South Africa should reposi- tion itself to take full advantage of the opportunity that will present itself when the diamond industry eventually turns up again, says Diamond Council of South Africa CEO Braen Migogo.

Migogo tells Mining Weekly in an exclusive interview that the tough economic passage of the global diamond industry has given South Africa the chance to work around the challenges that have been reducing its global competi- tiveness.

He discloses that South Africa’s Department of Trade and Industry (DTI), the National Treasury, the Department of Mineral Resources, Mintek and private bankers are exploring the opportunities that may result from the establishment of an industrial development zone (IDZ) with a difference at Jewel City, in Johannesburg.

The council has just completed the first phase of a study to show how the South African diamond industry compares with its counterparts in Israel, Belgium, India, China and Dubai in order to assist South Africa in arriving at a more competitive model.

“We need to revisit whether or not we have optimised exploiting the advantage that we have,” Migogo says, adding that the DTI is working closely with the council to define an IDZ that is best suited to South Africa’s diamond industry.

He believe that IDZs as currently defined have certain limitations, and reports that there is an acceptance that South Africa should be working towards a ‘hybrid’ IDZ that would be diamond-beneficiation specific.

What an IDZ with a customs-exempt area would present are opportunities for the industry to be exempted from value-added tax (Vat).

But while Vat relief would shave off some of the competitive dis- advantages that the South African diamond industry currently has, he explains that a hybrid IDZ would go beyond Vat exemption.

“If you look at the likes of Israel, Belgium, China and India, their tax systems are softer on the diamond industry than South Africa’s,” Migogo says.

With government cooperation, the industry could guarantee the production of products that would be priced more competitively and which would gain increased market share globally.

“We are competing in an industry in which other players have better tax regimes, and exemption from Vat would be a major deve- lopment to put us on a better footing, without suggesting that, if that happens, everything will just fall into place. “But it would introduce the stabi- lity and the liquidity that we are seeking.

“If the rest of the players globally are enjoying breaks that we are not, we are starting off from a position of disadvantage and we are saying, as partners with government, ‘Let’s factor out that disadvantage’.

“Government is launching a beneficiation policy and, for that to fly, the fiscal obligations will have to be looked at quite closely, among other things,” Mgogo adds.

To watch a video in which Diamond Council CEO Braen Migogo tells Mining Weekly Online’s Martin Creamer that the South African diamond business needs to have a ‘hybrid’ IDZ to allow it to level peg with its global competitors, click here.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.