BRIEFING ON THE DIAMONDS AMENDMENT BILL

1. PURPOSE OF BILL AND BACKGROUND INFORMATION

1.1 At present, the Diamonds Act, 1986 (Act No. 56 of 1986) ("the Act"), does not drive the beneficiation of the diamond resources in the Republic even though South Africa is one of the largest producers of diamonds in the world. In addition, the Board of Directors of the South African Diamonds Board ("the Board") is dominated by the industry and the Board, as an institution, is funded through levies thereby further strengthening industry control. Government initiatives and policies are not always in the best interest of the Board, resulting in decisions not being implemented or being delayed indefinitely.

1.2 The Act does not provide for the local supply of rough diamonds to the local diamond cutting and polishing industry. However, in terms of section 59 of the Act the Board may enter into an agreement with "any producer, dealer or any association or organization of producers or dealers in pursuance of which any such producer, dealer, association or organization allocates or offers unpolished diamonds ... cutters or toolmakers" in order to ensure that cutters and toolmakers obtain a regular supply of unpolished diamonds. There is no obligation on producers to offer a portion of their unpolished diamonds to the local market. Local beneficiation (value addition) is hampered by these "section 59 agreements" with producers in that the majority producers choose to export rough diamonds for beneficiation elsewhere in the world, creating wealth and jobs in those countries.

2. OBJECTS HAVE DIAMONDS AMENDMENT BILL

The objects of the Bill are—

(a) To establish the South African Diamonds and Precious Metals Regulator ("Regulator") to, inter alia, implement, administer and control all matters relating to the sale, purchase, local beneficiation, import, export of diamonds;

(b) To provide that government will dominate the Board of Directors of the Regulator, ensuring that government policies and initiatives with regards to diamonds will be implemented and regulated accordingly;

(c) To stipulate that the Regulator will be funded by money appropriated by Parliament as well as money accrued from any other sources, i.e. donations or bequests;

(d) To provide for the establishment of a Diamond Exchange and Export Centre as a "one- stop- shop" where temporary permit holders (foreigners) may purchase and export rough diamonds as well as pay the 15% export duty retained from the present legislation. Any producer who exports unpolished diamonds will export from this Centre and pay the relevant export duty;

(e) To provide for any local beneficiator to purchase unpolished diamonds at the Diamonds Exchange and Export Centre;

(f) To establish a State Diamond Trader ("Trader") for the purposes of promoting equitable access to and local beneficiation of South Africa’s rough diamond resources as well as rough diamonds acquired from other sources. The Trader will purchase a portion of rough diamonds from local producers based on the requirements of local beneficiators and sell those to local beneficiators at a fair market price. It is envisaged that the beneficiation industry should expand once the supply of rough diamonds to the Trader is maintained;

(g) To repeal section 59 of the Act. Local producers will have to offer their production to the Trader as the first step in any further dealings by the producers;

(h) To provide for the Trader to have it’s own Board of Directors;

(i) To licence local trading houses and the holder of such licence will be entitled to facilitate the buying and selling of unpolished diamonds locally on his or her business premises;

(j) To retain the present rate of 15% export duty on rough diamonds which will be mandatory on the export of rough diamonds from South Africa; and
  1. To provide for the conversion of licences and permits presently held by cutters, polishers, dealers and trading houses in terms of the transitional provisions within one year from the promulgation of this Bill.

 

1. Diamonds Amendment Bill

There has been a further split to the Diamonds Amendment Bill.

One is tagged in accordance with section 75 of the Constitution and the other one in terms of section 76 of the Constitution.

Diamonds Second Amendment Bill as tagged in accordance with section 76 provides for all matters relating to the trade in diamonds whereas the section 75 provides for the administrative functions of the Regulator.

Section 75 Diamonds Amendment Bill provides for: -

 

Section 76 Diamonds Second Amendment Bill provides for: -

 

 

 

2.BRIEFING ON PRECIOUS METAL BILL: -

 

1.BACKGROUND

    1. The Bill seeks to amend Chapter XVI of the Mining Rights Act, 1967 (Act No. 20 of 1967), so as to eliminate the barriers to local beneficiation of precious metals and to rationalize the regulation of matters pertaining to the downstream development of precious metals.

2. OBJECTS

2.1 Amendment to the definition "unwrought precious metal"

2.1.1 The Bill amends the definition "unwrought precious metal" to allow for access to precious metals for local beneficiation thereof.

2.1.2 The amendment of the current definition for "unwrought precious metal" is a necessity as the current definition is all-inclusive of any form of article or solution which is, or contains precious metals which is not a manufactured article, an article of commerce, a work of art or an item of archaeological interest. "Unwrought precious metal" has been redefined to exclude so-called "caratage" from the definition. Unwrought precious metal in the case of gold is that metal which has been refined to 99.99% purity and which is still currency. Any addition of other metals and alloys to create 9 carat, 18 carat or 24 carat gold thereby reducing the purity is now "wrought precious metal" and is regulated to a much lesser extent. It would be uneconomical to melt wrought gold back into bullion as a percentage of the gold (up to 10%) could be lost in the melting process. For platinum group metals, anything up to and including 99,90% purity is classified as unwrought and any subsequent process applied to platinum group metals is redefined as being wrought precious metal.

2.1.3 Minted bars are excluded from the definition of unwrought precious metal thus allowing for the type and quality of minted bars to be produced as well as the circumstances under which minted bars may be owned and traded by anyone who has purchased such minted bars.

2.1.4 The Bill proposes that the Department of Minerals and Energy through the Regulator issue the following licences permits and certificates, namely;

A certificate to possess and dispose of unwrought precious metals; and a temporary precious metals import permit.

Kinds of Licences, permit

2.1. Refining Licences replaces the recovery works licence issued in terms of the Mining Rights Act of 1967

2.2 Introduction of a Precious Metals Beneficiation Licence

2.2.1 The Bill seeks to amend the Act to cater for a new type of licence, the Precious Metals Beneficiation Licence. This licence will be available to any sector of the manufacturing industry such as the IT industry, the avionics industry and automobile industry using wrought precious metals in the manufacturing of consumer products.

 

 

    1. Jeweller’s Permit.

 

2.4 Centralized regulation of the precious metals industry

2.4.1 an amendment is proposed whereby the over-regulation of the precious metals industry by various Government Departments and institutions such as the Receiver of Revenue, the South African Police Service, the South African Reserve Bank and the National Treasury is addressed by centralizing those administrative functions of the various Government Departments and institutions within the Department of Minerals and Energy.

2.4.2 For the transporting or conveying of precious metals, the Bill seeks to amend the provisions for the issuing of a separate transport permit and merely requires the person transporting or conveying precious metals to be in possession of a certified copy of the senders licence, permit or certificate.