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South African diamond industry has gone to the dogs

27 june 2012

South Africa is said to contain the most diverse range of diamond deposits in the world and these included kimberlite mining, alluvial mining, as well as marine mining.

The country was ranked the world’s 6th leading rough diamond producer by volume in 2010 after Russia, Botswana, DRC, Australia and Canada.

It produced 8.9 million carats valued at $1.2 billion during the year under consideration.

South Africa was also home to De Beers, Petra Diamonds, Rockwell Diamonds, Trans Hex and DiamondCorp, to mention but a few.

The global economic crisis of 2008 and part of 2009 saw the country experiencing a decrease in diamond output and prices.

This discouraged several players who were forced to put their operations under care and maintenance.

However, recovery was registered when the global economy convalesced during the second half of 2009.

The talk of mines nationalization in the past few years by the youth wing of the ruling ANC party had also to some extent contributed to the current puny performance of the country’s mining sector, diamonds included.

Persistent labour strife in the mines, as workers called for higher wages, was another source of demons haunting the mining industry.

It was said that it costs more to produce diamonds in South Africa, compared with other countries such as Botswana.

Although this might be debatable, what was not questionable is the fact that the country’s diamond industry had gone to the dogs.

African Romance (a diamond cutting and polishing company) chief executive Mohseen Moosa was recently quoted by Mining Weekly as saying that the South African diamond industry had not been managed well.

He said that the South African diamond industry was in crisis.

“[The] government needs to ask itself what is being done upstream and downstream, from a regulatory point of view, to ensure the development of diamonds as a lucrative commodity in South Africa,” Moosa said.

He said that the country appeared as if it does not want to build the diamond industry as a commodity and was comfortable with the fact that Botswana had become the largest producer of rough diamonds in the world by value.

“There doesn’t seem to be any kind of urgency or critical analysis coming through from the Department of Mineral Resources (DMR), the State Diamond Trader or the Diamond Regulator to rectify this situation,” Moosa said.

He said the local diamond industry does not have sufficient support to compete in international markets.

Moosa also blasted South Africa’s State Diamond Trader for failing its statutory mandate to buy up to 10 percent of the run-of-mine from all diamond producers in the country for sale to local polishing houses.

“The State Diamond Trader is too expensive and forces companies to buy diamonds blind,” he said.

Local companies, Moosa said, had to compete with international buyers in open markets at auctions and tenders, with many of them being speculators that do not contribute to job creation in South Africa.

He said the South African government should make the industry more attractive by offering incentives to companies interested in diamond beneficiation.

Botswana was doing the same. It was offering tax incentives to companies polishing local stones and guaranteed the provision of rough diamonds in exchange for production.

“African Romance has also been approached to polish diamonds in Botswana and is tempted to move its polishing business from South Africa to Botswana, which understands that a diamond polishing business cannot run successfully without a consistent supply of rough diamonds,” Moosa said.

“South Africa should become more humble about the fact that it has lost its diamond industry, that it is weak and that it is no longer the sparkle of the world when it comes to diamonds. The industry needs to sit down with government and see what can be done to fix this.”

The state diamond firm Alexkor was also in comatose with less signs of recuperating and consequently grow into a force to reckon with.

As the continent’s largest economy, South Africa had the capacity to become the trading hub for the diamonds mined in Africa.

But for this to happen, there was need for seriousness and interest on part of the government and its agencies.

It would also be foolhardy to ignore the fact that 40 percent of the world’s natural resources reside in Africa.

Chances were high that South Africa had more important and profitable minerals and metals to chase after than diamonds.

However, this does not take away the fact that South Africa was a sleeping giant in the diamond industry.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished