The partnerships between De Beers and the governments of diamond-producing countries will be key in transforming the diamond industry going forward, but as the senior partner, the South African government should use its stick “very infrequently” or the company could “disengage”, De Beers chairperson Nicky Oppenheimer has cautioned.
Oppenheimer was addressing ministers and other participants on De Beers’ strategy of beneficiation in Africa at the African Mining Partnership Meeting on Sunday in Cape Town, ahead of the yearly Mining Indaba, set for February 8 to 10.
Beneficiation is a topical subject due to the South African government’s planned introduction of new legislation outlining beneficiation practices in the mining industry this year, with a view to creating greater local participation and employment.
The legislation could impact on De Beers’ practice of sending its rough diamonds directly to London for sorting and export to its clients, before returning some back to South Africa.
“Partnerships between governments and the private sector are not always easy, as they are very different animals with different shareholders and different ambitions,” Oppenheimer observed in his speech. “The partnership needs to be open and transparent, with either side listening carefully to the other and doing their best to understand one another.
“In South Africa, the new Minerals Act together with its Charter forces this interaction, which I much applaud. In this process, the government is always the senior partner and carries the largest knobkerrie, but it is a stick that needs to be used very infrequently. The mining companies know it is there and will act accordingly, but frequent clubbing will lead to disengagement, which will be in neither [party’s] interest.”
Oppenheimer noted that the South African government has tried to decentralise the diamond industry and encourage beneficiation several times in the past through incentives, but with little long-lasting effect.
Although the number of people employed in the cutting and polishing industry more than doubled to about 4Â 500 in the late 1980s following the use of an incentive, as soon as the incentive was removed, the number of employed immediately fell back to about 2Â 000.
He pointed out that, because diamond polishing costs in South Africa (at between R246 and R308 per carat) are four to five times more expensive than those in India (at R61 to R74 per carat), only larger, better-quality diamonds can be polished locally.
Still, over time South Africa has been able to establish a viable cutting and polishing industry that can now stand on its own two feet.
“All diamonds that can be economically cut in South Africa are offered to the South African industry,” he said.
“De Beers plays a constructive part in this process and currently supplies, in value terms, more than the South African production of these sizes and qualities to its clients here in South Africa. As we look forward, the industry needs to transform itself to fit into the new South Africa and once again De beers is committed to do all it can to help this process in consultation with the government.”
Oppenheimer said he is convinced that the partnerships between De Beers and governments of the region are key to achieving progress in the beneficiation drive.
In Botswana, he noted, De Beers has set up one of the first polishing factories and is currently in discussions with the Botswana government on how to develop this initiative further, in a “constructive and sustainable manner … the partnership between De Beers and the government has been the key to assuring that all possible beneficiation from diamonds in Botswana is realised”.
In Namibia, added Oppenheimer, the partnership between the Namibian government and De Beers will be taking another step forward in 2005 with the renegotiation of De Beers’ sales agreement.
As part of this process, both parties will be discussing all aspects of the diamond business, including cutting and polishing.
He concluded by suggesting that governments should insist that any mining enterprise be run in a way that makes a “real and forever” contribution to the countries where they operate.
In the diamond industry, this would include looking at every aspect of their business, from prospecting to mining, cutting and polishing, to ensure that they are doing all in their power for the benefits to last forever. — I-Net Bridge