India may directly import South African diamonds

South Africa is soon likely to open its doors for direct rough diamond sales to India. Rough diamonds mined in South Africa are currently routed through Antwerp or Botswana, adding additional cost to the processors in India.

At present, India directly imports rough diamonds only from Al Rosa, a Russia-based diamond mining company, in small quantity (worth $15 million in 2006) and is looking for direct imports to save cost by 5 to 10 per cent.

"Yes, we are in the process of amending the mining laws that will not only permit Indian companies to source roughs directly, but also to take part in mining activities in South Africa," said South African High Commissioner to India Francis Moloi on the sidelines of 'India Calling 2007' in Mumbai.

"We want to go beyond mining as India, a traditional and inherent trading partner, can play a major role in growing bilateral ties with South Africa," he added. Apart from tourism, South Africa seeks Indian participation in owning mines and setting up beneficiation plants, for which the former is offering electricity at economical rates.

India could also partner South Africa in training and education programmes related to mining, cutting and polishing of diamonds for use in jewellery, said Moloi.

The bilateral trade between the two countries surged to $4.1 billion in 2007 from $2.4 billion in July 2005 and $3.1 billion in 2006. The bilateral trade was was negligible 13 years ago. Moloi projected the trade between the two nations to grow up to $15 billion in the next three years.

Apart from cheap electricity at Rs 1.10-1.15 a unit to industrial houses, Indian companies could play a major role in garments, home and fashion accessories and a host of other segments, where the African nation offered vast opportunities for business, Moloi added.

On the delay in permitting direct diamond sales to India despite several years of strengthening ties, Moloi responded that lack of awareness was the cause.

Highlighting the benefits of owning a mine in South Africa, as Essar and the Tatas have already planned, the high commissioner said the labour cost in South Africa, which is slightly higher than that of India, could be compensated with cheap electricity and economical mining operations.

The South African government is planning to levy a mining tax for the existing miners, mainly the private companies, to end their monopoly. Additionally, the government has asked private miners to commence mining activities immediately on the sites that have already been allotted years before and warned that it might seize the mining licences if they failed to start operations.

Meanwhile, direct participation requires huge investment, which the small Indian companies may not be interested in. But, industrial houses may rope in diamond miners and sell the roughs directly to Indian companies.