The Department of Minerals and Energy has no intention of scrapping the proposed duty on the export of rough diamonds, Minister of Minerals and Energy Lindiwe Hendricks told parliamentarians on Monday.
Addressing the National Assembly minerals and energy portfolio committee, the minister noted that this has been “a contentious issue of serious debate” — during public hearings on the Diamonds Amendment Bill last week — but she said: “I can assure you that we cannot scrap duty on rough diamond exports, as this will be a deterrent to exporting our precious commodity without being beneficiated closer to source.”
Hendricks, however, noted that the matter of duties falls under the jurisdiction of the Treasury.
“We are engaging them with regards to develop a money Bill that will run concurrently with the implementation of the adopted amendments to this Bill [Diamonds Amendment Bill],” she said. “They have given us their word that the matter will be debated in Parliament early next year.”
De Beers, the largest producer of diamonds in South Africa, argued before the committee last week that the Bill would have unintended consequences of lower profitability, especially for marginal mines, and large-scale job losses.
De Beers deputy chairperson Gary Ralfe said in a written submission that the imposition of export duty and the absence of any rebate “will inhibit the free flow of goods and will compromise De Beers’ intention to move its London-based aggregation activities to the SADC [Southern African Development Community]”.
Ralfe said De Beers supplies more rough diamonds to the South African manufacturing industry than it produces “within the categories of rough diamonds that the industry has determined can be manufactured competitively locally”.
Ralfe added that in terms of an agreement between his company and the South African Diamond Board — which will also come to an end in terms of the Bill — all the diamonds produced by the company, with the exception of the high-value +10,8 carat stones that are retained in South Africa, are exported free of any export duty with the approval of the board.
“In exchange, De Beers undertakes to supply the South African industry with diamonds from an international mix made up of diamonds aggregated from different countries,” he said.
Ralfe stated: “The advantage of this arrangement is that the diamonds imported from the international mix are of a quality more suited for local manufacture than De Beers’ production in South Africa.”
But Hendricks said on Monday that her government is “yet to be convinced that certain categories of rough diamonds cannot be cut in South Africa”.
The minister said further: “We would like to allow ourselves to compete with Antwerp and even the Indian centres for [diamond-cutting] technology. The Indians have followed diamonds where they are, which is at present in places like Antwerp, and I don’t think there is anything stopping them from following them to South Africa to cut and polish them here.
“They will have to bring their technologies here if they need our diamonds. Therefore, until we have proof that some diamonds are uncuttable here in South Africa, we will not discriminate and will therefore not have the word in our vocabulary.” — I-Net Bridge