CHAPTER 1
1. INTRODUCTION AND BACKGROUND.
1.1 History of the appointment of the Commission of Inquiry into the South African diamond industry
On 1995-10-18 Cabinet approved the appointment of a Commission of Inquiry into the South African diamond industry. The need for an inquiry was motivated as follows :-
1.1.1 Many parties and commentators were not satisfied with a number of issues pertaining to the local diamond industry. Such issues included: Government regulation of and involvement/intervention in the industry; the lack of supplies of rough diamonds for the local cutting industry; certain existing provisions of the Diamonds Act, the role and composition of the Diamond Board; the effectiveness of illegal diamond buying (IDB) provisions; the role of the SAPS and the police trapping system; the role played by De Beers, certain practices in the industry; taxation issues; the minimal role in the diamond industry of those previously disadvantaged; and in general the manner in which the industry was being developed and administered.
1.1.2 The last inquiry into the South African diamond industry (the Greeff Commission, appointed in 1970) was completed more than 25 years ago. Since that time there have been many important changes and developments in the local diamond industry which support the proposal that a Commission of Inquiry be appointed, namely
Ø twenty five years ago South Africa was still the world’s most important diamond producer. In 1995 it ranked only 5th (3rd in value terms);
Ø the Diamonds Act deregulated aspects of the local diamond trade and introduced new measures to encourage local beneficiation;
Ø the Diamond Board was established in 1986 in terms of the provisions of the Diamonds Act to act as the regulator and facilitator of the industry. The Diamond Board in turn introduced certain changes;
Ø the local diamond cutting industry, in particular, underwent many changes, for example:
· approximately 200 new cutting licences have been issued between 1984 and 1995
· in 1976 the labour force was a “whites only” one. In 1995, only one third of workers in the industry was white;
· foreigners, assisted by the financial rand, have acquired control of about 70 % of the local cutting industry since the late eighties;
· the industry experienced substantial growth from 1986-1990 (mainly due to the availability of incentives offered in the decentralised areas and also the use of the financial rand for the purchasing of rough diamonds), but its total workforce has since then decreased from 4 000 workers to only 1 500;
· the industry used to receive some financial incentives, but received none in 1995;
· drastic changes to the rough diamond supply system were introduced in 1992; and
· South Africa’s political transformation has improved opportunities for closer co-operation with other African countries in the areas of diamond mining and diamond trade.
1.1.3 The local diamond industry should also play its part in the Government programme of reconstruction and development. The perception that the diamond industry is exclusive and that it only benefits certain vested-interest groups, should be investigated and assessed whilst existing regulatory measures with regard to the industry should be scrutinised and re-evaluated in the light of the policy principles of the Government.
1.2 Proclamation and members of the Commission of Inquiry into the South African diamond industry
The Commission was
proclaimed by the former President of the Republic of South Africa, Mr N R Mandela, in
Government Gazette 17679, dated
1996-12-13. In general notice 1701 of 1996,
Government Gazette 17680 of 1996-12-13, the then President appointed the Honourable Mr
Justice D S Levy as Chairperson and Mr Julius Feinstein and Mr Modise Khoza as members of
the Commission.
Mr B J Klaver of the Directorate, Mine Economics of the Department Minerals and Energy was appointed as Secretary of the Commission.
1.3 Terms of reference
The Commission’s terms of reference were :-
(a) to investigate and report on all aspects of the South African diamond industry, in particular:
(i) Government regulation of and involvement/intervention in the industry, including the provisions of the Diamonds Act of 1986 and the Minerals Act of 1991; the role of the South African Diamond Board; the effectiveness or otherwise of illegal diamond buying (IDB) provisions; and related matters;
(ii) the supply of rough and unpolished diamonds to the local processing industry;
(iii) the industry’s contribution to State revenue and the balance of payments as well as to job and wealth creation;
(iv) international models relevant to the local industry;
(v) the influence of foreign companies and international diamond combines on the supply of diamonds to the South African diamond industry and the export of diamonds from South Africa; and
(vi) any other matter considered relevant by the Commission.
(b) To make recommendations to the Minister of Minerals and Energy regarding:
(i) the above matters;
(ii) measures to exploit and develop South Africa’s diamond resources in the best interest of the country;
(iii) measures to enhance the competitiveness of the local industry; and
(iv) any other relevant matter.”
1.4 Activities of the Commission of Inquiry into the South African diamond industry
1.4.1 Interested parties or their representatives were invited to make submissions, either orally or in writing. Public hearings commenced on 1997-02-19.
1.4.2 Advocate M Khoza resigned as a member from the Commission in a letter directed to the Minister of Minerals and Energy, dated 1997-07-08. He gave no notice to the Chairperson of the Commission. The Commission’s legal status remained unchanged, despite the resignation.
1.4.3 Cabinet approved that the remaining two members could continue with the duties (Cabinet memorandum 11 of 1997) of the Commission.
1.4.4 The Chairperson, Mr Justice D S Levy passed away on 1998-02-13 leaving behind an incomplete draft report. The only remaining member of the Commission, Mr J Feinstein, was approached for appointment as new Chairperson, but he declined the request. The legal implications of the situation were investigated.
1.4.5 A total of 80 written and verbal submissions were received by the Commission from various interested parties. The Chairperson of the Commission made it clear that no written or oral evidence received, including statistics, would be regarded as confidential. Copies of submissions or transcripts were made available to interested parties. The total expenditure incurred by the Commission up to 1998-03-31 amounted to approximately R720 000. The Department of Minerals and Energy and the Diamond Board each contributed 50 % of the amount.
1.5 Further proceedings
1.5.1 A team consisting of officials of the Department of Minerals and Energy and the Chief Executive Officer of the Diamond Board have looked at the evidence received and the draft report by the late Judge D S Levy. The team was of the opinion that there were two broad models available to proceed from the present situation.
1.5.2 The first option would be to appoint a Task Team of officials from the Department of Minerals and Energy and the Diamond Board to summarise and analyse the evidence available and to prepare a report for the Minister of Minerals and Energy.
Advantages of this model would be savings in time and money, but a disadvantage would be that the final result might to a certain extent lack credibility because the report will not be a Commission report.
1.5.3 The second model would be to appoint a new Commission with the same terms of reference as the original Commission, having the opportunity to use the available evidence as input. This represented the official view of the Diamond Board.
Advantages of this model would be local and international credibility and acceptability. Disadvantages could be a lack of availability of funding and the time consuming procedure of appointing a new Commission which would be conducting essentially a de novo investigation.
1.5.4 Early in 1999 Cabinet was informed of the status quo of the Commission, and Cabinet approved the appointment of a Task Team of officials of the Department of Minerals and Energy and the Diamond Board.
1.6 Members and mandate of the Task Team
l.6.1 Members of the Task Team are :
Steering Committee
Department of Minerals and Energy:
- Dr J H Bredell Deputy Director-General: Mineral Development
- Mr H P Taljard Chief Director: Mineral Regulation
- Mr T Ramontja Chief Director: Mineral Promotion
Diamond Board:
- Dr V B Sibiya Chief Executive Officer
Working Committee :
Department of Minerals and Energy:
- Mr B J Klaver Deputy Director: Mine Economics
- Mr A Damarupurshad Chief Mineral Commodity Specialist
- Mr H W de Villiers Deputy Director: Mineral Laws Administration
- Mr T Falatsa Deputy Director: Mineral Policy and Research
- Mr A M Masombuka Mineral Laws: Administration Officer
1.6.2 The mandate of the Task Team is to summarise and analyse the written and oral evidence received by the Commission and to prepare a report for the Minister of Minerals and Energy regarding issues that have already been addressed and issues that are still outstanding.
This report includes all recommendations made by the persons and organisations who submitted memoranda to and gave evidence before the Commission, but does not include recommendations by the Task Team itself. Recommendations on outstanding issues will be made to the Minister in separate submissions by various parties concerned.
The existence of the Task Team was made known to the media by the former Minister of Minerals and Energy on 1999-05-05, where he mentioned that the report should be finalised by the end of September 1999.