SOUTH AFRICAN DIAMOND PRODUCERS ORGANISATION (SADPO)

30 OCTOBER 2006

The Portfolio Committee: Minerals & Energy and Finance

In re: DIAMOND EXP ORT LEVY BILL

1. This submission is made on behalf of the South African Diamond Producers Organisation (hereafter called" SADPO').

2. SADPO is appreciative of the opportunity to partake in the democratic process of consultation on the proposed Diamond Export Levy Bill (hereafter referred to as "the Bill') and for the opportunity to put forward the impact this Bill will have on the independent alluvial diamond producers in South Africa.

3. It is necessary for purposes of completeness to in short once again outline the history of SAD PO as being the organisation representing the independent alluvial producers in the North West, Northern Cape and the Free State Province.

4. It is in this regard important to note that SADPO is firmly committed to ensuring that proper beneficiation takes place in the diamond production industry. In this regard we are pleased with the initiative of the Northern Cape Government to establish an economic sustainable diamond hub in Kimberley.

5. SADPO also notes the relief measures especially in terms of sections 6 &7 relating to export houses and small mines. However we feel that marginal mines need also to be considered as in the Royalty bill.

6. In addition to the above, is it necessary to in short raise the following comments on certain of the specific provisions of the Bill.

7. Ad the provisions of clause 2(2)

a. a. Clause 2(2) is indicative of a further difficulty that arises when determining on what value of a diamond the levy will be imposed.

b. b. It is accordingly submitted that in the end the producer will be faced with two different values, namely­

i. A value determined by the regulator; and

ii. An international value

c. An international or real value which will be determined in terms of sub-clause (2)(a) and which will mean that for purposes of paying a levy a real value would have been determined, yet for purposes of being remunerated by the regulator for the 10% that it purchased there would have been a different value.

8. Ad clause 7

a. The only comment in this regard that needs to be made is, however, that if one compares the Bill with the Royalty Bill, one will find that in similar provisions the Royalty Bill caters for the situation vis-a-vis what is called "marginal mines” as well.

b. It is accordingly submitted that this exemption should also be extended to marginal mines and that a definition of marginal mines as appears in the Royalty Bill also accordingly be built into clause 1 (the definition clause of this Bill).

9. Ad clause 8

It is respectfully submitted that clause 8(1) as it is at present, is actually catering for producers that became producers within 45 days after the Act came into operation.

a. It is accordingly submitted that clause 8(1) needs to be amended to specifically provide for two categories of producers­

i. Those who have already been producers at the time of the coming into operation of-this Act, which will be given a 45 day period after the coming into operation of the Act to register as producers; and

11. Those who became producers after the coming into operation of the Act, which will then have a 45 day period after becoming a producer, to register as a producer.

10.  Ad clauses 13. 14. 15 and 16

a. It is submitted that insofar as these clauses are in line with the provisions of the Income Tax/ VAT Act, that the time periods herein determined be in line with the time periods laid down for assessments by the Commissioner as provided for by that legislation.

b. It is furthermore respectfully submitted that in this regard not only the provisions of those Acts, but also the rules made by the Commissioner under those Acts (for instance pertaining to the time period within which an objection has to be considered by the Commissioner and the time period within which an objection has to be raised) be made part of this legislation.

11. Ad clauses 17 and 18

No comment is to be made on these clauses other than to once again submit that insofar as it may be relevant, the relevant rules as laid down by the Commissioner in terms of the VAT legislation and/or the Income Tax legislation insofar as it may be applicable pertaining to time periods and procedures, be made mutatis mutandis applicable to this Bill.

12. Ad clause 19

a. It is respectfully submitted that the process for administering and the division of responsibility as provided for and contemplated by clause 19 loses sight of what is a fair market value of any rough diamond.

b. In this regard there is no indication­

i. whether this would be the value as determined by the regulator/State diamond trader;

ii. whether this will take into account the accepted principle of an international value;

iii. whether the producer may have the right of objection to this fair market value;

iv. whether the producer will have any input insofar as what the fair market value is.

v. what guidelines will be followed in determining what a fair market value is for purposes of verification as contemplated by clause 2(a)-(c).

c. It is furthermore respectfully submitted that although the cooperation between these entities may be necessary for purposes of administering the Act, this also, however, creates difficulties vis­ a-vis the clause of secrecy as this now effectively means that any information gathered by the Commissioner in furtherance of this Act automatically will be accessible to the Minister of Minerals & Energy.

d. It is respectfully submitted that careful consideration be given to the extent to which this information may now be divulged or immediately accessible to the Minister of Minerals & Energy without the necessary provisions regarding secrecy.

13. Ad the provisions of clause 20

a. It is submitted in this regard that there may be specific provision that not only the provisions of the Act but also the rules made thereunder will be relevant specifically pertaining to objections and appeals.

b. In other words, it is submitted that a reference to the Income Tax Act should include any rules and regulations made thereunder.

This is not specified in a definition and it is accordingly submitted that a definition of the Income Tax Act be stated so specifically.

14. Ad clause 22

a. It is respectfully submitted that this clause needs to be amended to specifically provide that in addition to what is contained therein, a producer be granted a period within which, after the coming into operation of this Act, he/she may apply for the necessary exemption in terms of clauses 5,6 or 7 and that, upon proof of such application, that producer will be exempt from the provisions of this Bill until a formal determination has been made by the Minister of Mineral & Energy insofar as the granting of an exemption or not is concerned.

b. This will allow for the fair, equitable situation that a producer will not­

i. be lumped with a levy;

ii. have to apply for an exemption and only thereafter, should the exemption be approved, be exempt from the provisions of this Bill.

c. account that up until the time of the coming into effect of this legislation, although in theory it may have been imposed, no levy had been imposed upon the producers. It will be fair and equitable to allow for a transitional period where within the producer continued to be exempt from the application of the Act upon him, however, being able to provide within a period of say 14 days, prove that he has applied for an exemption and that upon the decision of the exemption, then either clauses 6 and 7 or the remainder of the Act will become applicable to such person."

Mattie LoTTER: CHAIRPERSON :SADPO