The Diamond Council of South Africa has brought together a working group including industry, the government and labor to find ways to ensure the survival of diamond cutters, polishers and dealers under crisis conditions and grow the industry's global market share, writes Business Day.



CEO Braen Migogo said in an interview to Business Day last week SA's diamond beneficiators had been under severe pressure for more than a year, which has resulted in the closure of five large diamond companies, including some De Beers sightholders.



Up to the middle of last year there was an acute shortage of rough diamonds for SA's beneficiators but from mid-year the situation reversed. A sharp downturn in demand for luxury goods culminated in an estimated 20% decline in luxury goods purchases in the US over Christmas, the peak period for the sector, the report said.



Research group Bain & Company recently forecast another 15%-20% decline in the luxury goods market in the first two quarters of this year and a 10% drop for this year. SA exports 90%-98% of its cut and polished diamonds.



As retailers were unable to sell their stock of jewelry, jewelry fabricators had returned unused diamonds to the polishers and dealers. They were now holding stock worth less than the bank finance they incurred to buy it, and paying interest on that debt, it said.



The new working group includes diamond beneficiators, the Department of Minerals and Energy, the Department of Trade and Industry, the Treasury, banks, Mintek, the Industrial Development Corporation, the Chamber of Mines, the City of Johannesburg and the United Association of SA, it said.



The working group has identified the need to address liquidity pressures with assistance from banks and the government, although it was not looking for "handouts," Migogo said.



Another solution could be some form of tax relief.



The working group was also busy with a comparative study into the fiscal regimes in the world's leading diamond cutting and polishing countries - Belgium, Israel and India - to find out what competitive advantages they enjoyed that SA did not, said the report.



It was looking at ways to grow demand, including exploiting opportunities from the 2010 Soccer World Cup and establishing a trading floor for polished diamonds, it said.



Developing the right local skills was also critical and the Mining Qualifications Authority had "come to the party."



Three years ago SA introduced new legislation in the Diamond Amendment Act to promote beneficiation and make more rough diamonds available to the local industry. Migogo said there had been some problems in implementing the State Diamond Trader and certain contractual issues between the trader and diamond producers still had to be settled.



The only legislative issue of concern was the requirement for diamond cutters, polishers and dealers to comply with the Mining Charter to obtain licenses.

The Mining Charter was appropriate for diamond mining houses but not for manufacturers, Migogo said.



Last year then council developed a proposed alternative charter for the downstream diamond industry, and if this were accepted it would have to be incorporated into legislation, said the report.