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South Africa: Industrial Development Corp. to Fund Direct Rough Purchases

Feb 29, 2008 8:52 AM   By Jeff Miller
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RAPAPORT...  In an initiative that cements the expansion of the South Africa's diamond beneficiation industry, an $8.5 million (ZAR65.5 million) investment by the Industrial Development Corporation (IDC) into the State Diamond Trader (SDT) will be an economic catalyst for entrepreneurial development. The IDC (www.idc.co.za) is a self-financing, state-owned national development institution that provides financing to entrepreneurs engaged in competitive industries. The group's primary objectives are to contribute to balanced sustainable economic growth in Africa and to the economic empowerment of South Africa and acts as the backer for SDT.

IDC head of mining and beneficiation strategic business unit Abel Malinga said ZAR35 million ($4.6 million) of the investment would fund the direct purchase of diamonds from the mines with the balance going towards establishing the infrastructure and initial fixed costs (ZAR8.4 million,) plant and equipment (ZAR2.8 million,) three months worth of fixed costs (ZAR4.2 million,) and a ZAR15 million ($2 million) revolving credit facility.

The local industry has been characterized by a constant shortage of rough diamonds and idle processing capacity, despite South Africa’s position as a leading diamond producer.

“Diamond producing countries in southern Africa are therefore looking to bridge that gap by promoting local beneficiation to ensure a bigger share of the downstream profit – cutting and polishing adds around 50 percent to the value of rough stones – as well as much needed employment creation,” Malinga said.

“There is comfort insofar as the target market is concerned. SDT will have a significant developmental impact by fostering the rapid growth of the downstream industries,” he said.

In launching the SDT today, and the South African Diamond and Precious Metals Regulator, the director general of the Department of Minerals and Energy Affairs, Sandile Nogxina, said, “Extending South Africa’s world-class status as producer of diamonds and precious metals further downstream into fabrication is one of the objectives of government.  The two entities are a product of our commitment towards maximizing value addition of our mineral resources with particular reference to diamonds and precious metals.”

The SDT will acquire 10 percent of locally produced diamonds for resale on the market and develop local diamond cutting and polishing skills in line with the government’s Industrial Policy Action Plan to increase mineral beneficiation in the country.

“It is government’s policy that South Africa learns ways and means of adding value to our minerals so that we can realize the same benefits that are enjoyed by the developed world,” added Nogxina.

The SDT investment dove-tailed with the IDC mission for contributing to the generation of balanced, sustainable economic growth, economic empowerment and prosperity that simultaneously promoted entrepreneurship within a competitive industry.

 

 

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Tags: Government, Polishing, South Africa
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