Posted on 09/03/2005 3:11:14 PM PDT by LesbianThespianGymnasticMidget
JOHANNESBURG (Mineweb.com) --This past Friday, your intrepid correspondent set out for lunch at one of his favourite restaurants in Johannesburg’s Rosebank Mall. He stopped at his favourite tobacconist to pick up a pack of cigars and then went up the escalator to a computer store to buy a memory stick.
Which was when all hell broke loose. Gun shots and scampering shoppers as thieves tried to hold up security guards carrying cash boxes. The thieves escaped without their loot, but one of the mall’s employees was killed in the cross-fire and was left for more than three hours lying where he fell.
The attempted armed robbery, granted a less-common occurrence than rape or murder in the new South Africa, went unreported as far as I could tell by the state-owned public broadcaster, though it was picked up by some of the more sensational newspapers Saturday morning.
On Saturday morning, in the same mall, I sat drinking coffee with an old friend, an old friend whose junior diamond company has been hunting with some success these past several years for diamonds in southern and South Africa.
“We are pulling out of this country and out of (diamond rich) Angola”, he confided. “We are shifting our attention to the Congo.”
“Why?” I asked, expecting to hear about security fears after Friday’s shoot-out that was on everyone’s mind that Saturday spring morning. Not a chance, the reason behind the decision was certainly fears over security -- security of ownership of any diamonds his company might mine; over his freedom to market the gems at market prices; concerns over the effect of the new 15% export tax on all South African diamonds and, later, the proposed 8% royalty on diamond sales revenues (revenues, mind you, not profits); and reservations about the ANC government’s official black economic empowerment policies that are aimed at transferring business interests at fire-sale prices, or worse, to black South Africans who had been excluded from the economic mainstream under the years of Apartheid rule.
There is worse to come, as anyone who has tried to do business in a centrally-controlled economy will understand. The latest proposal from Comrade President Thabo Mbeki’s party, is that all South African diamonds shall be marketed by the new State Diamond Trader. This state-run marketing organization will first offer the diamonds for local sale to cutters and polishers inside the country. But given the skills capacity in South Africa and the high labour costs compared to other polishing centres such as India or China, it is likely that it will only be economically viable to polish none but the larger gem-quality stones.
So what happens to all the smaller stones for which the Indian cutters created a market and which can scarcely be turned into jewellery anywhere else?
It gets worse. What does this do to the prices that the South African diamond miners (and the exchequer) will receive for these smaller stones? To meet the high South African input costs, prices of these smaller stones are likely to tumble. Which Indian cutter in his right mind will buy small stones at an effective 15% premium (never mind the looming royalty) to the world market? The net effect, as experience has shown, will be to encourage smuggling.
The government’s misguided aim is to create jobs, even if they are in an unviable market niche. But even if that aim succeeds, jobs are likely to be lost on the mines, because who will continue to produce small stones for lower prices?
The Canadians tried the same, with the result that one of that country’s flagship cutting companies just went bust.
My friend’s logic seemed inescapable.
A week or two ago, De Beers announced that it was ceasing underground mining at its old Kimberley operations. It sees the future in that city as being in re-processing old dumps which generate small diamonds. But if the price of small stones crumbles, what will be the effect on other regional diamond producers such as Namibia and Botswana? Ask yourself. Better still, ask South Africa’s new mines minister, Lindiwe Hendricks.
De Beers is being its usual diplomatic self. It has submitted reams of submissions on the likely impact of the government’s new proposals. But even De Beers can surely not continue to focus on South Africa if its smaller competitors are actively moving elsewhere.
I have made the point before, African countries, for example the Congo, Ghana, Tanzania or Mozambique that have been through the various hells of civil war, pillage or gross misgovernance, have seen the light. They have put in place structures to attract and protect investors. Others, such as Zimbabwe, are busy taking the road to economic ruin and inappropriate government. Zimbabwe, for example, has just promulgated laws that prevent property owners from challenging in the courts nationalization or confiscation of their assets.
And only a few weeks ago, South Africa’s new deputy president saw fit to tell a conference that her country could learn from Zimbabwe’s land reform programme.
Enough said. I need a drink and one of those cigarillos.
fears over security -- security of ownership of any diamonds his company might mine; over his freedom to market the gems at market prices; concerns over the effect of the new 15% export tax on all South African diamonds and, later, the proposed 8% royalty on diamond sales revenues (revenues, mind you, not profits); and reservations about the ANC government’s official black economic empowerment policies that are aimed at transferring business interests at fire-sale prices, or worse, to black South Africans who had been excluded from the economic mainstream under the years of Apartheid rule
A week or two ago, De Beers announced that it was ceasing underground mining at its old Kimberley operations. It sees the future in that city as being in re-processing old dumps which generate small diamonds. But if the price of small stones crumbles, what will be the effect on other regional diamond producers such as Namibia and Botswana? Ask yourself. Better still, ask South Africa’s new mines minister, Lindiwe Hendricks.
all South African diamonds shall be marketed by the new State Diamond Trader
And only a few weeks ago, South Africa’s new deputy president saw fit to tell a conference that her country could learn from Zimbabwe’s land reform programme.
Ping a Ling.
Note the: And only a few weeks ago, South Africa’s new deputy president saw fit to tell a conference that her country could learn from Zimbabwe’s land reform programme.
Ping
Nothing good for South Africa or Southern Africa will come from any of their government actions. This is just one more nail in the coffin of the country. Somehow I feel that De Beers will be able to weather the storm.
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