exports
Mungo Soggot
The taxman is part of a team tasked with probing the way the state evaluates diamonds following an unprecedented finding that De Beers undervalued gems due for export.
Minister of Minerals and Energy Penuell Maduna appointed the team of civil servants this week after meeting with De Beers.
It emerged last week that the state diamond valuator had rejected De Beers’s evaluation of a consignment of diamonds due for export to the diamond giant’s marketing arm in London, the Central Selling Organisation (CSO), saying the gems were significantly more valuable.
The finding could have significant implications for the diamond giant where its tax bill is concerned. The previous government diamond valuator, which had close links to De Beers, never unearthed a similar alleged undervaluation, creating suspicion in some government circles that De Beers could have been paying less tax than it should. South Africa produces at least $1-billion a year in rough diamonds, most of which come from De Beers.
Maduna has put his Director General, Sandile Nogxina, in charge of the task team, which is expected to report back next week. The team will focus on the current stand-off between De Beers and the valuator.
Nogxina said the team would consist of himself, a senior official from the minerals division of his department, and the Department of Finance’s chief director on tax policy, Martin Grote.
He said he could also call in representatives from the South African Revenue Service and the Department of Trade and Industry. A De Beers representative said this week it would be “assisting [the team] wherever necessary”.
All diamond exports have to be approved by the South African Diamond Board, which uses the valuator to assess value, and tax liability, of consignments.
The valuator, which is run by a company called DVIC, was appointed late last year after the state valuation operation was put up for tender.
Most industry observers have interpreted the valuator’s decision as a symptom of a deterioration in the relationship between the government and De Beers, with some branding the move as simply “political”.
One said that if it came to a showdown over how gems are valued, the government would have a tough time arguing with De Beers which, through the CSO, controls about 70% of the world’s diamonds.
Industry players close to De Beers signalled early in the week they could be challenging the validity of the new valuator’s contract. It has been claimed the contract was not scrutinised properly by the board.
However, a government statement released after this week’s meeting between De Beers and Maduna said De Beers would not be pursuing the validity of the valuator’s contract.
CEO of the Diamond Board Victor Sibiya said there was no basis for questioning the validity of the new valuator’s contract. Sibiya said the fact that such a high-level task team had been appointed to probe the stand-off between De Beers and the valuator “tells you that lots of matters are at hand”.
Sibiya said last week the new valuator, which is headed by Belgian Claude Nobels, had brought home the importance of “independent valuation”. The previous valuator’s contract gave De Beers the right to vet its employees.
There has been considerable tension between some members of the Diamond Board close to De Beers and the body’s two bosses, Sibiya and chair Gibson Thula. Board members this week called an impromptu meeting to discuss the current debacle over the valuator.
Sibiya refused to attend, saying it was not a “properly constituted meeting in terms of the [Diamond] Act”. Maduna also said he would also be addressing corporate governance issues at the Diamond Board.