This definitely not good news. Whether or not it will effect SUF remains to be seen.:
Row puts local diamond sight on hold
May 5, 1999
By Renee Grawitzky
Johannesburg - Local diamond sight holders have been caught in the middle of the protracted dispute between De Beers and
the government diamond valuator.
The dispute - which centres on valuation of diamonds - could mean that diamond processors will have to put workers on
short time. They warned last night that the industry's future was at stake if the row remained unresolved.
The allocation of gem consignments to sight holders was yesterday postponed to Friday because of differences over how
diamonds should be valued. This comes ahead of today's release by Minerals and Energy Minister Penuell Maduna of a task
team report on the row.
The government diamond valuator has questioned the traditional use of De Beers' price book to value diamonds prior to
export. The valuator would like to value diamonds at a higher market-related price or spot price.
Analysts said the inherent problem in this approach was mandating a sale price "which is not sustainable". Ultimately diamond
prices were determined by De Beers through the activities of the Central Selling Organisation.
Mining analysts said that if De Beers could not export diamonds at its book value there was no incentive to import "specials" -
gems bigger than 10,8 carats - for the local market at that price.
Despite this the company was obliged, in terms of an agreement with government, to provide the local market with these
bigger stones.
The analysts said De Beers could not afford to back down. The dispute was ultimately a question of trust and, if De Beers
backed down, it would mean it had been exporting under a flawed system.
Diamond manufacturers last night accused government of abandoning the local diamond industry in the hope that it would get
more tax out of De Beers.
An industry source said "government and local processors together fought De Beers for 20 years to get a better price for
rough diamonds to ensure the industry's profitability". The tables had now turned as government was insisting that De Beers
sold diamonds to the industry at a higher price, the source said.
Local processors could import if not supplied by De Beers, but this would be at a higher price.
De Beers had been scheduled to supply its 18 sight holders with a regular consignment of rough diamonds yesterday, but
local diamond processors asked De Beers to cancel the sight as the consignments, without stones larger than 10,8 carats,
were incomplete.
Processors said De Beers was unable to provide complete consignments because of the dispute. De Beers confirmed that
the sight was postponed to Friday because of problems valuing "specials".
PHIL |
