De Beers answers ‘conflict of interest’ charges

Diamond giant De Beers on Friday denied there was a conflict of interest in having some of its major buyers on a South African regulatory body that decides if the firm is liable to pay an export tax, Reuters reported.  

The denial came after the Mail and Guardian newspaper reported that at least two of De Beers customers or “sightholders” had been appointed to the regulatory Diamond Board’s Section 59 committee which decides if De Beers should pay a 15% export duty on gem exports from South Africa. 

“We don’t believe it’s a conflict of interest…We are definitely not buying influence on the committee,” said De Beers spokeswoman Tracey Peterson, Reuters reported.

Section 59 committee chairman MacDonald Temane was also a director of Fabrikant Salant Masingita manufacturers (FSM), the South African arm of Fabrikant, a leading trader of polished diamonds, the Mail and Guardian reported.

 

FSM became a sightholder in January, the paper said.

 

Board member Louise Tager was also a director and shareholder of ABT Diamond Cutting Works which had been a sightholder since January last year, the paper said.

Diamond Board head Abe Chikane said the board would meet next week to discuss the section 59 legislation within the context of the government’s new draft minerals bill.

“We have to review section 59 in the context of the new minerals development bill but there is no conflict in having sightholders on the board as has happened in the past,” Chikane told Reuters.

 

The latest controversy involving the Diamond Board comes as De Beers faces a friendly $18 billion bid from a consortium led by mining giant Anglo American and the wealthy Oppenheimer dynasty.

 

Wrangles between the Diamond Board and De Beers over export duties have previously delayed De Beers export consignments, knocking the firm’s share price last year.

Legislation that governs the working of the Diamond Board, including specific clauses on whether diamond producers should pay an export tax, is also under review by the Pretoria government.

 

De Beers does not pay an export tax on its sales because more than half of its diamonds in value terms are brought back to South Africa to local cutters and polishers, Peterson said.

 

Being liable to an export tax on the near $1 billion worth of South African diamonds would force De Beers to pay duties running into millions of dollars.

 

De Beers said the decision on whether it was liable to pay an export tax was a decision on the entire Diamond Board and not just the section 59 committee.

 

There are 22 officials on the Diamond Board, six of which are De Beers sightholders and 11 on the section 59 committee of which three are sightholders.