The first inquiry into the diamond industry in 25 years could see a shake-up in the market, reports Max Gebhardt
THE diamond industry will come under the microscope next month as the government- appointed Commission of Inquiry kicks into gear. South African diamond giant De Beers is bound to feel the intense scrutiny of the wide-ranging investigation into the industry as it controls roughly 80% of the world diamond trade.
The commission, which was appointed by the Cabinet in 1995 to “investigate and report on all aspects of the South African diamond industry”, starts its hearings early next month. The three-member commission, chaired by Judge Dennis Levy, has invited all sections of the diamond industry to present submissions to the committee on any of the listed issues.
But fears have been expressed in the British media that the commission is an attempt by the South African government to place pressure on De Beers to “repatriate” high-value jobs in London’s Hatton Garden back to South Africa.
In an article in the London newspaper, The Guardian, concerns were raised that not just the well-paid jobs were at risk, but the “core of Britain’s expertise in precious stones and the $4,5-billion that goes annually through the British banking system as a result of the diamond auctions held in London”.
It was suggested that the 1 000-strong workforce at the Central Selling Organisation (CSO), De Beers’s marketing arm, was under threat from the wide-ranging investigation into the industry – an allegation that has been strongly denied by the diamond giant. Director Tim Capon, in a letter to The Guardian, wrote that “there are no South African-related activities currently taking place in London which are capable of being transferred to South Africa”.
De Beers has said it welcomes any investigation by the commission into the diamond industry and is willing to support its investigations.
“But London has been the centre of the rough diamond world since the 1600s and will remain so,” Capon said.
What appears to have the British worried is the commission’s ability to investigate “the supply of rough and unpolished diamonds to the local processing industry”.
The CSO dismissed the reports of its workforce being under threat as “nonsense”. It would not be affected by a South African commission of inquiry as it is controlled by Centenary, the Swiss-based off-shore arm of De Beers.
The Department of Mineral and Energy Affairs, the South African Diamond Board and other major stakeholders in the industry felt there was a need for an exhaustive investigation into the industry. The last such inquiry took place 25 years ago and was considered by many to be a whitewash.
The South African Diamond Workers Union has already said it would like to see the commission tackle the inadequate supply of rough diamonds to the local industry.
Linda Makatini, acting chief executive of the South African Diamond Board, said that the members – which includes De Beers – were committed to making sure the diamond industry is used for the wider development of South Africa.
“The Diamond Act clearly says that the industry should be for the benefit of the country,” she said.
The board is busy drawing up a submission for the commission and has been tasked by Mineral and Energy Affairs Minister Penuell Maduna to define what they should do in regard to the Act’s stipulation.
“If there is a fear based on us creating jobs in the diamond industry locally, then they have a right to fear us,” she said.
The 1986 Act, which introduced new measures to encourage local beneficiation, doesn’t appear to have achieved its task. Makatini said she would like to see more effort devoted to developing the cutting and polishing industry in South Africa.
According to De Beers, the number of people employed locally in the cutting industry has increased to between 1 600 and 1 800 workers in 1996, but this is off a high of about 4 000 in 1989. The quantity of rough diamonds sold by De Beers to its customers in South Africa last year increased by 20% to $341-million.
De Beers says every encouragement is given to cutters to ensure that diamonds allocated are processed locally. But given the high degree of specialist skills required in cutting and polishing larger diamonds, it says the potential for this sector to provide job opportunities is limited. However, it has launched a diamond training intitiative in Johannesburg to train a new generation of diamond workers.
The commission couldn’t be reached for comment at the time of going to press, despite numerous attempts.