Date: 16/03/2007

Source: Northern Cape Provincial Services

Title: Peters: National Council of Provinces Sedibeng

Speech by Northern Cape Premier at the National Council of Provinces (NCOP) ceremony, Sebokeng

* Madam Deputy President Mme Phumzile Mlambo-Ngcuka
* NCOP Chairperson
* Honourable Premiers
* MECs
* Mayors and councillors
* Leaders of faith based organisations
* Business representatives
* Non-Governmental Organisations (NGOs) and Community-Based Organisations (CBOs)
* Distinguished guests
* Ladies and gentlemen

Chairperson, Washington Irving, a well known author once said:

"Great minds have purposes; little minds have wishes."

I am here to today to tell you we have a purpose - not a wish! We are here today to assert that the initial source which provided the funds for the greater expansion of the South African mining industry, should be accorded its rightful place.

The capital of the Northern Cape province has often been referred to as the Diamond Capital of the World. The 1873 settlement known as the "New Rush" rapidly exceeded 50 000 people and was renamed Kimberley, home to the Kimberley Mine which later came to be known as the "Big Hole." This operation yielded more than 14,5 million carats while in operation and spawned the creation of De Beers Consolidated mines (Pty) Ltd and the birth of an entire modern global diamond industry. Diamonds have been extracted from the city for more than 140 years placing Kimberley at the forefront of most developments in the country.

Since the discovery of this precious stone, the city and province have had little to show for these priceless gems and these have been benefited in other centres around the country and the world. This is despite the city having hosted the first stock exchange, the embryonic stage of the University of Witwatersrand and streetlights to mention only a few firsts for Kimberley. The economic wealth of the city has significantly contributed to the development of the modern South African and the international economy. Taking cognisance of all these issue mentioned and that the Northern Cape is currently contributing 36% in value of South Africa's diamond production which includes the best quality marine and alluvial diamonds in the world one could rightfully ask where does all this wealth go?

With the announcement by De Beers of the closure of the three diamond mines in Kimberley and only the CTP plant to continue; headlines the world over read - Kimberley has lost its sparkle.

This was countered by the South African State President after his visit to Antwerp (seeing the influence of our diamonds in foreign countries), Belgium in 2005 and during a visit to Kimberley he stated that the diamond sparkle of Kimberley must be returned.

The Northern Cape Provincial Government submitted project proposals to National Government to be included in the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). This submission was based on the Northern Cape Provincial Growth and Development Strategy. The initial submission was reviewed and the diamond and jewellery initiatives were approved.

Based on this the Northern Cape Diamond Strategy and detailed business plan was then developed. The strategy provides a specific business case for the establishment and facilitation of the full value chain in the Northern Cape, primarily Kimberley with the intent to have the benefits and rational for the strategy to be advantageous to the rest of the province and the country. The strategy and business plan is in the broad sense of the International, National and Northern Cape Diamond and Jewellery Context.

Based on this AsgiSA assigned the Northern Cape the Special Provincial Project of Processing Diamonds, Precious Stones and Jewellery Manufacturing. These AsgiSA Special Provincial Projects were selected for their impact on unemployment, poverty eradication and economic growth, as well as the potential for sustainability and to possibly leverage private sector funding.

Based on AsgiSA, the Northern Cape Diamond Strategy and Business Plan the three key objectives identified were to establish Kimberley as a:

* cutting and polishing centre of world standard
* Jewellery Centre of Excellence
* International Service centre.

This must also be seen in the context of the diamond developments taking place in the Southern African Development Community (SADC) and specifically South Africa due to the diamond legislation.

It was identified that it is critical that the relevant critical mass be created in terms of the full diamond pipeline. This includes the actual traders, beneficiators, service providers, statutory bodies and finally the wholesale and tourism sector. Combined with it is the establishment of a specific brand.

The Northern Cape Government identified the 7 Wonders of the Northern Cape Diamond Strategy to realise the abovementioned:

* diamond cutting and polishing
* jewellery manufacturing
* Kimberley International Diamond and Jewellery Academy
* Kimberley Diamond, Gemology and Jewellery Hub
* branding
* tourism
* allocation of statutory body/bodies - the State Diamond Trader.

Chairperson, I wish to emphasise that the allocation of the State Diamond Trader to Kimberley is critical to really implement the Diamond Amendment Act successfully.

The Trader will have to ensure :

* close access to rough sources: To minimise risk, cost and infrastructure implications for the Government
* equitable distribution and access to rough diamonds
* lowering barriers of entry and ensuring PDI and small medium and micro enterprises (SMME) initiatives can take place
* positioning the Trader where the full diamond pipeline can have access - diamonds combined with gold and platinum jewellery to have maximum benefit and impact for the national context.

It is critical to note the following in terms of Kimberley and the Northern Cape:

An estimated 95% and some years even more, of the South African Diamond Production passes through Kimberley. This is made possible by De Beers Consolidated Mines and the Diamond Trading Company (the marketing and selling entity of the De Beers group) having the Harry Oppenheimer house in Kimberley. De Beers sent all their South African production to Kimberley to be sorted and valuated and then it is taken to London for the DTC aggregation process. For 2005 De Beers produced well over 90% of South Africa's rough and this has been the trend in the past.

Kimberley furthermore is serving as the central point for the diggers and small diggers from Schweizer Reneke to Prieska. Kimberley has five tender houses. The effect is that a few percent short 100% of South Africa's rough production that will have to be evaluated and from which the rough will be bought is in Kimberley. If the Trader is situated in Kimberley it will be able to review and buy rough from a number of facilities in very close vicinity. The Trader can tend to its primary responsibility from Kimberley with very limited cost and risk. If the Trader were to be anywhere else in South Africa it will account for a duplication of infrastructure, security risk, higher number of personnel and ultimately far higher cost and lower margins for the Trader seen as Kimberley will be the base for buying goods and selling goods.

Taking the risk, time, cost and thus margin issues into account, not establishing the State Diamond Trader in Kimberley will affect Government's capability to effectively implement the Diamond Amendment Act due to jeopardising the sustainability and viability of the Trader. Kimberley is geographically centrally located in South Africa and will ensure that the broader potential South African beneficiators will be able to have convenient access to rough.

It will also enable South Africa to effectively utilise all its precious stone and metal resources synergistically by being the third anchor to the Platinum and Gold provinces. It is centrally located in terms of the two main centres of South Africa (Gauteng and Cape Town) specifically in terms of jewellery retail and tourism.

Kimberley used to be the distribution centre up to the 1990s for De Beers in terms of their local and foreign clientele. The Harry Oppenheimer House was used for this purpose. De Beers took the decision to reinstate this process and it will be hosted in Kimberley from March 2007.

The South African DTC sightholders will view and receive their parcels in Kimberley. This is a bold step by De Beers and can be seen as an effort to support the allocation of the State Diamond Trader to Kimberley. Most of industry is currently situated in Gauteng and it is foreseen (based on consultation) that the effect on industry will be limited and will be transitional.

It must also be clarified that the intent is not relocate industry to Kimberley but to have a phased in equilibrium. This will be the exact similar pattern that will materialise with the allocation of the State Diamond Trader to Kimberley. By locating the Trader in Kimberley it will ensure new entrants in the market a fair and equal opportunity to start up a diamond beneficiation initiative, whereas in other cities it is made difficult by existing industry operators. It will also add value to the diggers and specifically the small diggers in the surrounding areas by creating a better and easier accessible market for their goods.

To really address the issues of poverty and unemployment across the board and throughout South Africa requires a regional approach need to be adapted to the extent of the Regional Industrial Development Policy.

The bigger centres and flourishing centres will not feel the impact of the State Diamond Trader in comparison to that of Kimberley and the central region of the country. The allocation of the State Diamond Trader will serve as a springboard to activate economic activity and employment for the whole central region of the country - specifically North West, Free State and the Northern Cape. We as the Northern Cape have already started to prepare ourselves for the allocation of the State Diamond Trader in Kimberley. The following is just a few points to prove our worth - collateral if I may:

* The Gemology School that has been assigned to Kimberley and forms an integral part in the effective roll out of the Diamond Beneficiation Act and the State Diamond Trader. Seen as the Trader will have to review all the local diamond production to buy in goods for the Trader, parcel, valuate goods and sell goods, it will require a substantial number of additional personnel.
* A critical requirement will be to provide industry with sufficient competent incumbents. The current South African skills pool does not have the number of skilled professionals to provide the future demand.

Taking all the abovementioned into consideration and that Southern Africa produces an estimated 60% of the world's rough and that Botswana will be doing all the De Beers DTC aggregation in Botswana from 2008, plus combined with the role of Angola and the Democratic Republic of the Congo, which are increasing one can gather that the whole of Southern Africa will require diamond capacity. To cover all of this the Northern Cape has developed the Gemology School to be the Kimberley International Diamond and Jewellery Academy. This will be an international centre of excellence for training.

The actual facility, technology, lecturers and curriculum will ensure that the Academy will be setting the standard internationally. The proposed model for governance ensures close alignment to industry and will ensure rapid alignment to a highly competitive, ever changing and improving industry.

The Trader and industry has three critical prerequisites for location:

* security
* logistical supporting services
* complementing infrastructure and arrangement.

Kimberley offers all of this.

The Northern Cape and Kimberley has very low crime rates - the lowest in the country. If one take into consideration that De Beers DTC has transported millions and millions of carats of diamonds in out of Kimberley over the years and have never been robbed it clearly proof of the fact that if you want to be safe, Kimberley is the place to be. Kimberley houses all the banks, insurance companies and security transport companies that have been serving the South African diamond and jewellery industry. Kimberley has a high level of infrastructure that will be able to facilitate the Trader and related activities. This covers the whole spectrum of physical and social infrastructure. Internationally Kimberley is renowned and acknowledged for diamonds. This means that Kimberley has a tremendous brand value that can be utilised to the benefit of all of South Africa. The Kimberley Process lends its name from Kimberley and is the international reference for diamonds with integrity.

This combined with the Northern Cape tourism drive will form the platform for diamond specific SMME initiatives that can be initiated. To prove this:

* An Italian company with local shareholders is setting up a jewellery manufacturing factory in Kimberley.
* An internationally renowned diamond beneficiator with local partners will be setting up a diamond cutting and polishing factory in Kimberley in due time.
* The Northern Cape Government has already commissioned a service provider to do a detailed feasibility study and develop a business plan for the Kimberley Diamond, Jewellery and Gemstone Hub which will be finished in three months time - which can be actioned immediately thereafter.
* The Kimberley International Diamond and Jewellery Academy will launch in the next few months.

Chairperson, Kimberley is on standby - ready to go!!

Issued by: Office of the Premier, Northern Cape Provincial Government
16 March 2007