Sonjica on the State Diamond Trader
5 October 2007
Three new important Acts were recently promulgated by the President of South
Africa, Thabo Mbeki, namely: the Diamonds Amendment Act, 2005, the Diamonds
Second Amendment Act, 2005 and the Precious Metals Act, 2005. These Acts came
into effect on the 1st of July 2007. The Diamonds Amendment and Second
Amendments Acts (Amendments) replace the Diamonds Act No 56 of 1986, while the
Precious Metals Act replaces Chapter 16 of the Mining Rights Act, 1967. These
Amendments provide for the establishment of a regulator to be known as the
Diamond and Precious Metals Regulator (the Regulator) and a State Diamond
Trader (SDT). The coming into effect of the Amendments has disbanded the South
African Diamond Board (SADB) and all its employees have been absorbed by the
Regulator.
The Regulator
All "beneficiates" of diamonds and precious metals, local dealers in
diamonds and precious metals, diamond researchers, temporary (foreign) buyers,
trading house owners, inheritors of diamonds, jewellery makers and etc, are
obliged to make an application for a licence to the Regulator before they can
operate as a business and approach the State Diamond Trader (SDT). All holders
of licences under the previous acts are expected to convert their licences in
accordance with the provisions of the new laws within a period of a year
starting from 1st July 2007.
On proclamation of the new legislation, the office of the Regulator, was
immediately opened for business being as it was merely a matter of expanding
the already existing infrastructure of the SADB. However, In the case of the
SDT, a whole new sector has to be set up before it can function
effectively.
The State Diamond Trader (SDT)
The objects of the SDT are to promote equitable access to local beneficiates
intending to beneficiate South African unpolished diamonds. The regulations
prescribe that the percentage of diamonds from South African production
acquired by the SDT for supplying local beneficiates shall be up to 10 percent
in terms of carats and value. The SDT will establish, maintain and expand a
client base of local diamond beneficiates. In acquiring diamonds for local
beneficiation the SDT will have to follow prescribed procedures and these are
set out in the Diamonds Second Amendment Act.
The office of the SDT was opened for business on 3 September 2007. Between
September and October the SDT will be approaching diamond producers to
determine their production cycles. Thereafter the Chief Executive Officer (CEO)
of SDT will start negotiating the purchasing of up to 10 percent of their
respective 'run of mine' production. Concurrent with actions taken by the CEO,
the Board of the SDT will determine the criteria for selecting clients
qualifying to purchase unpolished diamonds from the SDT.
Companies holding licences issued by the Regulator will not automatically
qualify to be SDT clients. After determining the producers' respective cycles,
the SDT will invite local beneficiates to make an application to become clients
of the SDT in accordance with the established criteria. The SDT will create
profiles of those who qualify to become clients while the clients will in turn
provide the SDT with the specifications of their needs. Thereafter, the SDT
will go back to producers and purchase diamonds accordingly.
The SDT will then make parcels for its clients according to their respective
profiles. Clients will then be invited to make offers to purchase their
prepared parcels. As the above-mentioned processes are quite intense and also
considering the tight demand and supply conditions in the country, the SDT is
committed towards fast-tracking the whole process. As a result, it could take
from four to five months before the SDT is in a position to invite its clients
to purchase diamonds from its premises.
Both the Department of Minerals and Energy and the SDT are fully aware of
the critical shortage of diamonds in the country, especially as regards the
availability to small players. Indeed, Government understands the sense of
frustration felt by those aspirant new players in the diamond sector and it is
for this reason that interim negotiations and transitional measures have been
taken up with De Beers. De Beers has been requested to continue supplying
diamonds through DIAMDEL until the SDT is finally ready to open its doors and
commence with diamond sales itself.
There are misconceptions doing the rounds of the diamond market that DIAMDEL
is the SDT and these have raised the level of uncertainty, especially among
offshore participants. I wish to reiterate that the SDT is not DIAMDEL and that
DIAMDEL is not the SDT. De Beers has offered the services of DIAMDEL to the SDT
mainly through the use of its equipment and expertise. De Beers and the SDT
have entered into a confidential agreement whereby the SDT appoints De Beers as
an agent to render services to the SDT over a three-year period, which should
allow for enough time for the SDT to acquire the relevant skills and the
necessary equipment to perform the functions assigned to it under the Diamonds
Act, as amended.
De Beers has accepted the appointment on the terms and conditions as set out
in the Confidential Agreement. However, it should be emphasised that even
during this transitional period there will be a complete and clear demarcation
between the functions of the SDT and ongoing DIAMDEL business. Concomitant with
the SDT's responsibilities in accordance with the Amendment Acts, the SDT also
has certain Human Resources issues it has to attend to, such as recruiting
staff. Currently the only employees listed on its books are the CEO and the
staff seconded from De Beers and it might well take some two to three months to
redress this situation.
Conclusion
I would like to take this opportunity to thank the entire mining industry
for showing such solid support for government interventions committed to
redressing the imbalances of the past, and also for being so ready and keen to
drive this new venture with the department. I would also like to thank my
department, SDT and the Regulator for the hard work done so far. I believe that
by this time next year our country will be proud of the good results attained
through the imposition of the new legislation. I believe the legislative
transformations that we have but recently introduced will be remembered in
history as occasions of crucial importance through a legacy that will have
positive effects for generations to come.
I also take this time to invite the media to a press conference on this
matter jointly with De Beers and SDT on Monday, 8 October in my offices on the
7th Floor, 120 Plein Street, Cape Town at 08h00.
For more information contact:
Sputnik Ratau
Cell: 082 521 9614
Issued by: Department of Minerals and Energy
5 October 2007
