South Africa's diamond cutting firms are shedding jobs as they grapple with squeezed margins in a sector the government hoped would expand and create more employment. Sector officials told Reuters on Monday nearly a fifth of cutting and polishing jobs had been lost in Johannesburg, centre of the industry in South Africa.
"We have been faced with huge retrenchments since January. To date we have had retrenchments of around 400 members," said Shadrack Motloung, of the United Association of South Africa trade union, which represents diamond cutters.
That has brought employment in Johannesburg down to around 1,800 cutters, with around 600 cutting jobs elsewhere in the country where the situation is not as serious, he added.
The government is seeking to boost local diamond cutting as part of a wider strategy to reduce exports of raw materials from its mining industry and process them locally to boost jobs and economic growth.
A new diamond law passed last year, but not yet implemented, will create a state diamond trader to expand the supply of rough diamonds to new cutting and jewellery firms.
The head of a major diamond cutting factory in Johannesburg, who declined to be named, said there was a imbalance between the high price of rough diamonds and revenues from selling the finished product.
"In general there's still good demand, the problem is that people are not prepared to pay. The rough prices in certain categories are very expensive, it's just not profitable," he said. His factory, one of the largest, has shrunk its workforce by natural attrition, but might have to start forced job losses if the business fails to improve. "We still have to watch the situation, if things deteriorate we might have to take other measures to take care of the business," he told Reuters.
PRICES TOO HIGH: De Beers, the world's largest diamond producer, warned in late July that higher interest rates, rising fuel prices and geopolitical instability would make it tough for its second half sales to match those of a year earlier.
In May, an official with De Beers marketing arm, the Diamond Trading Company (DTC) told Reuters a price rise for rough diamonds of just under 2 percent in February may have weakened sentiment among cutters and jewellery makers. De Beers is 45 percent owned by mining group Anglo American Plc.
The Johannesburg manager of the diamond cutting factory said he hoped De Beers would take some action to lower prices, but prices were unchanged at a sale last week. "Maybe they can do something because prices are too high at the moment. Most people are unhappy," he said.
MacDonald Temane, chair of the South Africa Master Diamond Cutters Association, said a delay in putting in place the government's new diamond law was not helping the industry. "There's really been a bit of a destabilising effect where there is uncertainty because implementation has not happened. People don't like uncertainty," he said.
A source in the mining ministry said there were many elements of the complex diamond law that had to be put into place, including input from the National Treasury on a proposed export duty. The law might be implemented by the end of year or early in 2007, he added.
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