Minister says South African diamond export duty may be lower

South African Minister of Minerals and Energy Lindiwe Hendricks expressed willingness to compromise on the export duty to be levied on rough diamonds under the Diamonds Amendment Bill, reports the Financial Times. De Beers was willing to accept a 5 percent duty, the government wanted 15 percent on October 17.

Hendricks proposed a 10 percent figure as a compromise in an interview with the Johannesburg newspaper, after she testified before a parliamentary committee. Too high of a duty could encourage a black market in rough diamonds, she admitted.

The Financial Times said a 15 percent duty would cost De Beers $65 million a year based on the $430 million in rough diamonds it exported from South Africa in 2004. A 10 percent duty would thus cost it $43 million. Chamber of Mines Chief Economist Roger Baxter warned that this proposed compromise is still not adequate and could end up costing the country up to 12,000 jobs as it hurts the industry. He warned that this is the wrong way to go about encouraging �beneficiation��local cutting of locally mined rough.

Hendricks said the imposition of a duty is not negotiable, although it will be introduced in a separate financial bill early next year to avoid possible constitutional problems, along with a proposed value added tax on diamonds. She said the government also intends to push ahead with the establishment of a state diamond trader, a new regulatory agency, and a diamond export and exchange center. The government will also cease to recognize the distinction between goods that can and cannot be cut profitably in South Africa, she said.