Diamond bill may backfire - Temane
September 16, 2005
By Eric Onstad
Johannesburg - A proposed shake-up of the local diamond sector, aimed at boosting jewellery making and black involvement, was in danger of backfiring, the chairman of the Master Diamond Cutters' Association said yesterday.
MacDonald Temane, the first black person to get a diamond-cutting licence 15 years ago, said the government was right to press for more black participation, but rushing through a sweeping new law could be damaging.
A key element of the new law, launching a state diamond trader to open up the distribution of rough diamonds, was fraught with problems, he said.
The marketing of local diamonds is largely controlled by De Beers, which sells nearly half the world's diamonds.
"The whole concept of having a state diamond trader is flawed," said Temane.
"All over the world governments have recognised that it is better for them to take tax and privatise. What the state diamond trader is doing is nationalising through the back door."
He said the bill envisaged private investment in the state diamond trader, which could lead to market manipulation, while the new law left vague the amount and grade of diamonds to be sold by the state unit.
The intentions were good in the draft Diamond Amendment Bill, which seeks to increase the number of diamonds that are cut in South Africa, the world's fourth-largest producer by value, to boost economic growth and employment.
However, opening up the sector without recognising its complexities could result in a free-for-all, with inexperienced newcomers losing money and some players taking advantage of the chaos, he said.
Availability of diamonds was not the only obstacle to new entrants. Black people needed to gain expertise through hands-on involvement, not passive shareholdings, and financing had to be available in the capital-intensive sector.
Temane, who on Tuesday met officials who drafted the law, said they mistakenly used India as a model, which along with China were the world's two biggest diamond-cutting centres.
India did not mine diamonds but only cut them, and its labour costs were a fraction of those in South Africa.
Temane said: "In my view, southern Africa should come up with a game plan as to how all of them as a unit would begin to increase their diamond trade."
The system used by De Beers to ship all production to London and create a mix that was later distributed made sense in principle since traders and cutters wanted a variety of gems."If I was government, I would enter into partnership with De Beers to bring the sorting that is in London to South Africa."
-Reuters
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