Diamond parastatal to review its model

THE South African government is reviewing the model of the State Diamond Trader (SDT) after it failed to deliver and resulted in job losses and bankruptcies of small cutting and polishing businesses.

Ernest Blom, the chairman of the Diamond Council of South Africa, said the model failed because the SDT had tried to buy and sell cheaper diamonds that were unviable to the local diamond industry.’The high value diamonds are the ones that can be processed locally,’ he added.However, Futhi Zikalala, the SDT chief executive, said the SDT was looking at changing the way it funded its business but not the diamonds it bought.’Our current funding model was not geared to all the developmental needs of the SDT,’ Zikalala said. ‘A change in business model would require an amendment to the law.’But Blom said: ‘The SDT’s model has not worked and, coupled with the economic crisis, a lot of smaller enterprises have gone out of business.’ The number of local diamond polishers had fallen from 2 500 to less than 800.ZikalalAa said it was ‘totally unfair’ to ascribe most of these job losses to the SDT’s business model, especially in light of the global credit crunch.The SDT found that smaller local players struggled due to access to markets as well as in raising finance.Blom said South Africa could only profitably cut and polish diamonds worth more than US$500 (N$4 140) a carat so these were the sort of diamonds the SDT needed to supply.However, Zikalala said the value per carat of a diamond could not be used to determine whether a diamond could be cut and polished locally.Zikalala said about 16 per cent of local diamonds by carat were able to be cut and polished locally, while 63 per cent of diamonds by value could be profitably cut and polished.Local diamonds vary from $80 a carat to $900 a carat.-Business Report