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Response to Issues Raised at Public Hearings on the Diamond Amendment Bill

Response to Issues Raised at Public Hearings on the Diamond Amendment Bill. Presented to the Parliamentary Portfolio Committee on Minerals and Energy 17 October 2005 Parliament, Cape Town. OVERVIEW BY MINISTER Mrs LINDIWE HENDRICKS Department of Minerals & Energy. The Team.

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Response to Issues Raised at Public Hearings on the Diamond Amendment Bill

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  1. Response to Issues Raised at Public Hearings on theDiamond Amendment Bill Presented to the Parliamentary Portfolio Committee on Minerals and Energy 17 October 2005 Parliament, Cape Town

  2. OVERVIEW BY MINISTERMrs LINDIWE HENDRICKSDepartment of Minerals & Energy

  3. The Team • Department of Minerals and Energy • South African Diamond Board • Mintek

  4. Overview • Purpose of Amending the Bill • Issues Raised: • Definitions • By Clause • Other Matters • Conclusion

  5. Purpose of Amending the Bill • Increase equitable access to rough diamonds for manufacturing • Increase participation throughout the value chain to create jobs • Make SA a significant international diamond beneficiation centre

  6. Definitions • Expansion of definition of dealer to combine dealing and beneficiation in one licence • Diamond dealers cannot be clients of the State Diamond Trader • Irreversibly treated diamonds • Will be defined separately • Disclosure obligation will be included in section 56A • Changing “parcel” to “container” • Term “parcel” is defined in the Kimberley Process and is used internationally in the trade

  7. Clause 4 and 5 • Objects and functions of the Regulator with regard to precious metals • To be dealt with in the Precious Metals Bill Clause 6 • Broader representation on the Board of the Regulator • Proposed change: • Increase number of members from 13 but not more than 16 • 2 members to represent the diamond industry • 2 to represent the precious metals industry.

  8. Clause 10 & 17 • Provision for majority of the members of the Boards to call for meetings • Allow for a 2/3 majority to call for meetings Clause 12 • Regulator is not entirely State funded • Regulator should be allowed to raise funds for developmental projects

  9. Clause 16 • Development and expansion of client base by State Diamond Trader (SDT) • To be prescribed in the regulations • How the SDT will export its rough • SDT will not export rough • Will offer its excess diamonds at the Diamond Exchange and Export Centre (DEEC) • Offer by De Beers that Diamdel partner with SDT • DME to pursue the discussions with De Beers

  10. Clause 17 • Representation by dealers on the Board of the SDT • Diamond dealers are not considered to be stakeholders of the SDT • Representation of investors • no change recommended as the SDT will raise and generate its own funds • SDT funding • SDT open to PPP for development

  11. Clause 19 & 24 • Sale and export of unpolished diamonds by holders of beneficiation licences (cutters) • Permit holder should be allowed to sell or export unpolished diamonds under prescribed conditions • Clause 26 (h) will be inserted to make provision for a permit Clause 26 (e) • Reduction of term of temporary permit from 1 month to 1 week • Temporary permit is for foreigners to purchase diamonds at the DEEC. • No change should be made

  12. Clause 26 (f) • Selling of rough by means of tender at Trading Houses to everyone • Diamond Trading Houses will continue with tender only for licensees Section 29 • No reference must be made to premises • For control of illicit dealing in diamonds it is imperative that reference be made to premises

  13. Clause 32 • Period of validity of diamond dealer’s licence must be 5 years • Clause will be amended accordingly Sections 40 - 43 • Sections 40, 42, 42 and 43 to be re-instated • Clause 26 will make provision for a special permit to sell diamonds under prescribed conditions

  14. Clause 48 A • Offering of all diamonds at the DEEC before export • The legislation subscribes to the principles of “general applicability” and as such all producers must offer production to the DEEC before export. • The Regulator from time to time may designate an area as a DEEC Section 39 • Appeal procedure to be included in the Bill • DME recommends that the appeal procedure remains as prescribed in the regulation

  15. Section 58 • Request for section 58 to be reinstated, that allows cutters and beneficiators to export unpolished diamonds • reinstatement of section 58 to allow diamond beneficiators to sell rough diamonds under the authority of a special permit issued under prescribed conditions

  16. Clause 59 • Request that “volume” be corrected to read “value” • words “carats or volume” be changed to “carats and value” • “Cherry picking” by the SDT • The SDT will purchase a representative sample of a production cycle by caratage and value. No “cherry picking” • Production cycle is too rigid • The SDT will exercise flexibility to accommodate small scale producers

  17. Section 63 • Exemption from export duty of diamonds offered at the DEEC but not purchased • All money issues will be referred to the Money Bill Section 64 • Deferment of payment of export duty • Provision for deferment on merit will be provided for in the Money Bill

  18. Clause 67 • 20% fine for difference in values is too high • This clause should remain the same as a deterrent Section 93 • Levies for the running of the South African Diamond Board • Section should be deleted

  19. Other issues • Industry would like the Bill to distinguish between “cuttables” and “non-cuttables” • No distinction should be made in the Bill as market forces will in time determine the distinction • VAT on imports • Consultation with Treasury • Transitional Period • No amendments recommended • Development of BEE charter and scorecard • Bill makes provision for BEE implementation through regulations as per clause 95 (1)(jA)

  20. Other issues cont… • Research on the diamond industry • Study on the diamond value chain conducted by NEDLAC • SDT will continue undertaking further research when necessary • Offset for producers who provide diamonds directly for beneficiation • The Bill does not provide for the offsets and this is not recommended • Guidelines for diamond pricing • The industry has a pricing guideline • The GDV is to stay abreast of market related prices

  21. Other issues cont… • Minerals and Petroleum Resources Development Act issues: • Long lead time for granting of licences • Size of mining area not economically viable • The MPRDA is currently being amended to cater for the both turn around time and size of mining areas

  22. Conclusion • Equitable access to rough • Maximise value addition • Separate regulatory function from the promotion function • Streamlining the Diamond Act with the MPRDA

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