De Beers on Tax Exemptions of Export Diamonds; Fidentia: hearings

STANDING COMMITTEE ON PUBLIC ACCOUNTS
12 September 2007
DE BEERS ON TAX EXEMPTIONS OF EXPORT DIAMONDS; FIDENTIA: HEARINGS

Acting Chairperson: Mr V Smith (ANC)

Relevant documents:
De Beers briefing document – strictly for Members only
AG’s briefing document on De Beers
Standing Committee on Public Accounts: 12 June 2007 meeting: interaction with the Minister of Minerals and Energy on SCOPA 62nd report 2005: South African Diamond Board
Business Report news article June 13 2007: MPs challenge De Beers over mysterious exports (see Appendix)

Audio recording of meeting

SUMMARY
The Committee interrogated the De Beers delegation on the tax exemptions relating to the export of diamonds in order to conclude the matter and submit its report to Parliament. It was the Committee’s view that there had been a ‘spike’ in the export of diamonds just prior to the coming to power of a democratic government. The Department of Minerals and Energy, the South African Diamonds Board, and the Office of the Auditor-General expressly concurred with this view. De Beers denied that there had been a ‘spike’.

The Committee was concerned that tax revenues had thereby been lost through the tax exemptions that De Beers claimed it had been granted by the South African Diamonds Board. De Beers denied that there was any irregularity in its being granted tax exemptions.

De Beers agreed to co-operate with the Committee by providing requested documentation promptly. The Committee’s view was that no corporation or individual was above the law.

The Committee interacted with the curator and co-curator of the Fidentia Group and urged them to bring the matter of the Fidentia Group to a conclusion as soon as possible and recover the money that was intended for Fidentia’s beneficiaries. The curator and co-curator said that they wanted to co-operate fully, without prejudice to the assets that they hoped to recover. The Committee was concerned about the cost of the curatorship and its duration. The curator said that he had offered to serve at no charge, but this offer had been declined; as for the duration of curatorship, they were constrained by court proceedings and processes; they were also frustrated by non-recognition in South Africa of the doctrine of conversion, whereby assets could be attached to exact payment of debts.

MINUTES
Mr V Smith (ANC) as Acting Chairperson in the temporary absence of Mr N Godi (African People’s Convention) opened the meeting. Mr Godi arrived subsequently, but Mr Smith continued as Acting Chairperson.

Interaction with De Beers
The Acting Chairperson welcomed the De Beers delegation, which the Committee in its 12 June 2007 meeting had agreed should be summoned to appear before it. The delegation consisted of Mr David Noko, Managing Director, Mr Bruce Cleaver, Group Director for Commercial Affairs and Legal Services, and Mr Barend Petersen, Director of Information Services. Also welcomed were Mr W Van Heerden, Corporate Executive, Office of the Auditor-General, Mr Sandile Nogxina, Director-General: Department of Mineral Affairs and Energy, and Mr Abbey Chikane, Chairman: South African Diamond Board.

The Acting Chairperson said that he hoped that the outcome of the meeting would be resolution and closure of the matter of the tax exemptions related to the export of diamonds by De Beers and that the Committee would thereupon be in a position to report on the matter to Parliament.

The Acting Chairperson said that the Committee had one and a half hours to deliberate on the De Beers matter. He asked that Members should ask only pertinent questions so as not to prolong the deliberations. He asked that respondents should answer the questions completely but strictly to the point so that the Committee could conclude its deliberations on the evidence before it and thereafter report to Parliament.

The Acting Chairperson asked Mr Pierre-Jean A Gerber (ANC) to summarise the background to the matter.

Mr Gerber thereafter began the Committee’s interrogation of De Beers. He said that in 1993 at the dawn of democracy in South Africa, De Beers took out approximately 20 million carats of uncut diamonds. These had a value of about 900 million US dollars. The tax levy due on these was some 135 million US dollars. This was equivalent to about 1 billion rands. This tax levy was not paid, because De Beers claimed that it had been given an exemption by the South African Diamond Board.

The objectives of the Diamonds Act were to regularise the activities of the diamond industry and to establish a more effective control structure. It was a fact that the diamond industry was an industry that lent itself to suspicion. The Government had found it necessary to order no fewer than three formal and three informal investigations.

Since 1999 SCOPA had raised this issue. It had been in the media. It had been raised in Parliament. Various ministers had raised it. De Beers at no time and nowhere had produced evidence of its permission for the export of the diamonds without paying tax.

Only when SCOPA had asked De Beers to appear before the Committee did De Beers produce a document.

The Acting Chairperson asked the Committee Members if they were familiar with the document about which Mr Gerber was talking, namely, the agreement between the South African Diamond Board and De Beers Consolidated Mines

Mr Gerber asked the De Beers delegation for the names of those who had signed on behalf of De Beers Consolidated Mines Ltd. The De Beers signature was illegible. He further asked who had signed on behalf of the Diamond Board.

Mr Bruce Cleaver, Group Director for Commercial Affairs and Legal Services: De Beers, said that there were two signatures: one was of Mr Gary Ralfe [De Beers Non-Executive Director], the second was not clear.

Mr Gerber further asked who had signed on behalf of the Diamond Board.

Mr Cleaver said that he was not in a position to say.

Mr Gerber, addressing the Acting Chairperson, said that the document that he was now referring to consisted of seven pages. All pages had been signed by the Diamond Board managers and by the members of De Beers.

With regard to the diamonds that De Beers had exported in 1993, Mr Gerber asked the De Beers delegation if he could ask them questions on the 1992 agreement that De Beers had from the Diamond Board. He asked if De Beers had a copy of that document. That was the document that had been approved on 03 December 1992.

Mr Cleaver replied: ‘Yes, we do.’

Mr Barend Petersen, Director for information services: De Beers, said that he confirmed that on behalf of De Beers.

Mr Gerber asked the De Beers delegation for the names of those who had signed the 1998 agreement, which had five signatures, and if De Beers could show him any of the names of signatories to the 1992 agreement. The 1992 agreement, unlike the 1998 agreement, lacked signatures. He again asked for the names of those who had accepted this agreement on behalf of De Beers.

Mr Cleaver replied that the document had been submitted to De Beers on 13 January 1993. There was a copy of the document dated 12 February 1993. The Diamond Board had agreed and its officials had signed. He said further that the 1992 agreement consisted of a suite of documents”, that together constituted a written agreement, although not all parties had signed the annex. No party had signed the attachment.

Mr Gerber said that he had in front of him a letter addressed to Mr Link; this was the letter that they had been looking for 13 years. This letter had many smudge marks.

Mr Cleaver asked if that was the letter that bore the date 13 January 1993 in the top right hand corner.

Mr Gerber said that was correct.

Mr Gerber said that there were three different kinds of lettering on this letter. This was significant, since in 1993 word processing facilities that would easily enable a writer to use three different kinds of lettering in the same letter were not readily available.

Mr Cleaver asked Mr Gerber to enlighten him with regard to his observation.

Mr Gerber said that the lettering for ‘Yours sincerely’ was different.

Mr Cleaver replied that De Beers had no knowledge as to how the South African Diamond Board had composed the letter, but De Beers regarded it as ‘a solid letter’.

Mr Gerber asked De Beers why, if in their view the 1992 agreement constituted a valid legal document, did they feel the need in 1998 to go and ask the Diamond Board for another agreement.

Mr Cleaver said that in the attachment to the 1992 agreement there was a sentence ‘The agreement will be subject to annual review’. Each year the Diamond Board had confirmed continuation of the 1992 agreement, and De Beers had felt no reason to doubt the validity of these yearly reconfirmations. In 1998, however, there had been, after negotiations, a new, formal agreement with slightly different terms. He said that both were perfectly valid legal documents. He could not shed any further light upon these agreements, since he was not present at the time. However, the 1998 agreement clearly referred to the terms of the 1992 agreement.

Mr Gerber asked if the 1992 agreement had come about through protracted negotiation or had it been the result of one Diamond Board meeting.

Mr Cleaver said that in 1990 and 1991 the industry had asked De Beers to provide a more consistent mix of diamonds. It was his impression that there had been negotiations behind the 1992 agreement. De Beers had agreed in the 1992 agreement for the first time to mix South African diamonds to be exported to London with De Beers diamonds from all over the world, and re-import not only De Beers South African produced diamonds but diamonds from De Beers mines all over the world. He confirmed that it was his understanding that there had been negotiation preliminary to the 1992 agreement.

Mr Cleaver thereupon informed the Acting Chairperson that he, Mr Cleaver, had just been offered an original of the letter issued to De Beers by the South African Diamond Board in January 1993. He would be happy to hand out a copy of the letter.

The Acting Chairperson asked Mr Gerber to continue.

Mr Gerber asked Mr Cleaver if he had copies of the discussion with the Diamond Board preliminary to the 1992 agreement, or had the discussion documents been given to a subcommittee.

Mr Cleaver asked if he could confer with a colleague.

Afterwards, Mr Cleaver said that they did not have with them any of those documents; they know that there had been lengthy discussions, and that the Diamond Board subcommittee was involved. They could investigate that. Nonetheless, they could confirm that there had been lengthy discussions.

The Acting Chairperson asked if the Diamond Board could enlighten the Committee.

Mr A Chikane, Chairperson: South African Diamond Board, said that they were aware only that there had been some resolutions.

The Acting Chairperson emphasized that the Committee really wanted to conclude the matter that day, and so he appealed to De Beers to conduct that investigation and return to the Committee as soon as possible.

Mr Cleaver reiterated that De Beers had a valid agreement. However, De Beers would do its best to conduct the investigation regarding the documents. They would search for any relevant minutes.

The Acting Chairperson said it was in the interests of De Beers, if they had substantial documentation related to the agreement, to produce that documentation. It was in everybody’s interest to produce that documentation. Failure to do so would leave the Committee to draw its own conclusions.

Mr Gerber asked De Beers what had motivated the company, on the eve of a new democratic South Africa, to ship 20 million carats of uncut diamonds to London, only to re-import some of them afterwards. These diamonds were worth 900 million US dollars free of tax. For a company such as De Beers, that was and remains an institution in South Africa, it really raised many questions.

Mr Cleaver said that that, in De Beers’ view, was a misconception. De Beers had comprehensive evidence for every diamond. It was De Beers’ view, based on its own records and evidence, that no more than its usual number of diamonds were exported in 1993. De Beers had comprehensive records and could substantiate that for every shipment of diamonds it had a certificate of exemption. There was not a material ‘spike’ in De Beers' export of diamonds in the year prior to the 1994 election.

The Acting Chairperson said that the Committee had documentation from the Office of the Auditor-General that gave a different picture. The Committee’s information was contrary to that of De Beers, which argued that its exports had remained constant. He asked the Auditor-General’s representative to confirm the information given by the Office of the Auditor-General to the Committee, in particular the information given on page seven of the document that the Auditor-General had provided on 11 September 2007. According to that document, there was a substantial difference in the sale of South African diamonds in the year 1992 from any other year. He asked for the source of that information.

Mr W Van Heerden, Corporate Executive: Office of the Auditor-General, said that the information had been supplied by the Department of Minerals and Energy.

The Acting Chairperson asked if the Committee could assume that De Beers had exported all those diamonds, or if any other company or organisation had contributed to the total. He asked if they were all De Beers’ diamonds.

Mr Van Heerden said that the total included the products of other companies or organisations, but that De Beers was the biggest diamond producer at the time.

The Acting Chairperson thanked Mr Van Heerden, saying that the Committee just wanted to set the record straight.

The Acting Chairperson said that the export of uncut diamonds to the value of R4.6 billion in 1992, compared with R1.7 billion in the year before, was, contrary to what De Beers had said, clear evidence of ‘a spike’.

Mr Petersen said that it was necessary to distinguish exports from sales. The document in question referred to sales.

The Acting Chairperson said that the Committee had a problem in reconciling the figures given by De Beers with the figures given by the Auditor-General to Parliament. It was a frustrating situation for the Committee. He asked the Department of Minerals and Energy if it had any information that could assist the Committee in its interrogation and if there had been ‘a spike’ in diamond exports.

Mr Sandile Nogxina, Director-General: Department of Minerals and Energy, said that the Department could confirm what the Auditor-General’s representative had said.

The Acting Chairperson asked Mr E W Trent (DA) if the above constituted an answer to his question.

Mr Trent said that his question was answered.

Mr Gerber asked De Beers if he was correct in assuming, with reference to the 1992 agreement, which De Beers insisted was legal, that De Beers had not paid any export levies up to 2007.

Mr Cleaver said that De Beers had a valid certificate of exemption.

The Acting Chairperson said that he did not want to open a debate between De Beers and the Auditor-General’s Office. He asked De Beers, that if they disputed the figures that the Committee had received from the Auditor-General’s Office, they should submit their figures to the Committee in writing so that the Committee could itself interrogate them. He said that the question that the Committee was now asking De Beers was whether or not they had been paying duties on exports since 1992. He asked Mr Gerber to repeat his question.

Mr Gerber asked if De Beers could give details of the exemption certificates.

Mr Cleaver said that De Beers had not paid duties on exports since 1992 since De Beers had been given exemption. De Beers could provide the Committee with copies of exemptions granted since 1993. The delegation members had with them the exemption for 1993, and could leave a copy with the Committee.

The Acting Chairperson asked De Beers to confirm, for the record, that De Beers had an exemption.

Mr Cleaver confirmed that De Beers had an exemption.

The Acting Chairperson asked that De Beers furnish the Committee with copies of the exemption.

Mr Gerber asked if De Beers had had an exemption for every parcel of stones that had been exported.

Mr Cleaver replied that De Beers had valid certificates of exemption for every shipment. De Beers would be happy to provide the Committee with copies of exemption for the year in question, 1993; it was a very large file, but De Beers would provide 1993 certificates to the Committee before they left that day, and subsequently any other documentation that the Committee required. They did not have with them the documentation for other years.

The Acting Chairperson thanked Mr Cleaver and said that the Committee would certainly examine the documents, either on the Committee’s premises or on De Beers’ premises.

The Auditor-General’s representative said that the 1992 exemptions were wanted as well.

Mr Gerber asked where the head office of De Beers was located.

Mr Cleaver said that it was in Kimberley.

The Acting Chairperson asked if De Beers would confirm that it had not deliberately held back any of its production as a stockpile. It was necessary to move away from being ‘nice’ and instead be ‘frank’ He asked De Beers if they were disputing that prior to 1992 there had been a big stockpile that had been shipped to London. He understood De Beers to be saying that there had been nothing untoward in its actions. However, the Committee was sure that there was something untoward in the shipment of a large stockpile to London just before the 1994 elections.

Mr Cleaver admitted that De Beers held stockpiles around the world. De Beers, however, maintained that the stockpile that it held at the time in question was substantially less than the Committee had alleged, and it was certainly not accumulated to avoid any kind of duty. It was shipped in 1992 in order to be mixed with other diamonds in London. De Beers denied any stockpiling in order to ship an abnormally large number of diamonds prior to the 1994 elections.

Mr Trent asked if it was De Beers’ view that De Beers had no liability to pay any duty whatsoever on those exports.

Mr Cleaver acknowledged that De Beers had a requirement to comply with the law, but De Beers had obtained an exemption

Mr Gerber asked if members of the Auditor-General’s Office who had gone to London could supply the Committee with information.

The Acting Chairperson said that, before any question was put to the Auditor-General’s representative, he wanted to ask the Director-General of the Department of Minerals and Energy whether or not there had been a stockpile. Also he wanted to ask the South African Diamond Board if there had been a stockpile.

Mr Van Heerden said that the Diamond Board evaluator had commissioned in London two audit reports by PKF to investigate the stockpile.

Mr Nogxina said that according to the Department’s understanding there had been a stockpile.

Mr Chikane said that there had indeed been a stockpile.

Mr Godi observed that the issue had been before the Committee for a long time. It appeared that De Beers was now more willing to provide information. He asked why they had not been willing to provide that information previously, which raised Mr Gerber’s question.

The Acting Chairperson asked for the reason for the difficulty in providing documentation. He asked why it had taken such a long time and such effort to provide it.

Mr Chikane said that the Diamond Board had instituted an investigation.

Mr Petersen said that De Beers had supplied the required information in February 2006 within two days.

Mr Cleaver said that in 1999 it was quite likely that a stockpile might have been built up. He said further that the 1998 agreement was a written agreement in the form of a letter from the South African Diamond Board with the terms and conditions attached. De Beers accepted the agreement by way of a letter dated 13 February 1998. De Beers’ position was that it was a valid agreement in writing, and De Beers had the originals. However, the relevant statute, in De Beers’ view, had not required a written agreement.

The Acting Chairperson said that the Committee was composed not of lawyers but of ‘mere mortals’. He asked for a copy of the agreement, and if De Beers could tell the Committee who was the chief executive officer of the Diamond Board at the time.

Mr Cleaver said that the letter appeared to have been signed by a Mr C J Hambley, Chief Executive Officer, as far as De Beers could tell, for the Diamond Board.

Acting Chairperson said that the Committee was not going to dispute that now, but take that as De Beers’ position for purposes of the Committee’s final deliberations. He asked the Auditor-General’s representative please to help. He asked for any further input from the Auditor-General’s representative in order that the Committee could take an informed decision.

Mr Van Heerden asked if the Committee had copies of the 1987-1991 agreements, and did the 1992 agreement differ in format from the other agreements referred to.

Mr Cleaver said that it was his understanding that there was in 1987 a one-page letter from the Diamond Board indicating an agreement. It was not a formal agreement.

Mr Trent asked if members of the Diamond Board at the time were available and could be called to appear before the Committee.

Mr Chikane said that he wished that the matter could be brought to a logical conclusion. He said that it would be helpful if De Beers and the Treasury could agree on figures to determine whether anything was owed to the state. The legal side of the matter, Mr Chikane felt, could be settled without recourse to the courts.

The Acting Chairperson said that definitely there would not be another hearing on De Beers. That was why he had been determined not to involve the Committee in legalistic discussions.

The Acting Chairperson repeated that the Committee’s view was that De Beers had an obligation to pay any taxes that it should have paid but which it had not paid. If De Beers had not paid taxes that it should have paid, the question remained how the Committee should proceed in the matter. If De Beers did not owe taxes, then that chapter could be closed.

Mr Trent said that he was satisfied that there was nothing more to be gleaned from the parties present.

Mr Gerber said that the 1992 agreement had been open-ended. He asked why there was a need for another agreement in 1998.

Mr Cleaver replied that the 1992 agreement had not been intended as a permanent agreement. Changes in circumstances by 1998 led to negotiation of a new agreement. He was aware that the Section 59 committee had reviewed the agreement.

The Acting Chairperson asked if any other Committee Member wished to ask a question.

Mr Gerber asked if the South African Revenue Service (SARS) had at any time audited De Beers.

Mr Cleaver said that De Beers had been subject to many audits by SARS.

The Acting Chairperson said that he would now review the proceedings and bring them to a close.

He said that the Committee required De Beers to submit its export duty exemption certificates for 1992 and 1993.

The Committee also wanted De Beers to investigate to see if it had paid RSC levies.

The Committee also wanted to indicate here that the Department of Minerals and Energy, the Diamond Board, and the Office of the Auditor-General had all confirmed that there had been a stockpile of diamonds in 1992.

He said that De Beers had a different view. The Committee asked De Beers therefore to give the Committee its information as soon as possible because that was critical to the Committee’s position.

He affirmed that the Members of the Committee were politicians. The Committee had received a report from the Office of the Auditor-General that a large corporate citizen of South Africa had had a stockpile and had taken it out of the country just before the 1994 elections. It had not paid duty.

The South African Diamond Board, which was supposed to be the regulator, had ruled in favour of business rather than the government.

A regime change was imminent.

These factors had aroused the Committee’s concern, and the Committee could not shirk its responsibility to Parliament to ask these questions.

He said that the Committee wanted to send a strong message. No corporation or individual was untouchable. There must be no perception that anyone was above being held accountable. If a corporation or individual had broken the law, the Committee would investigate the matter, as mandated by the Constitution. The Committee could call anyone to account, whether it be a director-general or even an ordinary civilian. In that context the Committee had summoned De Beers. In that context the Committee sent a message that everyone was accountable.

So De Beers was going to co-operate, and there would not be another engagement like the present one. The Committee would make its ruling and stand by it. The Auditor-General would live by it, in terms of reputation and otherwise. De Beers would live with it, and so would the present Diamond Board, and the future Board. The Committee would pronounce on all these matters, including the future role of the Board.

The Acting Chairperson thanked De Beers for appearing before the Committee and trusted that De Beers would provide the documentation requested as soon as possible.

The Auditor-General, the Board, and the Department would help the Committee by reaching agreement on the financial aspect of the matter.

If the Committee had any further questions of the parties present at the meeting, it would ask them telephonically or by letter. There would be no further meetings.

The Committee would complete its report and submit it to the matter to Parliament.

Mr Cleaver expressed De Beers’ thanks for the opportunity to appear before the Committee and assured the Committee of De Beers’ co-operation.

Interaction with Mr Dines Gihwala, curator of the Fidentia Group
The Committee interacted with the curator and co-curator of the Fidentia Group and urged them to conclude the matter as soon as possible. The Committee explained that its aim was to recover money intended for Fidentia’s investors and beneficiaries, including money intended for the use of training.

The curator, Mr Dines Gihwala, said that he and his co-curator, Mr George Papadakis, wanted to co-operate fully, without prejudice, with regard to the assets that they hoped to recover. He asked if the curator and co-curator had privilege in the meeting, to which the Acting Chairperson replied that, in so far as they were appearing before the Committee, they had privilege. However, members of the media were present and the Committee could give no guarantees that what was said might not be reported in the media.

Mr Gihwala said that on taking up the administration of Fidentia, the curator and co-curator had sought to cut costs; other than the Fidentia Football Club, they had not sold a single asset. R49 million had been paid to beneficiaries. Of this, R16 million had been repaid to the Transport Education Training Authority (Teta).

Mr Gerber asked how long would it take to resolve the Fidentia matter. The Committee wanted ‘an end to this debacle’.

Mr Gihwala said that when he took up his appointment as curator, he was told to prepare himself for a task that would take ten years. He said that the curator and co-curator were handicapped in their process. The Financial Services Board was aware of that handicap. It was hoped to produce a final liquidation account by the end of 2007. It was then hoped to make an award.

Mr George Papadakis, co-curator, said that the curator and co-curator had identified Fidentia’s assets to be in three groups: firstly, an equity portfolio, secondly, a property portfolio, and, thirdly, a cash portfolio.

Mr Godi (African People’s Convention) said that the curators had not been categorical with regard to the R49 million, and asked if that sum had included the R16 million.

Mr George Papadakis said that it was separate.

Mr Trent asked what was a reasonable time for curatorship.

Mr Dines Gihwala replied, ‘How long is a piece of string?’ Because of the urgent need of widows and orphans to be repaid, the curators lacked the time and space to build up assets.

To this, the Acting Chairperson responded that the Committee wanted to focus on Teta.

Mr Dines Gihwala said that, subject to court approval, it was hoped to make a distribution by 31 December 2008. The curator and co-curator said that they would try to achieve the highest price in the sale of assets.

Mr Gerber asked, in the interests of the taxpayer, what was the cost of curatorship.

Mr Gihwala said that the curatorship fees were at a discounted rate.

Mr Papadakis said that the Auditor-General had approved the rates.

Mr Gihwala said that he had offered to serve at no charge, but this offer had been declined, because it was thought that if he undertook to do the work pro bono then, because it was a difficult case, the work might be delayed behind more straightforward cases for which normal fees were applicable. So he had agreed upon a fee. However, with due respect to the Committee, the curator had to decline to disclose the agreed fee. He said that it was ‘not appropriate to put my private business on display.’ Moreover, Mr Gihwala, an attorney by profession, did not want to disclose to the Committee the level of the fees that he was charging for fear that he would be subjected by his profession to disciplinary proceedings for charging fees below those recommended by his profession. It was his view that the creditors of Fidentia were getting good value for their money.

Mr Gerber said that the Committee respected his view.

Mr Gihwala said that Teta had also informed them that Teta had engaged lawyers and forensic accountants. It was for Teta to decide if it was getting value for money. Lawyers could not accelerate the speed of what the curator and co-curator were doing already, since the curator and co-curator were constrained by the requirements and processes of the courts.

Mr Papadakis said that liquidation would not have helped.

The Acting Chairperson asked Mr Hennie J Bekker (IFP) if he had any questions.

Mr Bekker replied that he had no questions.

Mr G Koornhof (ANC) asked about Sunset Beach. It was a low valuation. He asked the curator and co-curator if they were going to sue for that money.

Mr Gihwala said that their valuation was R20 million. The curator and co-curator were constrained by the non-recognition in South African law of the doctrine of conversion, whereby property could be attached to exact payment of debt. This meant that a thief could profit from what he had stolen and keep his profit. However, this would not stop the curator and co-curator from suing for the money. He wanted to challenge this doctrine. Since the courts were inundated, the earliest likely trial date was in the first part of 2009.

Mr Koornhof said that the process did not make much sense.

Mr Gihwala said that there were pleadings. Mr J Arthur Brown, former head of Fidentia, had frustrated them every step of the way. January 2009 remained the earliest likely date for a trial. It was better to err on the side of caution.

Mr Gihwala and Mr Papadakis gave the Committee their unequivocal commitment to conclude the matter as soon as possible, but reminded the Committee that they were subject to external procedural constraints such as those of the court. Mr Gihwala said that Members should feel free to contact him. He had left his telephone number with the Committee Secretary, Mr Gurshwyn Dixon.

The meeting was adjourned.

Appendix:

Business Report news article: MPs challenge De Beers over mysterious exports
June 13, 2007

By Michael Hamlyn

Cape Town - MPs are considering whether to call De Beers to give evidence to the financial watchdog committee on public accounts on how it came suddenly to export huge numbers of uncut diamonds shortly before apartheid officially ended and the new democratic government came to power.

The committee was told yesterday that the export of uncut diamonds each year amounted to about R1.8 billion, but that in 1992 there was a sudden spike to R4.67 billion. But the Diamond Board said it had not been able to discover a copy of any agreement allowing the export of diamond without payment of the export levy.

It had no copy in its files, according to Abbey Chikane, who chairs the board. And when the board wrote to De Beers asking for the company's copy, all it received was a copy of a board resolution on the subject.

The chairman of the committee, Themba Godi, asked: "Where is the agreement that allowed De Beers to loot the diamonds out of the country?"

ANC MP Pierre Gerber referred to what happened in Namibia just before that country's independence, when uncut diamonds were similarly exported to be stockpiled in London, in what the MP called "a scorched earth policy".

The committee will consider the possibility of legal action against the company to recover the unpaid levies. The levies arise from clauses in the Diamond Act that require that gems be first offered to local polishers or cutters before being exported. Offering the diamonds locally allows the diamonds to be exported free of the 15 percent levy.

But Catinka Smit of the litigation department of the SA Revenue Service told the committee that the law was very imprecisely drawn. It did not, for example, specify in what way or how often the diamonds should be offered locally. Nor did it prescribe what form an agreement to export should take. It could even be a simple oral agreement, she said.

The director-general of minerals and energy, Sandile Nogxina, told MPs that the imprecision of the act encouraged the government to draw up a new bill that would tighten up the law. That bill, which was first to be called the Beneficiation Bill, has now taken the form of the Diamond Export Levy Bill before parliament.

The bill lays down specific terms under which uncut diamonds should be offered to local cutters and polishers.

De Beers spokesperson Tom Tweedy said uncut diamonds were exported when an equivalent amount of diamonds were imported, and when the diamonds themselves were not of sufficient quality or size to make it worthwhile cutting them here. "Local cutters are more expensive than those in India or Asia."

He later said: "De Beers keeps a record of its agreements and we are happy to assist the board should it require copies of agreements that we have." An agreement in section 59 of the Diamond Act "has been an evergreen agreement, which is reviewed annually by passing a resolution, unless there are material changes in any of the terms or technical details".

This had happened last year, when particular types of diamond were added to a section that deals with specials, which are diamonds of a colour, size or type of a higher value reserved for South African diamond cutters and not exported."