Law may change duty on diamonds
Business Day (Johannesburg)
February 17, 2000
By Linda Ensor
Cape Town - New legislation to replace the Diamonds Act would involve a
complete review of the ineffective system of export duty exemptions for
diamond producers, minerals development deputy director-general Jan
Bredell said yesterday.
The department believes that the section 59 agreements with diamond
producers have not been effective in promoting a local industry. In terms
of these agreements producers get exemptions from the 15% export duty
on rough diamonds in return for making a sufficient quantity available to
the local market for cutting and polishing.
Bredell said the chapter of the Minerals Development Bill, which would
replace the Diamond Act, was being drafted. It was therefore too soon to
say that section 59 would be abolished. It might be that its implementation
was made more effective.
However, De Beers spokesman Tracy Peterson said the corporation
could not consider the financial effect of the changes to the legislation until
their full implications had become clear. Abolition of the exemptions
altogether would have a serious impact on De Beers's marginal mines.
De Beers believes the SA cutting industry is competitive only in the larger,
higher-value diamonds.
Yesterday Diamond Board CEO Victor Sibiya called the section 59
agreements a complete farce. They had proved a "devastating cost" to
the economy.
He called for their immediate cancellation, saying an export duty was
essential to expand cutting and other value-added activities in SA.
"The acute lack of verification in all critical monitoring areas has meant
that these agreements have not delivered what is said on paper," Sibiya
told Parliament's minerals and energy portfolio committee.
Full data had to be made available.
The fiscus received inadequate financial returns as manipulations and
undervaluations were possible.
Sibiya said investment growth in the manufacturing sector had been
constrained by "rigid, rough, export-focused corporate ideologies".
He also believed that the composition of the Diamond Board was "highly
dysfunctional" as it contained an inherent conflict of interests.
The board represents government, the regulating authority and the private
sector. This was a recipe for conflict and had hindered the implementation
of new ideas.
The board was not performing more than 10% of its statutory mandate
and could not operate effectively without regional representation. The
urgently required solution, Sibiya said, was to create a regulatory board
answerable exclusively to the state.
The board was "overly inclined to direct and indirect De Beers
domination." The fact that the board was almost entirely (about 90%)
funded by levies on De Beers exports also opened the way for abuse.
Sibiya said De Beers's payments of levies was used "with apparent intent
to secure or induce compliant behaviour".
PHIL |
