diamond sector to shine
28 May 2007

The South African diamond-cutting and polishing industry might yet thrive thanks to legislative changes. President Thabo Mbeki approved two bills last year amending the Diamonds Act.

The amendments sought to promote local diamond beneficiation and "sanitise" the controversial diamond trade. The first and second Diamonds Amendment Acts brought the regulation of the diamond industry under government control for the first time. The amendments established a State Diamond Trader that can buy rough diamonds. The new law ensures more rough diamonds are polished locally.

It also introduces a government-administered Diamond Exchange and Export Centre to limit access points for export and to deal with diamond smuggling.

There are very few suitably skilled diamond cutters in the country. Many of them are in the twilight of their careers or no longer in the business.

Apartheid and De Beers also ensured that there were few black diamond cutters. Investment in training is required and government will have to lead the effort. More legislation being considered South Africa might have to send diamond cutters to India and China for training and also relax labour laws to compete globally.

Parliament is considering more legislation to discourage the export of rough diamonds through the Diamond Export Levy Bill. For years, South Africa has exported rough diamonds abroad. This practice has supported millions of jobs elsewhere.

The bill provides for the levying of a tax on all exported rough diamonds. The levy rate will be imposed at 5% of the value of all exported diamonds. It is hoped that the levy will help close loopholes in the Diamonds Act and help establish a substantial local cutting and polishing sector.

The Diamonds Act of 1986 made provision for a higher export levy (15%), but the mining companies took advantage of the many exemptions in the law to avoid paying the duty. Tsietsi Malakoane of the United Diamond Association of South Africa, which represents the emerging sector, said the government should ensure that the new law is enforced as soon as possible. "We have endured years of deprivation. The growth of our businesses and the industry as a whole has been stymied for too long," said Malakoane.

Malose Monama, www.fin24.co.za