Diamond Amendment Bill

1
Diamond Amendment Bill

• Supporting Industry Growth and Development By
  Maximising Local Beneficiation

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Introduction

• Eugene Roos Small-Scale Manufacturer
• I have been involved in the manufacturing
  industry for 7 years
• I am a member of UDASA (The United Diamond
  Association of South Africa)
• I represent numerous friends and colleagues in
  the diamond manufacturing industry
• As small-scale manufacturers we submit a
  grass-roots level presentation

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Congratulations

• We Hereby congratulate government on its
  initiative in becoming proactively involved in
  the local diamond manufacturing industry by
  addressing the current problems within the
  industry through the drafting of The Diamond
  Amendment Bill
• We whole-heartedly support every aspect of The
  Diamond Amendment Bill and eagerly await its
  urgent and prompt implementation

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Current Industry Situation

• A combined workforce of over 1 million in
  non-producing countries
• The combined workforce of Southern African
  producing countries, namely Botswana, Namibia and
  South Africa, is less than 1 of the workforce of
  non-producing countries
• A dismal South African workforce of only 2000
  manufacturers
• Poor regulation of the industry
• The indiscriminant export of the vast majority of
  South Africas rough diamonds
• Insufficient quantities of rough diamonds
  supplied to small-scale manufacturers
• High rough diamond prices that are not conducive
  to industry growth and development
• Increased rough diamond production
• Poor beneficiation of South Africas rough
  diamond resources

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Our Industry Vision Statement

• To become the global leader in diamond
  manufacturing by maximising the local
  beneficiation of South Africas rough diamond
  resources

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Goals and Objectives

• To amend the current Diamond Act to
• Remove the current industry irregularities and
  obstacles that hinder and suppress local
  beneficiation
• Create an environment for the sound growth and
  development of the local diamond manufacturing
  industry
• Proactively regulate the diamond industry at
  grass-roots level
• Maximise local beneficiation

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Current Industry Irregularities and Obstacles

• The current Diamond Act, in particular Section 59
  Agreements
• Over-inflated rough diamond prices
• Insufficient quantities of rough diamonds
  supplied to the local small-scale manufacturing
  industry despite an annual increase in rough
  diamond production
• A poorly regulated industry
• Cutting costs
• A distortion of beneficiation figures

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Section 59 Agreements

• One-sided, self-serving and ultimately
  unconstitutional agreements that have facilitated
  the duty free export of the vast majority of
  South Africas rough diamonds at the expense of a
  thriving local diamond manufacturing industry
• They have failed to deliver on their commitment
  to industry growth and development. The figures
  speak for themselves. A meager workforce of only
  2000

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Over-Inflated Rough Diamond Prices

• Over-inflated rough diamond prices do NOT create
  an environment for local industry growth and
  development
• Downstream Marketing is a current industry
  strategy employed to facilitate and validate high
  rough diamond prices

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Downstream Marketing

• This strategy now asks manufacturers to become
  actively involved in downstream industries, over
  and above their current manufacturing industry
  commitments and obligations, to increase the
  price of their polished diamonds
• This strategy only serves to benefit the producer
  by facilitating higher rough diamond prices. This
  strategy does not benefit the local small-scale
  manufacturer

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Insufficient Quantities of Rough Diamonds
Currently Supplied

• Despite annual increases in rough diamond
  production, the current supply of rough diamonds
  to the small-scale local manufacturing industry
  is insufficient and does NOT create an
  environment conducive to industry growth and
  development
• As manufacturers we wish to be supplied with
  sufficient quantities of rough diamonds to
  sustain our factories on a full-time basis,
  utilising every working day, as is the case in
  every other manufacturing industry

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A Poorly Regulated Industry

• Current regulation of the diamond industry is
  ineffective in maximising beneficiation and
  promoting the sound development of the local
  diamond manufacturing industry
• Government needs to become proactively involved
  in the industry to regulate the supply of rough
  diamonds to local manufacturers and to regulate
  exports to ensure maximum beneficiation
• Complaints presented to key stake holders and
  industry role players concerning shortages of
  rough diamonds currently supplied to the local
  small-scale manufacturing industry have not been
  addressed within the current regulatory framework

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Cutting Costs

• Cutting costs have also been used as an excuse as
  to why local beneficiation is not feasible
• When compared to the price of diamonds, cutting
  costs are negligible
• The value of diamonds and the level of skills
  required to manufacture them can surely not be
  compared to the value of a bowl of rice
• As a manufacturer working from home and not
  employing any additional manufacturers my cutting
  costs are zero. Yet I battle to sustain my
  business

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A Distortion of Figures

• The term by value has been repeatedly used to
  paint a pretty picture of rough diamond supply
  and commitment to the local industry. This is a
  distortion of facts and figures. The following
  phrase is used repeatedly
• South Africa manufactures more than 50 by
  value of the rough diamonds it produces. At one
  stage this figure was reported to be more than
  100 by value.
• The universal unit of measure for diamonds is the
  carat. Why not express the supply of rough
  diamonds to the South African industry in terms
  of carats or in terms of volume as a percentage
  of total production. You will find that South
  Africa is supplied with a very small percentage
  in volume, or carat weight, of its total
  production. That is why we have a workforce of
  only 2000.

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Promoting the Sound Growth and Development of the
Industry

• Creating an environment for skills transfer and
  job creation which will ultimately lead to
  empowerment by
• Allowing equitable access to South Africas rough
  diamond resources. Supplier of Choice (SOC) does
  NOT promote equitable access to rough diamonds
• Guaranteeing regular and sustainable supplies of
  rough diamonds to the local manufacturing
  industry based on manufacturers requirements
• Proactively regulating the industry
• Providing access to funding

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Regulating the Industry at Grass-Roots level

• By appointing the State Diamond Trader to become
  actively involved in sourcing and supplying rough
  diamonds to local manufacturers in a manner which
  promotes industry growth and development
• By regulating the quantity, quality and price of
  rough diamonds supplied to the local
  manufacturing industry to ensure growth and
  development
• By regulating the export of rough diamonds
  through the imposition of an export duty
• By removing from the industry entities whose sole
  purpose is to export industry sustainable rough
  diamonds from South Africa as this does NOT
  contribute to local beneficiation

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Imposition of Export Duties

• It has been reported that the imposition of
  export duties will promote illegal activities
  such as smuggling and money laundering. By this
  statement, smuggling is defined as the duty free
  export of rough diamonds. This statement, in
  itself, then serves to confirm that Section 59
  Agreements, through facilitating the duty free
  export of rough diamonds, have, in fact,
  legalized diamond smuggling and money laundering.
  Therefore the scrapping of Section 59 Agreements
  and the imposition of export duties will put an
  end to legal smuggling and money laundering

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Recommendation

• The implementation of The Diamond Amendment Bill
  to
• Scrap Section 59 Agreements
• Regulate the export of rough diamonds through the
  imposition of export duties
• Appoint a State Diamond Trader
• Regulate the supply and price of rough diamonds
  to South African manufacturers
• Empower local manufacturers to determine what
  goods are required for manufacture
• Create an environment for sustainable growth and
  development resulting in empowerment and job
  creation through maximised beneficiation

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Support of The Diamond Amendment Bill

• It is our view, as small-scale manufacturers,
  that those parties who oppose The Diamond
  Amendment Bill or appose the fundamental
  principles of The Diamond Bill are NOT committed
  to local beneficiation and are ultimately NOT
  committed to the economic growth and prosperity
  of South Africa

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Thank You