Writing On The Walls In South Africa
September 14, 06The drawn-out lack of clarity and the clouds of uncertainties over
The signs of pain begin early because of the unattractiveness of the Sight boxes. And there is a psychological factor – or maybe “mindset” is a better word. In the past, Sightholders remembered that before and after the “bad days” there were always good days. In the long run – you gain. The profound belief that in the DTC and De Beers “you have a partner” for better or worse, for the good times and the bad times, is no more.
This is not a local South African problem – but
One might argue: what’s the difference? The DTC and De Beers are on both sides of the border. The difference is the perception of the decisiveness and political will of the government.
In the meantime, the State Diamond Trader, the governmental body that will purchase 10 percent of the South African rough production and is mandated to sell rough to the local industry – and which will probably replace Diamdel – is to be launched shortly.
Though no formal announcement has been made, we expect that Abbey Chikane, the amicable chairman of the South African Diamond Board and founding chairman of the Kimberley Process Certification Scheme, will take charge of the operations. Chikane is a good and honorable man, and he will find out very quickly that running the Kimberley Process and the Diamond Board is just “peanuts” compared to the headache of making a governmental company into a commercially competitive diamond buying and selling company.
We are all supportive of the South African government’s legitimate aspirations to get meaningful domestic added value creation and beneficiation. We all want the government to succeed. I am not sure, however, whether anyone has told Chikane that, as of late, companies such as Diamdel Israel are selling diamonds BELOW DTC’s selling prices and are providing credit on top of it.
And here is the catch: it is politically incorrect to say to the government that the State Diamond Trader is definitely not a good idea, that it won’t work. Trading in diamonds isn’t a task for civil servants or for governmental appointees. Governments can own mines; there might even be a legitimate role in participation in the marketing. Yes, there have been precedents of governments becoming independent buyers and sellers (even in
The State Diamond Trader will require some $150 to $200 million in working capital. For months the government has been talking to banks and other sources of funds (including major diamond industry players) but, at the time of writing, that issue hasn’t been resolved yet. Chikane will soon find out that you cannot become a diamond dealer without having a lot of money on hand – well before you make your first deal. If Diamdel is able to “lose money” – I wonder how the State Diamond Trader can make money.
The South African people deserve better; much better.
Talking about Diamdel, two years ago, De Beers offered the South African government a 50 percent stake in Diamdel South
But the last word hasn’t been said yet. There is little likelihood that Diamdel can operate alongside a State Diamond Trader. The least pain would be achieved if the sign on the doors were changed and the experienced Diamdel personnel continued to work in the framework of the State Diamond Trader. If there are good and experienced people available – why reinvent the wheel?
Often governments decline taking an easier road, as it seems more challenging and painful to do it the hard way… It has taken the South African government a long time to implement the new Diamond Amendment Act – and to provide the certainty and stability that is so badly needed.
Though no formal announcement has been made on the fate of the 15 percent export tax on rough diamonds, we expect that the government may ultimately settle for only 5 percent – and provide also for a series of exemptions. That might prevent
Redundancies and Resignations at De Beers in
The De Beers head office in
It doesn’t manner what the precise figure is. What does matter is that De Beers’ Managing Director is apparently slated to announce a major restructuring of the De Beers headquarters in the days or weeks ahead.
Everybody seems to be waiting for something to happen in the South African diamond industry – and all are hoping for something good. One very wise Antwerp-based Indian diamantaire said to me some time ago, “
That is hardly a warm endorsement – but with some strenuous efforts, one might consider that coming close to say something nice about the present state of affairs in the South African diamond industry. Let me say it again: the country and its people deserve better.
Have a nice weekend.