Politics, Personalities Hit SA State Diamond Trader

The non-renewal of Abbey Chikane’s contract as CEO of South Africa’s State Diamond Trader (SDT) did not come as a shock to any of those who closely followed the developments in the country. Chaim Even-Zohar was the first to openly suggest it will happen a couple of weeks before it did. But for most, much of what is happening there is unclear.

Reported clashes between Chikane and his boss, SDT chairperson Linda Makatini over implementation of the law in a turbulent market were the starting point.

A recent article in the Financial Mail shed light on another possible issue - politics. Chikane’s brother, Frank, has been the Director General of President Thabo Mbeki’s office. Makatini, on the other hand, is the former lawyer of Mbeki’s political rival and successor Jacob Zuma.

The SDT was formed to insure supply of rough diamonds to local diamond polishers. Its charter calls for purchasing up to 10 percent of run of mine goods for that purpose. One of the first hurdles it met in implementing its agenda was that it is to buy the goods at fair market prices and sell it at fair market prices. In this situation the SDT won’t be able to cover its costs, one insider told IDEX Online. This is an important point because the Treasury Department is not very forth coming in financing the SDT’s purchases.

In the process of writing the new diamond laws, some issues seemed to have been overlooked. It happens on occasion when that happens laws are usually amended to close a loop hole, fix what works wrong or add what is missing.

In the case of SDT chair Makatiniled, she is insisting that the law is obeyed to the letter, yet missing the spirit of the law all together. Two tenders were cancelled because the SDT didn’t see the goods before hand. As first reported on IDEX Online, the DTC Sight in South Africa was postponed and many Sightholders will not be able to see their goods because they don’t have a license. Other issues have to do with licensing of small business that can’t afford an extra partner that Black Economic Empowerment laws require.

When talking with jewelry manufacturers, diamond polishers, traders and other people active in the local industry, you hear one conclusion - the new policies are causing more harm than benefit. Businesses are closing, polishers are moving to Botswana, money is running away and, most importantly, more and more jobs are lost. This isn’t the voice of disgruntled whites resisting the advancement of disadvantaged blacks. It is the latter that are first to pay the price.

The heavy handedness of those entrusted to apply the law is backfiring on the industry. Globally, many are already counting it out.