SA Lawmakers Pass Diamond Law Changes

November 1, 2005

SA Lawmakers Pass Diamond Law Changes

South Africa's national assembly approved controversial changes to diamond laws on Nov. 1, allowing for a state diamond trader to help lock-in wealth in the world's fourth largest diamond producing nation, reports Reuters. The planned shake-up of the sector aims to stimulate more jewelry manufacturing and gem cutting, especially by black South Africans, but has met opposition from major mining houses.

"While we still have the resources in the ground we need to maximize the benefits that they can bring," Minerals Minister Lindiwe Hendricks told assembly members. De Beers said the law would harm the industry, leading to mine closures and job losses, though it remains hopeful it can work with the government. The company's biggest shareholder, diversified miner Anglo American, said the proposed law might lead to the demise of De Beers' powerful marketing arm the Diamond Trading Co.

The Diamonds Amendment Bill, if it became law, would compel miners to first offer their diamonds to a state trader, which will make stones available to local cutters and polishers. The bill compels producers to route their exports through a state-controlled export center, although the minister can issue an exemption from this. A proposed levy will be charged on exports and will be set by a parallel finance law following negotiations between the National Treasury and an industry already facing an 8% royalty on total diamond sales.

Hendricks dismissed warnings of massive job losses because of the proposed law, saying a number of major companies had expressed interest in investing in South Africa's processing sector once it was passed. "Some of the concerns raised were valid whilst others were nothing but myths that were created by people who do not want to see the status quo changed." She added that diamonds could still be mixed in Botswana – in line with a request from that country's president Festus Mogae last week – as groups could be exempt from first offering their diamonds to the state trader.

The Diamonds Amendment Bill would not introduce nationalization in the diamond industry, Deputy Minerals & Energy Minister Lulu Xingwana told reporters. The minister said that while the opposition group Democratic Alliance had raised the specter of nationalization with this bill, this had not been the case when South Africa's neighbors Botswana and Namibia had determined that 50% of the diamonds produced in their countries belonged to the state, she pointed out. "The DA wants South Africa to continue to be an economic colony of other countries," she said. Noting that diamonds had been spirited away to the "mother country" – a clear reference to the United Kingdom, Xingwana said the bill now indicated that "diamonds must support the people of this country."

The bill will be referred to the South African parliament's lower house and implemented once the finance law is approved, likely early next year.

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