JOHANNESBURG (miningweekly.com) – The number of alluvial diamond operators is decreasing at an alarming rate.
In 2004, there were 2 000 small diamond-mining companies, which employed close to 25 000 people, and now there are only about 200 operators employing only 5 000 people – a 90% decline.
What is also alarming is the decrease in prospecting applications and the rapid growth of illegal mining.
“We do not think we have all the answers, but we believe that by working together, the private sector and government, we can save this industry,” South African Diamond Producers Organisation (Sadpo) national executive committee member Amo Marengwa told Mining Weekly in a Zoom interview. Also taking part in the interview were Sadpo chairperson Gert van Niekerk and Sadpo deputy chairperson Lyndon De Meillon, who outlined the rewards South Africa could potentially harvest with the right regulations and a lower cost of doing business. (Also watch attached Creamer Media video.)
“In South Africa, getting a right to mine is not an easy process. It’s very complicated, time-consuming and expensive,” said Marengwa, an alluvial diamond entrepreneur, who is the CEO and co-founder of Blue Banjo 3.
“In our case, my brothers and I applied for a right to mine using our own money and even put up some infrastructure to get going. Given our financial backgrounds, we do not have the financial muscle to grow the company. We’re unable to buy more machinery. Unfortunately, in our country, this is the reality.
“Emerging entrepreneurs do not have the resources to build sustainable companies, especially those that are based in the rural areas. The lack of finance and support forces many entrepreneurs to look for external help, meaning, for example, in my case, I had to look for partnerships, investors or any kind of help that could push he project along,” said Marengwa, adding that he had made unsuccessful approaches to the State-owned Industrial Development Corporation and a number of other developmental agencies.
“Unfortunately, in our country, exploration projects, especially alluvial diamond projects, are deemed too risky. There’s a lack of data and technical support from government institutions such as Mintek and the Council of Geoscience. Therefore, most of us cannot secure any investment.
“Much of these problems are the result of a poorly considered policy. In other words, we’re governed by the same mineral policy and regulations that were designed with only the large mining companies in mind. Our recommendations are based on developing a fit-for-purpose, policy and regulation framework, meaning changing the approach from a one-size-fits-all to a more inclusive approach,” said Marengwa, in presenting Sadpo’s eight-slide position paper on a South African artisanal and small-scale diamond mining policy framework.
“Our first recommendation is that to encourage new investment and particularly foreign investment into the industry and to also fast-track transformation, the process of applying for a mining right should be simplified and made cheaper. Our proposal is an adaptation of a tick-box application procedure, which will also help the department in granting licences quicker and more efficiently. To further simplify the process, a one-stop-shop system needs to be established, meaning I should be able to receive my mining right and water usage licence at the same place, at the same time.
“Our second recommendation is that, to encourage small miners to do business with black diamond dealers, we need to change the current requirement. Currently, dealers have to present proof that they have offered 15% of their total production to a beneficiation licence holder, before they are allowed to export their production – these are mostly the black diamond dealers. We propose that this should be decreased to 5%, as junior diamond miners cannot afford to beneficiate 15% of their production, as their cash flows are too tight. This implies that they sell their production locally, where they do not always get the best price. At 5%, they will make an effort to make stones available for local beneficiation as it is a much more achievable target in terms of their cash flows. Besides, this is something that I’ve always asked myself, where is government expecting the black dealers to get the money from to buy the diamonds. Yes, transformation is needed in this country, but for it to happen, resources…