DE Beers South Africa is likely to have its business affected by a Bill that was tabled recently, the Diamond Amendment Bill. According to an article in the Sunday Times newspaper of September 4, the Bill is aimed at giving the South African government more control over the diamonds. The government will have a say in how the diamonds are to be sold.%%De Beers has been selling its produce via the Diamond Trading Company. The diamonds were sent to London, England, to be mixed with stones from other parts of the world. DTC then distributes them to dealers and cutters throughout the world by ‘sightholders’, a select group of diamond traders that De Beers has been working with. If passed, the law could deal the organisation a significant blow in terms of profit making. The idea behind the legislation is to give the local people of the country more equitable access to the diamonds.

The Bill does not specify how much of the produce is to be retained by government; it could be any amount from zero to 100 percent, says the report. This will be facilitated by a yet-to-be established Diamond Exchange and Export centre. The Bill also provides for the creation of a State Diamond Trader. The government would determine the price it pays for the diamonds through a State Diamond Valuator.%%According to the report, for De Beers, there may be little to gain from the law, which would also see government imposing a 15% tax levy on the diamond producer. Previously there was a special agreement in place that exempts De Beers from tax. The report says the changes, if effected would present a rare opportunity for the South African diamond industry. Local companies would be able to cut and polish the gems. The fact that the Bill does not define how much of the diamonds the State Diamond Trader would buy means that De Beers could find itself challenged with maintaining good customer and investor confidence. If approved the Bill would become law some time in the first quarter of 2006.%%According to the report, if Botswana and other diamond producing nations follow the same route and make similar laws, then De beers could find itself with declining profits. For more than 70 years the company has been selling their diamonds through DTC. Some analysts in South Africa have observed that the law could result in the DTC coming to an end. Issues yet to be finalised are how the funds to set up the diamond exchange will be raised; also where the money to buy the diamonds would come from. De Beers Botswana was not available for comment at the time of going to press. Also contacted were officials of the Ministry of Minerals, Energy and Water Resources who were also unavailable.