South Africa Plans to Increase Diamond Processing 17-Fold

South Africa, the site of the biggest diamond discovery, plans to process a greater proportion of its gems locally to keep more profit in the country.

The government wants to cut and refine 70 percent of the diamonds mined in South Africa by 2023, Mineral Resources Minister Susan Shabangu said in an interview. Only 4 percent were processed locally in 2011, according to her department.

President Jacob Zuma, faced with a 23 percent unemployment rate before 2014 elections, is looking to revive the economy as gold, diamond and platinum output falls and mining companies retrench workers. By expanding processing, South Africa plans to add jobs and increase its revenue from the jewelry industry.

“We want to establish a complete value chain to the final product,” Shabangu said today in Johannesburg. “South Africa is a mineral-rich country. That creates an opportunity in creating that capacity.”

Miners in South Africa discovered the world’s biggest certified diamond in 1905. The 3,106-carat Cullinan, found near Pretoria, was cut to form the Great Star of Africa and the Lesser Star of Africa, set in the Crown Jewels of Britain.

In recent years output has dwindled as mines become depleted. South Africa, the fifth-biggest diamond producer according to Charles Stanley Group Plc (CAY), produced about 7 million carats in 2011, less than half the 15.3 million carats mined four years earlier, Chamber of Mines data show. Gold output dropped 25 percent in the period.

Skills Drive

The country currently supplies the raw materials to the established jewelry centers of New York, Antwerp and Mumbai. The government will now team with universities to boost skills and may even consider changing the law to keep more gemstones and precious metals in the country, Shabangu said.

“The issue of sharing the mineral wealth in South Africa is still inadequate,” she said. “If we can have more skilled people in SA getting into the industry we can see better growth.”

Expanding processing is “ambitious” considering that the country’s diamond industry has been shrinking since 2008 as the economy weakened, the rand fell and regulation increased, according to Andrew Stephens, vice chairman of the Jewellery Council of South Africa.

“We need a level playing field with our international competitors,” he said, citing burdensome regulation. “We don’t have that at the moment.”

A parliamentary committee is holding public hearings on planned changes to natural-resources legislation with a view to boosting local processing and declaring some output strategic to the country. Mining companies have said the proposals would affect their businesses negatively and give the mines minister too much regulatory discretion.

To contact the reporter on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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