South Africa has launched an association for young, mainly black entrepreneurs to boost the processing and manufacturing of rough diamonds, the mines ministry said on Tuesday.
Manufacturers and middlemen who buy rough stones, polish and resell them to retailers struggle with a stronger dollar and liquidity problems, having to rely on bank loans to cover purchases until they can sell their finished goods.
Launched at the first South African Diamond Indaba, the South African Young Diamond Beneficiators’ Guild aims to help start ups led by mainly black entrepreneurs to cut and polish diamonds.
The government in Africa’s second largest economy is pushing to revitalise industrial capacity by encouraging companies to process or add value to minerals – a process referred to as “beneficiation” locally – before exporting them.
Processing diamonds could help ease unemployment which stands at around 25 percent, although analysts say this is higher.
Global diamond demand growth has declined over the last few years owing to slower interest from China. Mining companies have slashed output in response as they also battle rising costs.
South Africa’s diamond manufacturing industry now employs about 200 workers from a peak of 4,500 about 20 years ago, losing ground in Africa to Botswana, the ministry and industry players said.
“South Africa has been muscled out of its status as the world diamond destination. We have to re-capture that legacy,” Dolly Mokgatle, chairperson of the diamond mining conference said.
Mining in South Africa contributes about 7 percent to the gross domestic product and is the world’s fifth largest producer of rough diamonds.
President of the World Federation of Diamond Bourses Ernst Blom told delegates that processing of the precious metals locally had to be economically viable for companies and that South African mining industry should introduce measures such as tax incentives to attract investment.
“Enabling firms to process diamonds means costs have to be reduced on them to make it profitable for them to do so,” he said, adding that South Africa had to cut the red tape related to diamond mining and to align costs with global peers.