Transformation of Diamond Board: briefing

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
2 March 2000
TRANSFORMATION OF THE DIAMOND BOARD

SUMMARY
The Minister's presentation highlighted the structural problems created by the Diamond Act of 1986. These problems will require a long-term solution, but in the meantime, short and medium term solutions need to be found to address current tensions.

The Diamond Act creates a situation where the Board is dependent on the very people it is supposed to regulate, namely the Government Diamond Evaluator (GDV). This is because the funding of the Board is restricted to a levy based on the value of unpolished diamonds. In addition, 60% of the Board's budget goes towards payment of the GDV. The tensions between De Beers and GDV are the result of this relationship.

In the long term, the Act needs to be replaced. Until then, the Minister would like to see the GDV be moved to the South African Revenue Service (SARS). The Minister will explore the appropriate mechanism, based on best practices for separating the regulator from the regulated.

Another problematic area has been the question of corporate governance. The Minister would like to see better efficiency and accountability, and there are conflicts of interest that need to be addressed. For example, De Beers should not sit on the Board, just as Eskom does not sit on the National Electricity Regulator.

A report prepared by Mr Hennie Taljaard (the Taljaard Report) will be issued shortly and will form the basis for an investigation into corporate governance by a task team.

There was a great deal of anxiety about finding the right balance between the powers of the government and those of other stakeholders, particularly de Beers. The Minister gave her assurance that there would be a workshop for the whole industry - including De Beers as well as downstream players - in order to exchange information and concerns and to consult on the structural issues. An Indaba has been scheduled for the end of July.

Finally, South Africa has been asked to lead the effort to address the illegal trade in diamonds on the continent. This issue is inextricably linked to the economic problems in particular countries, and the wealth in those countries needs to be reconstructed around mineral resources. Industry and government thus need to work together to decrease the illegal trade, and international players need to step forward as well. There is a need for a Diamond Conference, so that diamonds are no longer a "rebel's best friend".