South African diamond industry in "crisis"

A short supply of rough diamonds is causing the South African diamond industry to shrink.

JOHANNESBURG - 

The South African diamond cutting industry is in crisis over the short supply of rough diamonds and has convened an industry meeting this month to address the woes that have shrunk the sector.   

President of the World Federation of Diamond Bourses Ernest Blom told Mineweb the South African industry was suffering as the newly established State Diamond Trader was not providing the sector with adequate rough diamond supply for beneficiation yet. The industry was also no longer receiving rough diamond supply from De Beers subsidiary Diamdel.

Blom said the trader was buying about 3% of  De Beers'diamond production for supply to local beneficiators, while it was set up to buy 10% of the country's rough production for supply to local cutters and polishers. 

The result was that the local beneficiation industry has shrunk from about 3,000 cutters and polishers to about 1,500. Some of the beneficiators have left South Africa in favour of countries such as Botswana, which offered better job security. 

The president said the country's largest diamond cutting, polishing and training facility, Zurel Bros SA, has also started retrenching staff as it does not receive sufficient rough diamonds to make the factory economically viable.

Blom said the local industry only recently started seeing a lack of rough diamond supply.  Rough diamonds had to be of a certain size to be economically beneficiated in South Africa, while the small rough stones were cut and polished in India.

When the state diamond trader was established last year, the Department of Minerals and Energy said De Beers has agreed to assist with management, technical skills and asset provision over its first three years for free.

General Manager of the SA Diamond and Precious Metals Regulator Simon Sikhosana told Mineweb that although there was currently a shortage of rough diamond supply, the local diamond industry was not in crises.

He said De Beers was the leader in diamond mining and currently produced about 93% of South Africa's diamonds. The company's recent disposal of some of its production assets and the energy shortage experienced by most operating mines led to decline in diamond production.

"Besides the production problem access to rough diamonds for local traders has been compounded by numerous factors which need to be addressed by all stakeholders as a matter of urgency," said Sikhosana. 

The decline in South African diamond production started in 2006 when production was about 16m carats and production dropped to about 15m carats last year.

Sikhosana said the role of the Regulator was to ensure that there was sufficient and constant supply of rough diamonds in the country. This could be attained by ensuring the State Diamond Trade and local diamond traders purchased these goods at fair market value from producers.

He added that the industry was currently dominated by a few big players, while the Regulator wanted it to grow to be as inclusive and diverse as possible.

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