by a Diamond Exchange and Export Centre, a body overseeing the buying, selling, exporting and importing of gemstones.In 2003, South Africa produced diamonds weighing 12,8 million carats with a total value of US$1,3 billion (N$8,32 billion), up from 1,6 million carats in 2002, according to diamond analysts Kaiser Associates.South Africa’s cutting and polishing industry is estimated to be the fifth-biggest by value after India, Israel, the US and China.”We need to ensure that we have a strong beneficiation (production) industry, which can create jobs and make diamonds more accessible to emerging miners,” said Mthethwa.”Diamond producers have exaggerated the scarcity of diamonds” but the new bill would allow greater access to them, Mthethwa said.-Nampa-APEven though South Africa is the fourth-largest producer of diamonds after Botswana, Russia and Canada, the value-added cutting and polishing processes are largely done outside of its borders.”This bill is long overdue,” said Herbert Mkhize, chief executive of the National Economic Development and Labour Council (NEDLAC), a body representing business, government and labour.He continued: “It will unleash the potential of SME’s (small and medium-sized enterprises) but, of course, big business will see it as a threat,” says Mkhize.A report commissioned by NEDLAC warned, however, that the South African diamond-cutting and polishing industry was uncompetitive compared with China, India and Israel.Others say that the greater regulation would increase the opportunities for smugglers who would find ways of selling the diamonds illicitly on international markets.The chief executive of De Beers, the world’s biggest diamond producer, told a mining conference last week that the bill would open the door to smugglers.”Any time you try to impose financial restrictions on the flow of diamonds they have traditionally tended to…be smuggled,” Jonathan Oppenheimer was quoted as saying by a local business newspaper.Supporters in the government claim that the enactment of the legislation would help to break down barriers for small jewellers because the supply of rough, or unpolished, diamonds has become so concentrated in the hands of De Beers.De Beers, 45 per cent-owned by South African mining giant Anglo American, is estimated to control around 70 per cent of worldwide rough diamond supplies, and has a highly centralised sales system whereby diamonds from all over the world are sold together in a “London Mix”.Parliamentary portfolio committee chairman on minerals and energy, Nathi Mthethwa, said: “This is an industry which has been made to be inaccessible to the emerging miners.”Up until now, the existing Diamonds Act, passed in 1986, made no provision for the supply of rough diamonds to local processors.Under proposals in the bill, diamond producers would have to send a percentage of their total rough diamond output to the State Diamond Trader.This public body would then value, sell and possibly transfer the diamonds to local “jewellery hubs” for cutting and polishing.The percentage would be determined by a Diamond Exchange and Export Centre, a body overseeing the buying, selling, exporting and importing of gemstones.In 2003, South Africa produced diamonds weighing 12,8 million carats with a total value of US$1,3 billion (N$8,32 billion), up from 1,6 million carats in 2002, according to diamond analysts Kaiser Associates.South Africa’s cutting and polishing industry is estimated to be the fifth-biggest by value after India, Israel, the US and China.”We need to ensure that we have a strong beneficiation (production) industry, which can create jobs and make diamonds more accessible to emerging miners,” said Mthethwa.”Diamond producers have exaggerated the scarcity of diamonds” but the new bill would allow greater access to them, Mthethwa said.-Nampa-AP