Maryann Middleton, director at Routledge, Modise, Moss & Morris states that, despite niggling industry concerns, both bills have immense potential to address inequalities at grassroots level.
Concerns over the monetary effects of the bills, especially the Diamonds Amedment Bill, are temporary and peripheral, as the most pressing fear at this stage is that the bills get lost in the administration process, delaying the potentially positive contribution they can make to the South African economy. Middleton notes that the Precious Metals Bill seeks to repeal restrictive definitions and regulatory measures in the industry and provide for the acquisition, possession, smelting, refining, beneficiation, use and disposal of precious metals, in terms of a refining licence or a precious-metals beneficiation licence. She explains that the definitions of the terms ‘precious metals’ and ‘unwrought precious metals’, and the regulation of the use and control of unwrought precious metals remain unchanged from the Mining Rights Act of 1967, notwithstanding the subsequent enactment of the Min- erals Act and the Mineral and Petro-leum Resources Development Act (MPRDA). The provisions burden owners of unwrought precious metals with lengthy administrative procedures and restrict dealing in and possession of unwrought precious metals. The precious metals industry is overregulated as a result of the involvement of various government department institutions, as identified by the Minister of Minerals and Energy, namely the South African Revenue Service the Reserve Bank, the South African Police Service, the National Treasury and the Depart- ment of Minerals and Energy. She states that, although unwrought precious metals will remain regulated, semifabricated precious metals for use in industry and jewellery manufacture will be subject to less strenuous licensing arrangements. The bill contemplates a precious-metals beneficiation licence which will entitle the holder to buy or receive semifabricated precious metals in any form, and to change the form or add value to the metal in any manner.
The Minister has noted that the purpose for which the precious-metals benefication licences will be granted will be any sector of the manufacturing industries, such as the IT industry, the avionics indus- try or the automotive industry, which uses precious metals in the manufacturing of consumer pro- ducts. Middelton notes that a separate process is being contemplated for a jeweller’s permit, which will entitle the jeweller to buy or receive semifabricated precious metals and to change the form or in any other manner add value to it. Metals classed as precious metals are gold, any metal of the platinum group and the ores of such metals. Semifabricated precious metals are precious metals or precious metal alloys that have been refined to or beyond 99,95% purity, in the case of gold, and to or beyond 99,90% purity in the case of metals of the platinum group, and which are made up in the form of sheet, tube, wire, grain, plate, strip or rod. The possession of silver in any form will be deregulated in terms of the Bill. Silver will, therefore, be easily accessible for use in the jewellery manufacturing industry, and no licence or permit will be required for acquiring or possessing unwrought silver. Middelton feels this will be of benefit to the jewellery industry at grassroots level. With easier access to materials of a higher quality, the bill will have an enormous impact on bringing semiskilled workers to the level of fully-qualified artisans. “I have noticed jewellery stores taking in an increased amount of African designs. I see these pro- ducts finding success as there is a receptive market for them in South Africa. Ethnic design is not for tourists alone,” she says. The promotion of benefication in South Africa plays a vital role in this. The retention of minerals in South Africa, as well as the greater ease of acquiring them, will create the neces- sary environment for skills and a local industry to prosper.
In line with these intentions to limit the export of unbeneficiated minerals from South Africa, the MPRDA requires any person who intends to undertake a beneficiation process outside South Africa using any mineral mined in the country, to give notice thereof to the Minister and to do so only in consultation with the Minister. ‘Minerals’, as defined in the MPRDA, refers to any substance whether in solid, liquid or gaseous form occurring naturally in or on the earth, under the water and which was formed by or subjected to a geological process, and includes sand, stone, rock, gravel, clay soil and any mineral excluding water, petroleum or peat. Middleton explains that the Income Tax Act provides for a special depreciation allowance on machinery and buildings used for beneficiation processes. However, the definitions and the terminology used in the relevant section only apply to the production of intermediate products, which are products produced by the tax payer to be used by any person as raw material, and would therefore not embrace the beneficiation processes contemplated in the Precious Metals Bill. With regard to the Diamonds Amendment Bill, Middleton feels that, once the bigger players have survived the initial financial hiccups, the trading of unpolished diamonds in South Africa will change for the better. She explains that the bill proposes the scrapping of the existing South African Diamond Board to have it replaced by the establishment of a South African Diamonds and Precious Metals Regulator. This will implement, administer and control all matters rela- ting to the sale, purchase, local beneficiation, import and export of diamonds. The sale and purchase of unpolished diamonds will remain controlled trans- actions requiring permits in terms of the Act. Another key creation by the bill is a State Diamond Trader. The purpose of this body is to promote equit- able access to and local beneficiation of South Africa’s diamonds. It is proposed that the State Diamond Trader will acquire and supply unpolished diamonds to local diamond beneficiators. Middelton feels beneficiation is an absolute necessity in the development of skills and jobs. A beneficiated (cut and polished) diamond increases in value by 100%. In the event of the passing of the bill, all unpolished diamonds intended for export purposes will first be required to be offered for sale at a diamond exchange and export centre. In the past, local producers of diamonds could enter into agreements with the South African Diamond Board for the purposes of ensuring that local cutters and tool makers obtained a regular supply of unpolished diamonds. However, there was no obligation on producers to offer a portion of their unpolished diamonds to the local market. Thus, the local beneficiation industry has been hampered by the shortage of unpolished diamonds available for sale in the local market. For this reason it has been proposed that the existing section allowing for the agreements between producers and the Diamond Board be deleted and, in future, the Minister of Minerals and Energy may from time to time determine the volume of diamonds, by carat or percentage, to be bought by the State Diamond Trader for onward sale to the local diamond beneficiators. It follows that, at the end of every production cycle, a diamond producer will be obliged to offer all the unpolished diamonds produced in that production cycle to the State Diamond Trader and specify the fair market value of those diamonds and allow the State Diamond Trader to inspect the diamonds for the purposes of selecting the ones for purchase. It is then up to the State Diamond Trader to decide to buy the diamonds within one week after the price of the diamonds has been verified. If the State Diamond Trader does not buy the diamonds offered, then the producer is entitled to export or sell the diamonds in that parcel. The price of the unpolished diamonds is to be established by agreement between the producer and the government diamond valuer, or failing such agreement, an independent valuer. The Bill also requires all diamonds producers exporting diamonds from South Africa to pay a 15% export duty on the fair value of the unpolished diamonds exported from the country. The existing provision which allows deferment of the payment of export duty has also been deleted. In order to guarantee a steady influx of capi- tal into the country, within three months from the date on which any unpolished diamond has been released for export, the exporter is required to prove that the proceeds of the sale have gone back to the country. The Bill also makes it an offence to sell a synthetic diamond without disclosing, in writing, that it is a synthetic diamond. This applies to both polished and unpolished synthetic diamonds. Middleton concludes that the overriding purpose of the Bill is to ensure that the beneficiation industry in South Africa receives an adequate supply of unpolished diamonds in order to expand that industry, promote and facilitate the creation of skills and jobs in South Africa. “Both Bills were published in 2005 and although some amendments and comments have been made, our greatest concern at this point is that the two bills do not get lost in the wings,” she concludes.