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"Each time we approach Diamdel (the wholly-owned De Beers rough diamond trading subsidiary) for rough, we are told there are no diamonds, we need to know where all the rough ends up," said Ernest Malakoane, chairperson of the United Diamond Association of South Africa (Udasa).
South Africa produces about 14 million carats valued at almost R8bn annually.
Diamdel is a major supplier of rough diamonds to the local small cutters, polishers and jewellery manufacturers.
Malakoane said Udasa represented 200 emerging diamond dealers, cutters, polishers and jewellery manufacturers.
Malakoane, managing director of Ma-Africa Diamonds, said Udasa would ask the government for the forensic audit because much of the country's diamond production did not land up in the hands of black diamond processors and manufacturers.
He accused De Beers, the global diamond giant, which commands most of the local production, of paying lip service to black economic empowerment (BEE) and of stifling the growth of the local beneficiation sector.
"Diamdel sells far less than 10% of rough available for local processing to black entrepreneurs.
Chaff and crumbs
"All we get allocated is chaff and crumbs," said Malakoane.
"The company's (De Beers) lofty ideals of accelerating the entry of black entrepreneurs in the downstream side of the diamond industry are coming to naught.
"Here we are, all 200 of us, struggling for business."
His sentiments were supported by businessperson Barbara Klaassen, director of Ideal Diamonds.
Klaassen said her company had to put its staff on short time to avoid retrenchments because of a lack of rough diamonds.
She said South Africa, as the fourth-largest diamond producer in the world, produced enough rough to support the local diamond processing sector.
"The problem is in the distribution of these diamonds to local factories. The amount of work coming the way of small factories is only a fraction of what gets given to the few dominant players, some of whom are foreigners who just ship out the stones," she said.
Malakoane said his company had to lay off 16 polishers because it struggled to find rough diamonds.
Waiting for relief
"Many BEE enterprises are on the verge of collapse," he said. "Their owners are hanging in, hoping that the much-awaited changes in legislation will bring relief."
The government is amending the acts that relate to the diamond business to lower barriers to entry and to enhance participation by black people in the industry and to encourage local processing to create much-needed jobs.
The Precious Metals and Diamonds General Amendment Bill, which is before parliament, will, if passed, impose export taxes as a disincentive to shipping out rough diamonds and may also impose a compulsory supply regime.
The suggested rate of export tax is 5%.
Ten other small diamond cutters and polishers in business incubation at the Velani Hive, which operates from the SA Diamond Centre in downtown Johannesburg, are also struggling to lay their hands on quality rough.
"Like everybody we are waiting for the new law, which should make things better," said Hive manager Brian de Swardt.
He said the problem was not so much about access to rough as it was of pricing, because "it is difficult to find a diamond stone that one can polish at a profit".
Velani co-founder Abe Sher, who has since left the business, told City Press Business, sister publication of Finance24, last year that De Beers was to blame for the floundering beneficiation sector.
Sher claimed the diamond giant hampered supply of diamonds to the small and medium sector.
Committed to BEE
Diamdel chief evaluator Brian Rae denied claims that De Beers or Diamdel were not committed to BEE.
He said the company had wholeheartedly embraced domestic beneficiation of rough diamonds and had invited government to take a stake in Diamdel so it could be close and monitor its progress.
De Beers has given an undertaking to government to ensure that its supplier-of-choice-scheme for local supply of rough, will include BEE companies.
SA Diamond Board chief executive Louis Selekane said the industry had a long way to go before it could be truly representative.
He said South Africa was still predominantly an exporter of diamonds, adding "we need to create a high-value chain".
He said only high-value diamonds were cheaper to cut and polish locally, which might explain the preference by the industry to ship off rough to other markets.
He said it was unacceptable that South Africa as a leading diamond producer could not support a strong downstream sector.
"We may not be the most competitive diamond processor in the world but our costs of labour are lower than major cutting centres in Belgium and the US."
The diamond industry employs 28 000 people, 13 000 in mining, 9 000 in retail, 3 000 in manufacturing, 2 100 in cutting and polishing and 900 in sorting and valuing.
