Recent political developments in South
Africa, among which is the resignation of President Mbeki from his presidency,
might have affected the South African diamond industry, also undergoing
turbulent times despite the recently enacted Diamond Act.
Ernie Blom is the Chairman of the Diamond
Council of South Africa and the WFDB Honorary President. Despite the recent
events, he doesn't believe that the political changes will cause instability.
He thinks that at the most, the South African cabinet might be reshuffled,
since the government wishes to maintain its stability. Blom was asked whether
the new diamond law may be causing some of the problems, which resulted in a
diplomatic answer: “There is no doubt that the Diamond Act could be improved.
On October 13, the Diamond Regulator will hold a workshop in order to identify
the hurdles that are hampering the South African diamond industry. All
stakeholders in the industry have been invited to attend, from mining companies
to manufacturers.” Blom added that following the comprehensive workshop, the
Diamond Council will prepare a document to be submitted to the government with
recommendations for improvement.
In keeping with the Diamond Act, a State
Diamond Trader (SDT) was set up to execute
the new diamond policy. The SDT would have the right to purchase 10% of all of South Africa’s
rough diamond production with the aim of boosting local polishing and cutting
facilities. But the fact is that the SDT has only purchased 3% of De Beers’
diamond production, following which Ernest Malakoane, Chairman of the United
Diamond Association of South Africa,
threatened to sue South
Africa’s Minerals and Energy Minister
Buyelwa Sonjica for losses sustained due to the failure of the SDT to supply
the association with diamonds. When asked about the pending lawsuit, Blom
prefers not comment, stating that it is still early days.
A lack of funds is one of the main reasons
for the SDT’s inability to purchase sufficient rough diamonds stems. The IDC, a
South African funding institute whose allocations are subject to the Treasury’s
approval, provided about R35 million for the first year of operation. The
initial funding period has already expired, and the SDT has was reported to have
applied for additional funding which has yet to be approved.
When asked about the SDT, Blom replied: “The
concept is sound, but it is obvious that the delivery is disappointing. Members
of the diamond industry expected more of this entity, but it possible that it
is still ‘finding its feet’.” The concept of providing a 10% allocation to the
local industry is not really working, Blom added: “In principle, I believe that
this too is not a bad concept although many members of the local diamond mining
industry are up in arms. Diamond miners are actually challenging the obligation
to allocate 10% of their production to the local industry in court.”
Although there is a shortage of rough
diamonds, both in South Africa and worldwide, the fact is that South African
diamond miners can sell their remaining 90% to whomever they wish, since
private diamond tenders and sales are held regularly in the country, and buyers
have not been driven away by the current crisis. In addition to the rough
shortage there is another serious problem in the industry which must be
addressed soon. Blom comments that due to the shortage, skilled South African
diamond polishers are leaving the country in favor of other countries such as Namibia and Botswana, where there are ample
employment possibilities. "Efforts must be made to make the diamond
industry in South Africa
sustainable, as it was in the past," he summarizes.