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African Diamond Producers Refuse to Support Beneficiation With Mining Revenue

Apr 27, 2015 3:40 AM   By Ronen Shnidman
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RAPAPORT... Africa’s major diamond producing nations expressed unwillingness to compromise government revenue from rough diamond sales to support local manufacturers in the current weak market.

"We are not willing to forgo profits from diamond mining activities," said Jacob Thamage, the diamond hub coordinator at Botswana's Minerals, Energy and Water Resources Ministry, during a panel discussion at last week’s Dubai Diamond Conference.

Government representatives from Botswana, Zimbabwe, Namibia, South Africa and the Democratic Republic of the Congo (DRC) participated in the panel, which addressed efforts by African nations to move up the value chain in the diamond industry.

Panelists were challenged by manufacturers from the audience regarding whether their respective governments would be willing to sacrifice some of their diamond mining revenue to help sustain local manufacturing operations, which have been hurt by high rough prices and low profit margins. Several diamond manufacturers operating in Botswana announced major layoffs in recent months due to their lack of profitability.

Botswana has embarked on a program in the past decade to develop its beneficiation industry in an effort to diversify the economy’s reliance on diamond mining. Other countries in the region have similar initiatives or have expressed an ambition to encourage beneficiation.

However, Thamage stressed that the Botswana government needs to maintain current levels of diamond mining revenue to fulfill its financing obligations as a shareholder of Debswana, the mining joint venture between the government and De Beers.

Thamage said the Botswana government will need to invest close to $10 billion over the next decade in order to sustain long-term production at the high volume Jwaneng and Orapa mines.

Walter Chidakwa, Zimbabwe's minister of Mines and Mining Development, suggested that his country was also unlikely to reduce the state's share of diamond mining revenue to encourage manufacturing. However, he noted that the government was open to discussing the implementation of tax incentives for polished diamond manufacturers.

Chidakwa surprised many at the conference by requesting frank feedback from manufacturers and other diamond industry members. The minister said that it was imperative that African nations know what they have been lacking or getting wrong in their efforts to move up the value chain in the diamond industry.

"Please tell us, 'You guys are a disaster,' if that is the case because we must hear these criticisms if we are to correct things one, two, three," the minister said.

Most of the African government officials involved in the discussion, including Thamage and Ngoako Ramatlhodi, South Africa's minister of Mineral Resources, agreed that African nations were most willing to aid diamond manufacturers on matters related to the ease of doing business. Key areas of improvement include assistance in job training for local polishers, improving logistical capacity and reducing bureaucratic red tape for diamond manufacturing centers located in African nations.

Maurice Miema, a mining ministry official from the DRC, noted that many African nations were also willing to consider implementing a better incentive structure for foreign-based miners as well. He explained that most Sub-Saharan African countries are reviewing their mining codes for the first time in a decade and are seeking to encourage greater foreign investment in their respective mineral resource sectors.

He said that the DRC, in particular, was eager to restart commercial mining activity in the diamond sector after years of civil war and instability had discouraged corporate investment. 
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Tags: benificiation, Botswana, Chidakwa, drc, Manufacturing, Ramtlhodi, Ronen Shnidman, Thamage, Zimbabwe
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