Chairperson, the usual suspect is back. The Minister wanted to know if I was back and he called me. Madam Deputy Speaker and hon members, the Bill before the House is an unequivocal demonstration by the ANC-led government that the aspirations of the drafters of the Freedom Charter were not a pipedream, but a realisable vision that requires a resolute developmental state that consciously intervenes in the best interest of the people.
The mineral wealth of this country is at the centre of this intervention - in an economy that is confronted by a number of challenges that seek to undermine the enormous gains we have made since the advent of our democracy. As it has already been indicated, the main object of this Bill is to give effect to the Diamond Act of 1986, that was amended in 1998 and later in 2005.
The 2005 version creates space for this Parliament to make provision for the imposition for an export levy on unpolished diamonds and also allows for offsets with respect to that levy. The 1998 version sought to promote local beneficiation of rough diamonds by imposing a 15% levy on the ones exported from the country. This 15% was not able to realise its intended objective as there are provisions or exemptions that allowed exporting parties to justify such exports by demonstrating the promotion of local beneficiation through other means.
This resulted in an unintended consequence that when the 15% levy was really applied, if ever. The ANC-led government's policy is determined by the needs of the people, particularly those that are vulnerable. In this instance, the beneficiation is not only an instrument of and for economic development, but also has the potential of creating jobs locally, through the development of a diamond beneficiation industry.
As I have already indicated that this Bill gives effect to the Diamond Act of 2005, among other things, establishing the state diamonds trader with the intention of ensuring that rough diamonds are retained in the country and to promote local beneficiation. The state diamond trader, in terms of this Bill, is intended to purchase 10% of rough diamonds before considering exporting. The state diamond trader will, in turn, sell these diamonds to local cutters for polishing and further beneficiation. This process will create a steady long-term supply for local cutters.
This Bill proposes an export levy of 5%, as it has been indicated, to be levied on all rough diamonds exported and is triggered by section 69 of the Diamond Act, which states that an unpolished diamond intended for export, will be subject to this levy. The 5% levy applies to the market value of exported diamonds as determined by this section.
As a safeguard against undervaluation, this levy will be imposed on the greater of the two following values: The greater of the value specified by an exporter on a return, as required by section 69 of the Diamond Act; or a value assessed by the diamond and precious metals regulator, who in this case is the government diamond valuator.
After lengthy deliberations on the appropriateness of the reduction of the levy from 15% to 5%, the committee was satisfied that this rate is high enough to contribute towards local beneficiation, whilst low enough not to unduly encourage smuggling. The other point to be borne in mind is that this levy is not necessarily intended to generate tax revenue, but to encourage local beneficiation. This piece of legislation fits perfectly into the government's strategy informed by the People's Charter of sharing in the country's wealth, in particular, mineral wealth. The introduction of the levy does not prevent the Minister of Minerals and Energy from granting exemptions, but to the extent that sufficient measures exist to ensure that local cutters receive a sufficient and sustainable supply of unpolished diamonds. In line with our democratic responsibility of promoting public participation, the committee held public hearings on this Bill together with the Portfolio Committee on Minerals and Energy. We were convinced that the stakeholders' views were adequately canvassed and where possible, accommodated.
To mention but a few: a number of industry players requested that the definition or threshold for small mines be increased from an annual turnover of R10 million to R35 million, in line with the threshold, as per the BEE - Black Economic Empowerment codes used by the Department of Trade and Industry. It was further felt that the requirement of parcels consisting of 10 stones was always practical.
These concerns were addressed and the threshold was relaxed, and the requirement of parcels was dropped. The other concern was that the large producer monetary threshold of R5 billion was too high and was subsequently reduced to R3 billion. These were just some of those concerns that were raised and addressed and those that relate to the Diamond Act were accordingly referred to the appropriate Ministry and committee for further discussions.
The Bill is a conscious and deliberate intervention by the developmental state, with a distinct objective of promoting economic development in a manner that addresses the dual economy divide without compromising productivity. It is the committee's view that the passing of the Bill is fully supportive of the objectives of the Diamond Act and that, once passed, the constraints prevailing as result of the void, will be laid to rest. The ANC supports the Bill. I thank you.