South African Bill Seeks Diamond Beneficiation

September 2, 2005

South African Bill Seeks Diamond Beneficiation

South Africa's Diamonds Amendment Bill, anticipated for several years, was finally entered into the country's parliament August 30. The bill aims to keep a larger percentage of South African-mined diamonds in South Africa, with the goal of encouraging a local diamond cutting industry. It would also exact an export duty on exports of unfinished diamonds. The exact percentage South Africa aims to keep within its borders was not disclosed in the bill.

The country's leaders say the bill will bring added value, revenues and jobs to the sector. Former Minister of Mines and Energy, Phumzile Mlambo-Nguka (now deputy president of South Africa) had hinted in past years that South Africa sought a 20% portion for local cutting – to the dismay of cutting centers around the world, which depend on diamond supplies from South Africa. "Africa must shift from being an exporter of resources to an exporter of value-added goods," she said. The Black Economic Empowerment Act, passed in April 2004, is the umbrella under which mining and other industries are passing white business controls to black Africans.

Some industry observers say it's cheaper to cut diamonds elsewhere and that South Africa will simply not be able to compete for price and quality against centers such as India, Belgium and Israel. India, for example, cuts over 90% of the world's diamonds, by volume. But the argument has only caught fire as a rival to De Beers, Russian-born Israeli diamond tycoon Lev Leviev persistently drummed the message that the creation of local cutting factories and local beneficiation is not only possible, but a good business proposition. Leviev has established local diamond cutting factories in countries like Namibia and Botswana. Both countries also have extensive ties to De Beers.

De Beers, which has a 50/50 partnership with the Government of South Africa for mining diamonds, has sought to maintain its current arrangement while also cautiously supporting the move for beneficiation and black empowerment. Still, the diamond giant has objected to South Africa's proposals [within the Diamonds Amendment Bill] to develop a state-controlled diamond trader, for example, saying private controllers better understand global market prices.

by Robert Weldon, G.G.

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