SA Parliament Starts Diamond Amendment Bill Hearings

Miners and other diamond industry businesses and bodies have a chance to publicly voice their opinion on the controversial South African Diamond Amendment Bill proposed by government. Most don’t like the bill, fearing the taxation is high and that the country won’t drive much benefit from keeping more of the locally minded diamonds in the country for polishing.

After years of discussions, yesterday the South African parliament started public hearings on the Diamond Amendment Bill. The government hopes the bill will strengthen the local diamond industry, by requiring miners to leave some of their rough diamonds in the country to be sold by a government diamond company to local polishers.

But while some of the smaller polishing operations are cheering, others claim that the market needs to be left alone and allow exports to where polishing is economical, mainly India and China.

However, there is no argument that bigger goods, above 3 carats, can be polished economically almost anywhere, including in South Africa. The government already understands that smaller goods don’t fit their needs, and it is understood that half carat rough diamonds and smaller are viewed as not fitting for local manufacturing.

Some key and influential people in the global diamond market are taking their criticism of the move further, saying the entire plan is not driven by a true logical economical thought, but rather by an emotional desire. “That won’t really get them what they want,” says a central player involved in South African diamond mining.

The fear of the possible financial ramifications is such, that Anglo American already said that “The Diamond Bill will have the effect of compromising the DTC's future viability”. Anglo holds a 45 percent stake in De Beers.

“Elimination of South Africa's unpolished diamonds from the DTC's aggregation of production might lead to the demise of the DTC should other major producer countries follow suit with similar legislation,” Anglo's South African office warned the parliament's minerals and energy committee in a written statement.

Anglo American and De Beers are slated to testify tomorrow (Wednesday) before the committee.

While the country is the world’s fourth largest source of diamonds, most are exported to cutting centers in India and China, and only a small portion of the goods are polished locally.

The proposed 15 percent diamond export tax is especially harsh, considering that other locally mined commodities such as gold and platinum would be less levied. Anglo’s criticism is echoed by the recent closure of low grade diamond mines due to the high currency exchange rate.

The SA government, however, is not expected to back off. It is adamant that putting the bill in place will create new jobs in local diamond polishing.