Govt set to boost diamond beneficiation sector: Oliphant

Deputy Mineral Resources Minister Godfrey Oliphant on Wednesday outlined plans to boost South Africa's fledgling diamond cutting and polishing industry.

Speaking during debate on his department's 2011-12 budget, he told MPs these included developing a local "diamond funding model" to support small and medium-sized manufacturers in the sector.

Government would also look to supplement the country's locally mined diamonds with stones from other African countries, such as Angola, the Democratic Republic of Congo and Zimbabwe.

"It is... worrying that we remain a small player in the downstream sector of the diamond value chain, with a disproportionately small and under-developed beneficiation industry," Oliphant said.

This was despite the country's ranking as the world's sixth-largest producer in terms of volume carats and fourth-largest in terms of value.

While the diamond beneficiation industry had immense potential to create thousands of jobs, it remained "significantly small". One of the reasons was the high cost of setting up, with small and medium-sized manufacturers having limited or no access to finance.

"We are currently studying different diamond-funding models, like the Antwerp Diamond Bank, the Bank of Israel and the State Bank of India, in order to propose to local financial institutions -- and especially the IDC [Industrial Development Corporation] -- to consider developing a South African diamond funding model to support our local beneficiation industry," he said.

On security of supply, Oliphant said many manufacturers did not have access to a constant supply of rough stones.

"Limited access to rough diamonds is often cited as one of the main reasons why the local downstream beneficiation industry has not really taken off."

In this regard, the department was looking to some of South Africa's northern neighbours.

"To supplement locally-produced diamonds, we are exploring the possibilities of importing diamonds from other African diamond-producing countries.

"In particular, through our membership of the African Diamond Producing Countries, we are looking at importing diamonds from, among others, Angola, the Democratic Republic of Congo and Zimbabwe."

Oliphant said a shortage of advanced cutting and polishing skills was also a major barrier to developing the industry.

"To this end, we are working with the further education and training sector... the Mining Qualification Authority (MQA) and other industry stakeholders to develop a curriculum that will respond meaningfully to the skills needs of the diamond beneficiation industry."

Government was also looking at access to markets.

"The African Growth and Opportunity Act provides access to markets in the US, which consumes more than 50 percent of all diamond jewellery in the world. This is an opportunity for local diamond beneficiators to grow their markets internationally.

"In addition, a free trade area exists with the European Union, which provides for duty free access into the EU.http://www.blogger.com/img/blank.gif

"Together with local diamond beneficiators, we will be exploring means to leverage on these instruments, in order to facilitate access of local beneficiators goods into these lucrative markets," Oliphant said.

Speaking at the start of the debate, Mineral Resources Minister Susan Shabangu said government was well aware of the problems currently besetting the diamond beneficiation sector, including a "lack of access to rough diamonds".

Government's strategy would be finalised "before the end of the current financial year", she said.