Maduna to announce
new diamond plan
MUNGO SOGGOT, Johannesburg | Thursday 3.30pm.
THE Minister of Minerals and Energy, Penuell Maduna, is
expected to announce on Friday the preliminary results of the
government's snap probe into the way diamonds are
evaluated.
It is understood that Maduna has been advised that diamonds
being exported from South Africa should be valued at
market-related prices, and not at the value attached to them
by diamond giant De Beers.
Such an announcement would boil down to a challenge to the
"price book" which De Beers uses to run its diamond cartel.
These prices are set by De Beers' London-based marketing
arm, the Central Selling Organisation.
The director general of the Department of Minerals and
Energy, Sandile Nogxina, confirmed the investigating team
included officials from the South African Revenue Services
(SARS) and Customs and Excise.
Despite the inclusion of the SARS officials, joining the finance
department's chief tax policy director, De Beers chairman
Nicky Oppenheimer this week played down the significance
of the probe, saying there were "no tax implications" for the
diamond giant.
The team was appointed by Maduna last week after an
unprecedented decision by the government's diamond
valuator to reject De Beers' evaluation of a consignment of
diamonds due for its London marketing arm. The new
government diamond valuator, which vets diamond export
prices, said the gems were significantly more valuable than the
price suggested by De Beers.
The valuator's move is consistent with a government strategy
to address the way De Beers has operated in South Africa
and find ways to resuscitate the local diamond cutting
industry.
De Beers initially wanted to challenge the validity of the
valuator's contract, but backed down after the meeting where
it was agreed Maduna would appoint a task team to resolve
the deadlock by Friday.
Nogxina said the team would be offering some "short term
solutions" initially, but needed about another month to resolve
longer term problems.
Oppenheimer told Reuters this week that the government
probe had no tax implications because De Beers does not
pay export duty on diamonds.
The export tax exemption to which Oppenheimer referred is
granted to De Beers in terms of an agreement with the
government which obliges De Beers to give local diamond
cutters first choice on diamonds suitable for the local industry
before they are exported to De Beers' Central Selling
Organisation in London. In return, De Beers gets its tax
exemption. In practice a committee appointed by the
Diamond Board selects the diamonds suitable for the local
industry. Then all De Beers' diamonds are shipped to the
CSO in London and De Beers brings back to South Africa,
carat for carat, the type of diamonds desired by the local
industry. It is up to De Beers to monitor this process, which is
understood to be an area of concern for some state diamond
officials.
Diamond analysts said this week that by confining the tax
implications of the probe to export duties, Oppenheimer was
ignoring other tax implications stemming from the prices at
which diamonds are valued - most obvious being the taxable
profits of De Beers mines.
De Beers' argument is that it is difficult to challenge its pricing
policy because it claims it is effectively the diamond market.
Some officials believe De Beers has set up an operating
environment that often supports its worldwide diamond cartel
at the expense of the local industry and the government.
ie: SUF will most likely prosper with such change ... We may not initially see any increase in prices, however it looks favorable in that it will occur. This was obviously not a coincident in having selected the parcel of diamonds (Jan/99) from the Marsfontain, in effort to conduct such study. |
