The row between the government and the world’s biggest diamond company, De Beers, intensified recently as the deadline for comment on controversial new legislation aimed at limiting the export of uncut gems expired.
Jonathan Oppenheimer, MD of De Beers Consolidated Mines, told Reuters on Monday that the Diamonds Amendment Bill had ”potentially damaging” unintended consequences, and could lead to increased smuggling and money-laundering.
This is a marked change from the company’s cautious line on the legislation — previously, it said only that it hoped the government would take account of ”constructive” comment.
Rough diamonds have long been subject to a 15% export duty, to encourage producers to sell more output locally and promote the domestic cutting and polishing industry. But after the 1986 passage of the Diamonds Act, De Beers negotiated exemptions with the South African Diamond Board requiring it to offer stones to local cutters while exporting the rest of its production duty-free. It has paid minimal export duty since the early 1990s when the first of these deals were concluded.
Some in the industry and the government believe these ”Section 59 exemptions” have been abused, stunting the development of diamond beneficiation and depriving the fiscus of revenue.
The Bill aims to close loopholes and ensure that more rough stones are available locally. Critics believe it will reduce the profitability of mining and threaten more jobs than it creates.
As the Mail & Guardian has reported, Parliament’s committee on public accounts (Scopa) has recommended that the government take legal action to recover export levies and establish how De Beers exported a 19-million carat stockpile ahead of the 1994 election. The company strongly denies unusual shipments.
”Our records, maintained meticulously for 20 years, demonstrate that we exported 11-million carats in 1994, in line with our production,” group managing director Gary Ralfe told the M&G. ”De Beers remains committed to the country of its birth. It continues to invest heavily in diamond mining in South Africa and it is committed to the downstream beneficiation industry … with sales to cutters last year of $575-million,” Ralfe says.
But the role of the diamond board, the government diamond valuator and Diamdel, the company created by De Beers to supply local cutters under its Section 59 agreements, are intensely controversial.
Ernest Malakoane, chairperson of the United Diamond Association of South Africa (Udasa), which represents smaller cutters, insisted Diamdel made only minimal quantities of stones available to most companies that buy from it. ”The bulk goes to five or 10 companies of a list of maybe 120 Diamdel clients. It’s easy to get a licence these days, but almost impossible to get rough diamonds.”
Malakoane said the diamond board was under-resourced, toothless, and more likely to look after De Beers’s interests than rigorously implement its mandate.
Another small cutter, who asked not to be named, said he was concerned his derisory stone supply would be further cut. He told the M&G that he could not buy as many rough stones as he wanted from Diamdel. ”We need to know who they are selling to, and more about what is going overseas. But the board won’t provide the information”, he said.