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De Beers and the South African Government
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Posted 13th Septmebr 2006
De Beers could be facing a large multi-billion dollar tax claim from the South African Government over a large amount of Diamonds that the company exported out of the Country just before the countries first democratic election in 1994.
Somewhere in the region of 3.5 million tons of unpolished diamonds, (19 million carats) were shipped to London and De Beers avoided paying 15% export duty after a deal was made with the South African Diamond Board.
Although the deal was struck in 1994 it has always abgered to Government who viewed it as a complete vote of no confidence from De Beers.
There is now talk in South Africa that the tax authorities and the Government are hopeful that they will ahve a case for a huge claim against the world's leading Diamond marketeer.
The whole case rests on the validity of "section 59 agreements" that were struck back in the 1986 Diamonds Act. Some believe that the levies can now be clawed back by the Government.
The whole political situation in South Africa is ripe for a fight over gemstones. There is currently a new bill, the Diamonds Amendment Bill in the South African Parliament. The main aim for the new bill is to create more "local" business for the South African diamond jewllers and diamond cutting industries.
The Government basiclally believes that by closing the loop holes in the 1986 Diamonds Act it will
The political climate is ripe for a battle over gemstones. The Diamonds Ammendment Bill, currently under consideration in Parliament, has as its primary aim the creation of more substantial local jewellery and diamond cutting industries.
It aims to achieve that by closing the apparent loopholes in the 1986 Diamonds Act that enabled De Beers to win exemptions.
The Government also proposes to create a state run Diamond Export and Exchange Center. This center would buy a proportion of the entire South African diamond production and make them available for purchase by local diamond cutters.
It is unclear what proportion of the diamonds would be purchased by the Diamond Exchange or even if the Government will succeed in its bid to claw back money form De Beers, but one thing is for sure, chanfges are afoot.
