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South Africa's diamond industry no longer sparkling

         Date: 2012-06-08

           Tag: South Africa, South Africa diamond

Summary: African Romance claims that it does not buy diamonds from the State Diamond Trader, as it does not supply diamonds suitable for polishing.

The South African diamond industry faces serious challenges upstream and downstream, where job creation, wealth creation and the beneficiation of raw diamonds are not concerns for regulatory authorities, says diamond polishing company African Romance CEO Mohseen Moosa.

“In my opinion, the State Diamond Trader has failed in its objectives to buy up to 10% of the run-of-mine from all diamond producers in South Africa for sale to local polishing houses,” he says.

“It is also the responsibility of the State-owned entity to promote equitable access to and beneficiation of diamond resources, but the state of the diamond industry proves otherwise.”

African Romance claims that it does not buy diamonds from the State Diamond Trader, as it does not supply diamonds suitable for polishing.

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

Diamonds cannot be viewed before buying; therefore, the quality and suitability of the diamonds for polishing cannot be evaluated and companies stand the risk of losing profits.

“The State Diamond Trader is buying diamonds from the industry but is not selling it according to the mandate that Parliament has given it, which is to only sell diamonds to South African companies for the purpose of South African economic growth.

“African Romance is committed to this issue and has tried to raise it with government but there has been no response,” the company states.

Six years ago, South Africa employed 3 000 diamond polishers in the downstream diamond sector and today the industry employs only 900 polishers.

This means that the South African downstream diamond industry has shrunk by about 300%, says Moosa.

In comparison, neighbouring countries’ diamond industries seem to be growing. Botswana is now employing 500% to 600% more polishers than South Africa, which was once the largest diamond-producing country in the world. Today, South Africa is number five.

African Romance has been polishing diamonds in South Africa since 2007 and, while the company possesses the required technologies and skills for polishing, it struggles to find rough diamonds in the country.

“We have never had a consistent supply of rough diamonds in South Africa, even though the country mines 11-million to 12-million carats of rough diamonds a year,” says Moosa.

That is because the system used to sell rough diamonds does not provide sufficient opportunity for local buyers. Local companies have to compete with international buyers in open markets at auctions and tenders, with many of them being specu- lators that do not contribute to job creation in South Africa.

Moosa states that the diamond industry in South Africa has not been managed well from a regulatory point of view and that it seems that the country does not want to build the diamond industry as a commodity and that it is comfortable with the fact that Botswana has become the largest producer of rough diamonds in the world.

“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,” he states.

In addition, Moosa says the diamond industry does not have sufficient support to compete in international markets.

African Romance has attempted to acquire raw materials and to create jobs and develop skills, but says it is not being sufficiently engaged by government.

“There is a small amount of support, but without engagement from government, we won’t be able to tread new waters and chart new courses.”

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