This policy on the one hand has been of great benefit to the RSA and the diamond industry globally. On the other hand it has together with geo economical and political factors resulted in the manufacturing industry growing largely in Belgium, Israel, India, Thailand etc. instead of locally. Today Southern Africa produces about 70% of the world’s gem diamonds yet polishes less than 1%. Up and until 1979 manufacturing licenses in the RSA were only issued to De Beers Sightholders (16 in total presently). A few dozen were issued over the next 15 years by the Diamond Board on the pretext that these licensees should seek its supply from the uncontrolled or so-called open market. This being such an erratic source not so conducive to permanent job creation a very few of the new entrepreneurs actually succeeded. With the advent of the new South Africa hundreds of licenses were issued to mostly the "previously disadvantaged". Facing the same plight with regard to supply on top of other barriers i.e. access to finance and polished markets this strategy did not really spark a dramatic growth in the SMME sector of the industry either. Today probably only 30% of all licensees are actually active in the industry.

The Master Diamond Cutters Association MDCA traditionally represented almost the entire manufacturing industry at all levels including the diamond board. As new licenses were issued to "Non-Sight Holders" since 1980 most of them joined the membership with the hope that somehow the organisation will further their needs and problems. Understandably the Sightholders (big business sector) not only had very little insight in the peculiar problems facing the SMME sector but found their presence somewhat irritating in more ways than one. Sensing this Frustration IDMASA (Independent Diamond Manufacturing Association of Southern Africa) was formed in 1998. The membership mostly consisted of those non-sight holding licensees that seemed to have survived the eighties and early nineties. More the less concurrently the Rainbow Association (RA) was formed mostly consisting of the new licenses since 1994 (the previously disadvantaged) who understandably surmised that they have a more unique set of challenges facing them.

Inspired by our new national motto ultimately members from both IDMSA and RA faced up to the fact that we are truly living in a new South Africa and that we all need each other to overcome the obstacles of participating in the African Renaissance. UDASA (United Diamond Association of South Africa) was formed in May 2000 with the two organisations merging into one. The newly elected executive committee immediately set out defining its mission, vision and identified some key goals in the short and longer term. In order to pursue these goals eight sub committees were formed each chaired by a member of the executive and staffed by others or co-opted members of UDASA.

To develop the diamond cutting industry in Southern Africa as part of the African Renaissance by beneficiating the continents raw materials.

To build on the extensive and modern infrastructure existing in the Republic of South Africa by developing the SMME sector of the industry into a significant contributor to the total output of polished diamonds of the region and become a major employer by constructively challenging all barriers to growth and enhancing the business environment to attract new entrepreneurs to the industry.

• To negotiate a regime of consistent and sustainable supply of rough diamonds at fair market prices for all members.

• To negotiate a system of financial support for members struggling to finance rough purchases.

• To create a unified marketing platform from where members can market their goods at competitive prices internationally.

• To co-ordinate training services in both technical and managerial skills with all authorities and institutions concerned to upgrade the productivity levels of all members and their employers.

• To interact with local and national government departments in order to motivate the re-regulation of the industry and the adjustment of the legal framework of the country to encourage growth and incentives development.

• To interact with organized Labour in order to eradicate all hindrances in the way of job creation and manpower development.

• To seek representation on every forum where decisions are taken influencing our future.

• To recruit all active licensees to the membership of UDASA and unite them in a disciplined commercial force acting with integrity and on the highest ethical standard possible.

• To maintain an open relationship both internally and externally by regularly issuing newsletters to members and press releases to the media.

UDASA identified the regular and consistent supply of raw materials at manufacturable prices as the most serious limiting factor to growth in the SMME sector.

Alexcor on the other hand can only benefit from selling their product in a competitive and transparent manner whilst simultaneously contributing to government’s stated policy of beneficiation and job creation.

Surely there is a lot of synergy in combing these interested particularly so as long as the state maintains any kind of interest in this mining venture.

The mechanism to be employed in order to direct and distribute the raw material to individual cutters can take on many different formats. This surely should be thrashed out by all the role players concerned. It is imperative however, that certain basic principles are observed in the process i.e. transparency. The current arrangement (a legacy from the previous regime) that the product is sold to one buyer at his price without any check is completely unacceptable in fact it is tantamount to fraud.

Following on the Indaba 2000 where UDASA made some significant inputs into debating the role of the SMME sector in the future development of the gold and diamond industry in the Republic of South Africa we developed a new model to expedite and facilitate the forceful growth of this sector.

It is quite evident from all industry deliberations, studies, workshops etc. that South Africa currently only has a dismal share of the world jewellery market completely disproportionate to the abundance of raw materials found in its soil.

The Labour intensive nature of this industry and the traditional family business type format augers well for a dramatic growth in this sector.

On the other hand however, the negative and limiting factors inherent in this kind of set p must be overcome. The availability of finance and marketing capacity for instance are distinct weaknesses in the SMME sector. These and other obstacles can best be overcome by organizing the SMME sector into a co-operative manner. (We can still take some lessons from ants and bees). Annexure B attempts to summarise a possible scenario for such an outcome as a final solution to the future prosperity of this lucrative business sector.

UDASA is NOT in a position financially or expertise-wise to offer a solution to Alexcor from a production point of view. Issues of ownership, and management of this wonderful state asset should be decided carefully weighing up the collective interests of the State, local people, and the national economy.

UDASA can however, play a vital role in the marketing of the product adding value to it (+-30%) and creating a significant number of jobs. (+-3 jobs for every 1000 carats produced per annum). Therefore, it is only in national interest that a bond be formed between the two entities and that the current almost scandalous situation is not allowed to continue. The link between the two entities can take on various shapes but the ultimate in our opinion would be the formation of a national diamond and jewellery finance and marketing Corporation. In such a format the State and the private sector together, can find the optimum solution for the benefit of all people concerned. This will bring prosperity not only to diamond miners and polishers but also those who create and manufacture the jewellery that the world market is begging for.

In October 1996 a mandate was given by G.H. Akharwaray the MEC of Economic Affairs of Northern Cape to Gibb Africa to investigate the establishment of a diamond cutting works to beneficiate the diamonds of Alexkor.

I was invited by Gibb Africa to assist them in their investigation and to possibly become involved as an investor in a cutting works.

I am a Civil Engineer by Profession and have been involved in the diamond industry for the past 23 years as a major player in virtually all aspects of the industry from mining, polishing and rough diamond buying as well as numerous aspects of the jewellery industry.

Over the past 8 years I have been involved in the establishment of Jewel City which is the centralisation of the Diamond and Gold Industry in South Africa which presently houses some 70% of the diamond industry and a larger portion of the jewellery industry under one roof. I have also been instrumental in the establishment of the Diamond Bourse and the Diamond Training School.

In November 1996 I was privileged to be part of a delegation that visited the mine and was given access to the final recovery plant. It was during this visit that I realised just how little transparency there was in the marketing of the diamonds of Alexkor and how completely dependant the Mine was on the integrity of De Beers which came under scrutiny during the Commission of Inquiry into the Diamond Industry in 1997. I will not elaborate on my visit to the Mine, a report on which is incorporated in the Gibb Africa submission, except that it was easy to conclude that there was nobody at the Mine at that stage who had any knowledge of diamond valuation or marketing skills and that there was a conspiracy not to change the status quo.

It appears that there is collusion between certain interested parties who are determined to preserve the lack of transparency with regard to marketing of the mines production by hindering and frustrating prospective buyers of the rough diamonds. The delegation consisting of Charles Wyndham, Joe De Decker, Macdonald Temane, and Richard Tyrell, experienced the same obstructive treatment at Alexcor in September 1999 as I had experienced three years earlier when inspecting the mines production. The Charles Wyndham Consortium inspected the production at the request of Nabera who were taking over the management of Alexcor. That delegation valued a parcel of rough diamonds consisting of 11,000 carats at approximately $300 per carat and it appears that the parcel was sold to De Beers at approximately $200 per carat. If this is correct, it means that Alexcor was deprived of some R9m of extra income on that particular parcel.

As a further illustration of the lack of transparency regarding the marketing of the mines production, I noticed that there were no Alexcor goods at the layout of De Beers production in Kimberley in April last year. When I raised the issue at the Section 59 Agreement Committee meeting after the inspection, I was told by Warren Simcox of De Beers that they no longer handled the Alexcor goods and he was not aware of who was marketing the mines production. It was subsequently found that Diamdel, a marketing arm of De Beers, was in possession of the goods. There were two Diamdel members at the Committee meeting who I am sure had knowledge of the Alexcor goods in their possession.

I have written numerous papers on the mine at the request of my associates at Letuli House regarding the marketing of the diamonds from Alexkor and the establishment of a cutting works, once the situation at Alexkor had been stabilised.

The first misconception regarding the marketing of the Alexkor diamonds is that the large quantity of goods produced can only be handled by the C.S.O. This is not correct, as there are a few local diamond concerns that do a larger turnover than Alexkor’s production. In fact the diamond cutting works that I assisted in establishing, does a larger turnover than that of Alexkor.

In studying the limited information supplied to us regarding the diamonds recovered from Alexkor, it appears that the goods have been undervalued, especially with regard to the larger stones.

The only way of getting rid of these accusations and perceptions which have been damaging to De Beers as well as to the staff in the employ of Alexkor, is by introducing a system of marketing, whereby all concerned have a vested interest to ensure that the maximum value is attained for the goods mined.

We are all aware of how expensive and difficult it is to recover diamonds from the earth, and then only to find that others are reaping the real benefits from the Mines efforts. It is sad that Alexcor personnel have been excluded from participating in the marketing of the mines production which in this case appears to be the most profitable part of the mining process.

Unless one is exposed to the diamond world one will never get a feel of the true value of a diamond. In the past this was very difficult, as the business was a closed shop. With the establishment of the Training Schools and the Bourse, new entrants to the industry can receive the necessary education. This education, together with the knowledge, which some people in the industry are prepared to part with, new entrants to the industry, can gain the necessary experience to become true diamantaires.

There are numerous instances where dealers have made a great deal more money by cutting stones and selling them off as polished stones instead of in their rough state. This is particularly the case when dealing with speculative larger stones. A person who has a true knowledge of diamonds, which under the proper supervision can be gained within one or two years, can only make these decisions.

My recommendation has always been that the Mine should embark on a new and aggressive strategy to market its diamonds. This can be done by forming a Company in which the Mine and the community will have a vested interest together with members of the industry, who will provide the expertise to train the Mine personnel in becoming proper valuators as well as providing the finance to defend the Mines goods with a view to obtaining the best price for the Mines production.

The Company will have to establish an infrastructure whereby the Mine will have a close interaction with the industry in Jewel City. This can be done by chartering aircraft that will fly between Johannesburg and Alexander Bay at least once a week and establishing an Alexcor sales office in Jewel City.

Personnel from the Mine should be selected and sent to one of the Diamond Training Schools in Jewel City and thereafter tutored, so that they can actively become involved in the marketing of the Mines production. This will be done together with the personnel representing the interest from the private sector investor. This is the only way to ensure transparency and that the best price is being obtained for the Mines production.

The Company could provide these services at a fee based on 3-5% of the Sales Value of the diamonds. This fee should be sufficient to pay for the charter flight contract between Johannesburg and Alexcor, besides the normal running costs of a marketing operation.

One of the objectives of the Company should be to establish a program so that a fair proportion of the production could eventually be beneficiated in a local diamond cutting works and by so doing create jobs in Alexander Bay. Another important spin off in the initial stages would come about by marketing most of the production through the South African Diamond Bourse or some other entity in Jewel City and by so doing, give local small cutters an opportunity of purchasing the high quality goods from Alexcor.

The United Diamond Association of South Africa represents the SMME Sector of the industry and a large portion of its membership consists of PDI’s whose rights are entrenched in our constitution. Our organisation is eager to participate in a joint venture marketing initiative with Alexcor and has the expertise amongst our members to undertake the task as facilitators.

Our submission on Alexcor, submitted to the Minister of Mineral & Energy Affairs at her request in November last year, formed the basis of our written submission to this public hearing. The marketing proposal by Transformation Diamonds which was attached to the submission to the Minister, was drawn up in 1998 and submitted to Alexcor, to which there was no response. The proposal sets out the modus operandi of a marketing strategy which we as an organisation would be happy to adopt by assuming the role to be played by Transformation Diamonds in the report.

This strategy fits in with our organisations intentions to establish a National Diamond and Jewellery Marketing and Finance Corporation. The proposed Corporation is in line with Government policy with regard to beneficiation of our Countries raw materials and is a holistic approach to the Jewellery industry.

There is a perception that a large portion of Alexkor’s production cannot be economically polished in South Africa. This is not correct, as even when comparing our polishing costs against India, who have over a million polishers, we are competitive especially with diamonds above a quarter of a carat in size. We have done a comparative study, which shows that depending on the quality and size of diamonds above a quarter carat, India has only a 1.5% to 7% advantage on their bottom line profits against polishing the same goods in South Africa. This is an insignificant advantage especially when taking into account our preferred nation status with regard to exports to the USA, which in the case of jewellery gives us a 5% advantage over India.

With the partial privatization of Alexcor, the marketing operation should be separated from the mining operation to keep everyone honest. We as an organisation are confident that we can play a part in improving the profitability of the mine by ensuring that the highest prices are obtained for the mine production and at the same time provide jobs for many South Africans.