UNITED DIAMOND ASSOCIATION OF SOUTH AFRICA(UDASA) SUBMISSION ON THEDIAMOND AMENDMENT BILL

BACKGROUND

I, Tsietsi Ernest Malakoane in my capacity as the Chairman of the United Diamond Association of South Africa (UDASA), would like to make the following submission to on behalf of my organisation; in relation to the Diamond Amendment Bill, published in Government Gazette 27929 of 19 August 2005. That UDASA recognises and supports the proposed "New Diamond Amendment Bill".

UDASA is a United Diamond Association of South Africa that represents the previously excluded and disadvantaged diamond dealers; and cutters and polisher of the industry. In accordance with the definition of the Bill UDASA represents the diamond beneficiators of the industry.

As part of the main objectives UDASA is aimed at levelling the playing field in the existing diamond industry so that the previously excluded and disadvantaged members of the community can achieve their rightful position in the industry. It is in this light that UDASA appreciates and fully supports the governments’ initiative to increase the beneficiation of South Africa’s raw materials; in this case diamonds; and deliver on its promise of a better life for all by increasing not only the employment level but also the level skill of South Africa’s labour force. UDASA has on behalf of its members; consistently expressed its dissatisfaction with the lack of access to rough diamonds and therefore also appreciates the provision, by the Bill for an increase in access to rough diamonds.

Comments on the Bill:

1. Section 6(3) (b) Taking into account that UDASA represents the previously excluded and disadvantaged members of the diamond industry, it is requested that UDASA forms part of the representation as provided for in section 6(3) (b) of the Bill (i.e. form part of the Board of the Regulator) and section 17(3) (b) (providing for the membership of the Board of the State Diamond Trader). Section 17(f) (3) The process of obtaining investors and lenders provided for in s17 (f)(3) should be transparent and their interest be made clear in order to ensure that they do not waver any influence over the Regulator and the State Diamond Trader.

Section 59 (1)(b) Section 59(1) (b) should be corrected to mean by "value". Section 32 (1) UDASA welcomes the increase in the period of the validity of the licence of the Diamond beneficiators, as it encourages and provides incentives for the beneficiating of the South Africa’s mineral resources.

Section 56A]UDASA welcomes the requirement by section 56A that synthetic diamonds should be disclosed and as such provides protection for natural diamonds.

Section 59

UDASA particularly supports the creation of a State Diamond Trader and the determination by the Minister of a of a percentage of diamonds produced in a production cycle that may be required for local beneficiation. This section is an answer to the members of UDASA who are diamond beneficiators; who have been requesting access of rough diamonds.

Section 69It submitted that the word "parcel" should be amended to "container" as the word parcel is commonly used in the diamond sector to mean diamond parcel.

VATIt is submitted that the turnaround time of VAT refund should be improved; it ties up the business’s cash flow and makes it difficult for small players to run their businesses.

Section 62 (2) of Act 56 of 1986- Export Duty

UDASA supports to 15% export duty as levied by section 62(2) of the Act 56 of 1986. The imposition of the export duty makes the rough diamonds available to the South African diamond industry before exporting without beneficiating to other countries.

Goods that are uneconomic to cut in SA. It is proposed that the legislation should not differentiate between goods that are economic and uneconomic to cut in South Africa. This results in conditional cutting of goods. Whilst in the past some goods may have been termed uneconomic to cut in South Africa, it

may well be that within the South African diamond industry there are people who can and are willing to cut these goods. This issue should be left to the discretion and capability of the industry.

S59 of Act 56 of 1986

It is submitted that section 59 dealing with agreements for supply of unpolished diamonds to cutters and tool-makers had been abused by the industry. UDASA supports it repeal.

Growth of the Labour Force

UDASA submits that the Department of Minerals and Energy in conjunction with the Department of Labour should as its target impose by legislation a 30% per annum growth in the beneficiation labour force over the next 5 years. This would result in a 30 000 diamond cutters workforce by the end of five years, a needed increase in employment.

Sight holders

UDASA submits that the South African government should demand that sight holders mainly consist of South Africans as majority of shareholders with partners from other countries (where necessary), not vice-versa. The current system of sight holders had, resulted in an export of rough diamonds with zero growth rate its labour force, this is despite existence of organisations such as Rough Diamond Dealers Associations of South Africa and the South African Diamond Board. South Africa is a producer of mineral resources; it does not make sense that neither the country not its labour force does not benefit from this ownership of minerals.

Education

UDASA submits that the Department of Minerals and Energy in conjunction with the Department of Education, should require that the current form of education be changed from producing division of labour operators to producing "diamond cross working" apprentices who are multi-skilled in all forms of cutting and polishing. This would result in a skilled and employable workforce who can multi- task.

In conclusion UDASA welcomes the effort made by the Department of minerals and Energy in the form of the Diamond Amendment Bill providing for the beneficiation of South African minerals, which will result in an increase in employment and access to rough diamonds.