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Law will fuel smuggling - Oppenheimer Posted: Tue, 20 Sep 2005 [miningmx.com] -- THE South African government’s proposed legislation aimed at developing a local diamond manufacturing sector would fuel illicit trade in diamonds from the country, said Jonathan Oppenheimer, MD of De Beers Consolidated Mines (DBCM). Government tabled terms for its proposed Diamonds Amendment Bill in Parliament in August the thrust of which was to retain a greater portion of diamonds in South Africa rather than exporting them. Currently, De Beers follows a time-honoured system in which it exports its South African production and reimports it in the so-called ‘London Mix’. This mix of unpolished diamonds includes material mined from all of De Beers’ mines. The South African government believes De Beers’ current system prejudices the local manufacturing diamond industry. “We would be worried about the illicit trade that would develop,” said Oppenheimer in an interview with Miningmx. “It will drive goods from South Africa into the illegitimate diamond industry”. Oppenheimer was also doubtful that a key driver of the legislation – job creation – would not be properly served. On the basis that cutting and polishing diamonds is cheaper in India than in South Africa, smugglers would reimport highly portable rough diamonds back into the country for re-export at a hefty premium. Oppenheimer said his company would abide by the laws of the country but would meantime challenge some of the terms of the Diamond Amendment Bill arguing that it would damage the world’s diamond industry. Consumers wanted proof of the integrity of diamonds following recent shocks such as the emergence of conflict or blood diamonds, gems mined and sold by warlords to fund civil war and human rights abuses. At its height, trade in blood diamonds accounted for 4% of the world’s diamond trade, Oppenheimer said. Enacting legislation that contributed towards smuggling would help reverse efforts to instil integrity into the industry, he said. Local and international consumers of De Beers’ diamonds, known as sightholders, have to abide by the company’s corporate governance standards including the Kimberley Process, an industry pact aimed at containing blood diamond trade. The stakes are high: there were more than 250 million owners of diamond jewellery worldwide with an estimated value of $1 trillion. In addition, about $60bn in value was traded in diamond jewellery annually of which $10bn was rough diamond sales. The philosophy of the Diamonds Amendment Bill was also muddied by comments recently by minerals and energy minister, Lindiwe Hendricks, who said government wanted to commandeer De Beers’ local marketing operations. Apart from confusing the activities of marketing and distribution, Hendricks’ comments raise the possibility government was victimising De Beers. Jacinto Rocha, minerals and energy deputy director, said government’s intentions had been misinterpreted. “We will not take over the full distribution of De Beers’ diamonds,” he said. Government’s intention were to “facilitate access to rough diamonds”. “Our relationship with government is informed by different starting points,” Oppenheimer said. “The government views proposed changes from a South African context, but De Beers looks at the global context. Against this backdrop, De Beers says it will support any attempts to grow the market anywhere subject to that constraint”.
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