This diamond sector is in the rough
South Africa’s small-scale diamond sector needs policy reform if it’s going to shine again. By
When South Africa’s Mineral and Petroleum Resources Development Act came into effect in 2004, about 2,000 small-scale alluvial diamond miners were operating in the country, employing about 25,000 people in remote and impoverished areas of the Northern Cape, North West and other provinces.
“Today that figure has plummeted to about 220 small and junior mining operators, with a drastic reduction in employment numbers projected to be about 5,720,” says a new report published by the Africa Earth Observatory Network (AEON), a branch of Nelson Mandela University.
“Since 2013, there also appears to have been about a 61% decrease in prospecting rights applications in the Northern Cape, where the bulk of alluvial diamond mining takes place – largely the ambit of entrepreneurs, local private operators and farmers.
“Like many other mining sectors, the diamond mining sector is also seeing rapid growth of illegal operations. Much of this [is] on the back of poorly considered policy.”
Many prospectors have no doubt thrown their hands in the air in despair in the face of the Department of Mineral Resources and Energy’s utterly useless South African Mineral Resources Administration System for logging mining rights applications, which at last count had a backlog of more than 5,000.
The Department of Home Affairs may have bigger backlogs for many of its applications, but that sort of comparison is setting the bar pretty low.
The bottom line of this extensive report is that poor policy, including subjecting junior miners to some of the regulations imposed on large, publicly listed companies, has laid waste a sector that should be thriving.
The sector is a victim of a one-policy-fitsall approach.
“It is difficult for the smaller guys to comply with regulations like BBBEE,” AEON researcher and report author Sinazo Dlakavu told DM168, noting that they do not typically have excess capital that can be spent to bring in a BBBEE partner.
Social and labour plans have also been imposed on the sector, squeezing out smallscale operators who take big risks mining ultra-low-grade deposits that may or may not yield a profit.
South African Diamond Producers Organisation deputy chairperson Lyndon de Meillon, a geologist and consultant, said compliance with the regulations was just not realistic, given the scale of the operations.
“We are all privately owned companies, we’re not listed entities. To comply [with] BBBEE requirements and social and labour plans [is] very difficult. We are very good at creating jobs and mining these ultra-lowgrade deposits. We feel social upliftment is the government’s responsibility but we are prepared to make a contribution. Just make things a lot simpler for us. Most of us are small and family businesses,” he said.
He said one option would be for such small-scale operators to pay a percentage of turnover into a fund aimed at social upliftment goals.
“The cost of compliance is becoming too high,” he said.
The report pointedly says that regulations “make no distinction between the geology, mineral resources, structure, size and funding differences between small or junior miners versus large private or publicly listed mining companies. Unless the key differences between the two sectors are recognised, and enabling ‘fit-for-purpose’ mineral and mining policies are implemented for the small and junior mining sector, there will be an ongoing decline of South Africa’s entrepreneurial miners and job losses in vulnerable rural communities.”
And the issue is not geological.
“In stark contrast [with] the situation facing the large diamond sector and the closure of operations by the likes of De Beers and Trans Hex ... there are still large resources of high-quality alluvial diamonds contained in the extensive ancient river gravels of the Vaal, Harts, Orange and Riet rivers, and related ancient [palaeorivers], glacial and marine systems of the Northern Cape,” it says.
This is another prime example of perhaps well-intentioned government policy having the opposite effect of its goals, resulting in a loss of economic opportunities in poor rural areas and leaving many diamonds in the rough.
Poor policy, including subjecting junior miners to some of the regulations imposed on large, publicly listed companies, has laid waste to a sector that should be thriving