Marketplace
South African Government Restricts Diamond Exports
Terry FitzPatrick / November 8, 2005
Radio Transcript
Host Intro: The world’s biggest diamond company, South Africa-based De Beers, is selling 26 percent of its mining operations to employees, pensioners and other black investors. The sale is worth more than half a billion dollars, and it comes after years of criticism that De Beers manipulates the diamond industry as a cartel for privileged whites. It also comes as the South African government is poised to intervene in the diamond market to create jobs for local jewelers. Terry FitzPatrick reports.
(Sounds of jewelry store)
FitzPatrick: Jewelers say they don’t deal in diamonds, they deal in emotions.
Michael Davenport: This is beautiful. Oh my goodness. Sharon Davenport: Hum, hum.
FitzPatrick: Michael and Sharon Davenport, on vacation in Cape Town, are peering through a magnifying glass.
Sharon Davenport: Ah this is beautiful, it is so clear.
(Sounds of cutting and polishing diamonds)
FitzPatrick: At Shimansky’s, one of Cape Town’s most prominent jewelers, customers drop by to watch diamonds cut to size on spinning machines, then polished to a gleam on grinding wheels. South Africa is the world’s fourth-biggest diamond-mining country, but only 25-hundred people actually work in polishing factories here.
Diamond polishing factory
FitzPatrick: Now that racial apartheid is over, South African leaders want more blacks employed in this lucrative end of the business. But most raw stones are exported to India, China, Israel, Belgium and Britain. Jewelers like Ernest Malakoane want that to stop.
Ernest Malokoane: We don’t want our diamonds to leave our country before we are given the first preference. That’s very important.
Ernest Malakoane
FitzPatrick: Jeweler McDonald Temane wants that too.
McDonald Temane: I mean, what’s the point of selling the crown jewels and making everybody in Europe and other place richer while you starve? And you originate the product! Hey, 1900s maybe that was the way to do business; but 2005, no.
(Sounds of diamond mine operations)
FitzPatrick: Most South Africans who earn a living from diamonds, do so, quite literally underground. More than13-thousand miners have to blast and crush through volcanic rocks a half mile deep to find the stones. This is De Beer’s Cullinan mine, one of Africa’s oldest and richest diamond sites. Still, mining accounts for half the value of a typical gem-quality stone. It’s the skill of the cutter’s hand that creates the other half. That’s why South African officials are changing what happens to raw stones to keep more of them at home.
Cullinan Mine
(Sounds of weighing diamonds inside vault at diamond market)
Technician: Now we go to what we call a mélange, which is a mixture of stones.
FitzPatrick: Currently, more than 90-percent of the diamonds go straight to London. The rest are weighed and registered in a small secure room inside Johannesburg’s industry-run trading center.
Technician: This is 1,078.80. That’s 1078 carats.
FitzPatrick: This is where South Africa often loses it stones. International traders with more experience and deeper pockets snap them up. McDonald Temane says locals can’t compete.
McDonald Temane: The free market has failed us. It’s almost like starting a race where people have gone twice around the block and then you are supposed to race with them.
FitzPatrick: South Africa’s parliament is taking control to be sure domestic craftsmen get a better cut of the market. This could mean South Africa will slap stiff tariffs on raw diamond exports. Spokesman Tom Tweedy at De Beers cautions it could backfire, driving up the price of diamonds and sending buyers elsewhere.
Tom Tweedy: It’s your cutting costs and your mining costs that will determine how viable your business is. It doesn’t matter what you legislate. The dollar has no nationalism about it at all.
FitzPatrick: Today’s announcement by DeBeers may lead the way for more black investors in the industry. But the company warns that South Africa’s protectionism for diamond cutters could jeopardize the viability of some of the country’s mines. In South Africa, I’m Terry FitzPatrick for Marketplace.
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