There was a high level of optimism about the future of African Romance, a South African diamond beneficiation company, when it opened its doors in 2007.
One of the guest speakers at the launch of the firm, former Department of Mineral Resources (DMR) director-general Sandile Nogxina, now South Africa’s ambassador to Mexico, described African Romance as the actualisation of an African dream and urged other local enterprises to follow its example.
Almost six years later, the company that was subject to all sorts of flattering statements amid pomp and fanfare is battling for survival in a financial ICU.
Liquidation
Mining Weekly reported that a decision had been taken to place WakeGem, which traded as African Romance, into voluntary liquidation.
Company chief executive Mohseen Valli Moosa was quoted by the online publication as saying that African Romance had experienced a significantly negative trading and operating environment since the global financial crisis of 2008/2009, which affected the diamond industry.
He said the lack of adequate funding for marketing, trading and retail development, the high cost structure of funding and operating diamond cutting businesses in South Africa as compared to India and China had contributed to the poor financial performance of the business.
He also cited severe lack of a dependable supply of rough diamonds from the major diamond producers in South Africa.
African Romance was unsuccessful in its attempts of becoming a De Beers sightholder.
As if that was not enough, the State Diamond Trader, was not in a position to supply good rough diamonds at competitive prices to South African producers, he said.
“Unfortunately, beneficiation will only succeed if there is a pipeline of raw materials that is guaranteed and if the funding is able to support a long-term time horizon which allows for the development of marketing and retail strategies alongside production and beneficiation,” Moosa said.
“In the absence of such support, despite all the best intentions of government agencies and development funders, beneficiation is unlikely to succeed.”
His argument was raised in 2011 by Deputy Mineral Resources Minister Godfrey Oliphant while presenting a paper on diamond beneficiation in parliament.
“Limited access to rough diamonds is often cited as one of the main reasons why the local downstream beneficiation industry has not really taken off,” Oliphant said.
“To supplement locally-produced diamonds, we are exploring the possibilities of importing diamonds from other African diamond-producing countries. In particular, through our membership of the African Diamond Producing Countries, we are looking at importing diamonds from, among others, Angola, [the] Democratic Republic of Congo and Zimbabwe.”
Worrying
He said it was worrying that South Africa remained a small player in the downstream sector of the diamond value chain, with a disproportionately small and under-developed beneficiation industry.
Oliphant said most investors were discouraged from investing in the sector due to the high cost of setting up, with small and medium-sized manufacturers having limited or no access to finance.
He, therefore, said South Africa was currently studying different diamond-funding models, like the Antwerp Diamond Bank, the Bank of Israel and the State Bank of India, in order to propose to local financial institutions—and especially the IDC [Industrial Development Corporation]—to consider developing a South African diamond funding model to support our local beneficiation industry.
Meanwhile, Moosa said with an independent forensic review of the diamond-beneficiation company expected to commence soon, he was hopeful that such investigation would serve as a learning experience of the kind of support that beneficiation projects required in order to succeed in South Africa.
Glowing assessment
According to reports South Africa’s diamond beneficiation showed vast improvements in 2010 as the value of goods polished by local cutters rose 25 percent year on year to an estimated $354 million.
“We have a future because we have the resources,” said Levy Rapoo, chief executive of the South African Diamond and Precious Metals Regulator (SADPMR) in 2011.
“We have been cutting diamonds for many years and South Africa is still a top diamond producer.”
Such a glowing assessment of the state of South Africa’s diamond beneficiation industry does not help anyone.
Is it not ironic that a deputy minister responsible with the mining industry concedes that the sector was in trouble only to hear from his subordinate that all was moving in the right direction?
There are approximately 100 companies registered to buy from the State Diamond Trader (SDT), which was created in 2007 to facilitate rough supply to local beneficiators, but only about 15 were active.
This and coupled with the folding up of African Romance was indeed a clear statement that South Africa, despite being one of the leading diamond producing countries in the world, should move swiftly to rescue the sector.
The problems facing diamond manufacturers and prospective ones are well known, what is needed now was action and less talking.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
