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Diamonds

There is no such thing as a standard engagement ring, precisely because it is such a personal thing. But the solitaire diamond ring would likely typify an engagement ring, more than others. And, then, there is no standard price.1 However, to give an idea: R50 000 is the average likely cost of a ring, with a good quality diamond weighing in at approximately 0.80 carat.2 Actually, this is not even a big stone: one carat is only 0.2 gm.3

So consider this: the world’s biggest diamond was discovered at the Premier Mine in Cullinan, just outside Pretoria, on 26 January 1905. It weighed a whopping 3 106.75 carats – or 621.35 grams, about as much as a normal jar of strawberry jam, bottle included. The Cullinan Diamond was cut into several polished gems; a number of these are in the Crown Jewels, part of the Royal Collection held in trust by Queen Elizabeth II.4

Until the 1980’s, South Africa controlled about 90% of the world’s diamond production. We have since fallen to about eighth on the list,5 although our northern neighbour, at Jwaneng, has the world’s largest diamond mine in terms of value produced.6 Obviously, diamonds have been an important part of South Africa’s economy. It is not just because they are a girl’s best friend that the controls in place regarding diamonds are rather tight.

A. Unpolished diamonds

The Diamonds Act 1986 defines ‘unpolished diamonds’ and the meaning applies to virtually all forms of the stone except as you see it in the jeweller’s window. So, it covers their natural state, in a semi-worked state, broken or crushed, dust, and even powder.

  1. It is an offence to place any unpolished diamond in the possession of any person, or on his premises, or on his vessel, vehicle or aircraft with the intent that he be charged with an offence.7

  2. If you find any unpolished diamond, and you do not have a permit to prospect, dig or mine for diamonds, you must immediately take it to the nearest police station. It is an offence not to do this.8

  3. It is against the law to have in your possession any unpolished diamond, unless:9
    • you are a producer and you have recovered that diamond from a mine in accordance with a permit, or a right under the Mineral and Petroleum Resources Development Act 2002;10
    • you manufactured that diamond, if it is synthetic;11
    • you hold a licence – whether as a dealer, beneficiator,12 a trading house, or researcher;13
    • you have a permit in respect of that diamond;14
    • it is following a written agreement with one of the abovementioned people;15 or
    • if you have otherwise come into possession of the diamond in a lawful manner.16

  4. Even if you are licensed, it is an offence to receive or purchase any unpolished diamond from someone who is not in lawful possession of that diamond.17

  5. It is an offence to crush, or set any unpolished diamond in any article unless you are:18
    • a licensed beneficiator or researcher;19
    • acting in the course of employment by a beneficiator or researcher;20 or
    • authorised in writing by the Regulator.21 22

  6. Except as approved by the Regulator, no beneficiator or researcher may polish any diamond, or crush any unpolished diamond, or set one in an article elsewhere than on his business premises.23 It is an offence to do otherwise.24

  7. No person may sell, offer for sale, exchange or deliver for trade any unpolished diamond unless:25
    • he is a producer – that is, a person entitled to recover diamonds under a permit from the Minister;26
    • it is a synthetic diamond he has manufactured;27 or
    • he is a holder of a dealer’s licence, or a specific permit.28
  8. It is illegal to purchase or deal in any unpolished diamond unless you are:29
    • a licensed dealer or beneficiator;
    • the holder of a trading house licence;
    • a licensed researcher; or
    • the holder of a permit to sell, export or import unpolished diamonds.

  9. It is an offence to receive, or purchase any unpolished diamond for any purpose other than the activities authorised by your licence.30

  10. You may not export any unpolished diamond, except if you are:31
    • a producer;32
    • a licensed dealer;33
    • the holder of a temporary buyer’s permit,34 or a permit to export unpolished diamonds;35
    • a dealer (the holder of a diamond dealer’s licence, which entitles the holder to carry on business as a buyer, seller, importer or exporter of unpolished diamonds);36
    • the holder of a permit entitling a person to sell, export or import an unpolished diamond on prescribed conditions;37
    • the holder of a temporary diamond buyer’s permit;38 or
    • it is a synthetic diamond you have manufactured.39
  11. It is in contravention with the Act to assist the viewing, purchasing or selling of unpolished diamonds if you are not licensed, except if it is at a diamond exchange and export centre.40

B. Polished diamonds

‘Polish’ means to saw, cut, divide, facet or alter a diamond.

  1. It is an offence to polish any diamond, or even erect or operate any machine designed or adapted for polishing diamonds, unless you are:41
    • a licensed beneficiator or researcher;
    • acting in the course of employment with a beneficiator or researcher; or
    • authorised in writing by the Regulator.

C. Trading, export and import

  1. The Minister is empowered to make regulations controlling certain aspects of the trade in unpolished diamonds. These include:42
    • the maximum value which can, in a stated period, be disposed of or exported – whether at all, or even by a specific producer;43
    • the manner in which the value of all, or a class of unpolished diamonds, is to be determined;44
    • prohibitions on selling at a lower price;45
    • prohibitions on who may purchase or export unpolished diamonds;46
    • declarations on the invalidity of any agreement to dispose of, or deliver unpolished diamonds.47

    These directions are published in the Government Gazette. It is an offence not to comply with them.48

  2. It is an offence to use any premises to facilitate local buying and selling of unpolished diamonds (that is, a ‘diamond trading house’) unless you hold a licence for, and the premises are registered as, a diamond trading house.49

  3. Unpolished diamonds may only be sold on:
    • the business premises of a licensed dealer, or diamond trading house;50
    • the premises of any diamond exchange and export centre established by the Regulator;51
    • the premises of the State Diamond Trader;52 or
    • such other premises as the Regulator may approve.53

    If an unpolished diamond is sold anywhere else, both the seller and the person who purchases or receives the unpolished diamond each commit an offence.54

  4. Sales representatives and buyers employed by companies must be registered with the Regulator as an ‘authorised representative’. There is quite a process to obtain this registration, but be warned: it is an offence to sell or purchase any unpolished diamond, on behalf of a company, if you are not registered.55

  5. If a licensed dealer, beneficiator, researcher or diamond trading house receives or purchases any unpolished diamond, he must forthwith complete (in duplicate) a note of the receipt, or purchase, on the prescribed form.56 It is an offence not to do this.57

  6. It is also an offence not to give the original note to the person who delivered, or sold the unpolished diamond; and, to retain a copy for a period of at least five years.58

  7. Every producer, manufacturer of synthetic diamonds, dealer or diamond beneficiator shall keep a register. Specified details must be entered regarding transactions or occurrences in respect of unpolished diamonds, and polished synthetic diamonds. If you are a producer, this entry must be made within 24 hours; in the case of any other person, within seven days. It is an offence not to do any of this.59

  8. It is also an offence not to retain the register for at least five years after the last entry.60

  9. It is unlawful to export, or import, any unpolished diamond unless:
    • that diamond has been registered, and released for export or import as the case may be;61
    • the exporter, or the importer is registered in terms of the Diamond Export Levy Act 2007.62

  10. With three months after an unpolished diamond has been released for export, proof from the Reserve Bank that the sale proceeds have been repatriated into the country must be lodged with the Regulator. If the exporter fails to do this, he commits an offence.63

  11. The export of any polished diamond, whether set in jewellery or not, is forbidden unless that diamond has been registered, and released, for export.64

D. Licences

There are several different kinds of licences that may be granted by the Regulator. The licence may have conditions attached, and may be limited by time periods as well.

  1. If you have been granted any licence, permit or certificate under the Diamonds Act, you commit an offence by failing to adhere to every one of their conditions.65

  2. The Regulator may at any time cancel, vary or impose any conditions under which a licence is granted.66 He can request that you return the licence so that such changes can be endorsed.67 If you fail to comply with this request, it is an offence.68

  3. It is against the law to dispose of a licence, or allow any other person to acquire any interest in your licence, except if you are a natural person and have the approval of the Regulator to do so.69

  4. It is an offence to acquire a controlling interest in any company after it has obtained a licence, without the prior written approval of the Regulator.70

  5. If a licensee is one type of company, and is converted into another type, it must submit its licence and a certified copy of the certificate of incorporation to the Regulator within 30 days of the conversion. It is an offence to fail to do so.71

  6. If an activity authorised by a licence has stopped, or the licence is suspended or cancelled, it must be returned to the Regulator within 30 days. It is an offence to fail to do so.72

E. The Regulator

The Regulator73 is the big daddy in the diamond industry and has lots of powers. His function is to:

  1. The Regulator may direct any person to furnish information as he considers necessary for his functions under the Act. He may also direct any person to submit any register, book or document.75 It is an offence to ignore any such direction.76

  2. The Regulator may convene an inquiry into anything to which the Diamonds Act relates. For purposes of the inquiry, he can summon any person to give information, produce documents, be interrogated, and so forth.77

    It is an offence, if summoned:

    • not to attend the inquiry at the time and place specified, without good cause;78
    • not to remain in attendance until excused;79
    • to refuse to be sworn, or to make an affirmation as a witness;80
    • not to answer fully and satisfactorily any question lawfully put to him;81 and
    • to fail to produce any register, book, document or thing required by the summons.82

  3. It is, anyway, also an offence to:

    • obstruct any inspector or police official in the performance of functions under the Act;83
    • refuse or fail to comply with any requirements or request made by an inspector or police official;84
    • refuse or fail to answer to any question put by an inspector or police official;85 and
    • furnish information which is false or misleading to any inspector or police official.86

F. Fraudulent conduct

  1. It is an offence to furnish information, or make a statement which is false or misleading, in connection with the registration of any diamond for export.87

  2. For that matter, this applies to any application in terms of the Act.88

  3. Also, any person who fraudulently alters or destroys any register or document commits an offence.89

  4. Any person who, with intent to defraud, sells any synthetic diamond or enhanced diamond without disclosing this quality commits an offence.90

  5. Any person who falsely declares an unpolished diamond as a synthetic diamond, or as an enhanced diamond, commits an offence.91

  6. It is an offence to falsely claim or pretend:

    • to have a licence or permit under the Act;92
    • to be registered as an authorised representative;93
    • to be an inspector.94

G. Employer’s liability

  1. Employers and principals take note: if your employee, or agent, commits an offence because of something he did (or did not do) acting in the course and scope of his employment, you may also be convicted of the offence, unless you prove:95
    • you did not permit or conspire in such conduct;96
    • you took all reasonable action (just ‘forbidding’ it does not count) to prevent the conduct;97 and
    • the conduct in question was not part of the job description.98

  1. Many factors affect the price of a diamond – the 4 C’s actually: colour, clarity, carat and cut. ↩

  2. See, for example: http://blog.poggenpoel.com/engagement-ring-prices-a-guide – ‘Engagement Ring Prices – A Guide’. ↩

  3. That’s the weight of an average pea – Wikipedia – ‘Pea’; and about only 6 mm in diameter – www.lumeradiamonds.com . ↩

  4. Wikipedia – ‘Cullinan Diamond’. https://en.wikipedia.org/wiki/Cullinan_Diamond. ↩

  5. www.ehudlaniado.com – ‘World’s Top Diamond – Producing Countries’. ↩

  6. http://www.paulzimnisky.com/global-rough-diamond-production-estimated-to-hit-over-135m-carats-in-2015 – ‘Global Rough Diamond Production Estimated to Hit over 135 m carats in 2015’. ↩

  7. Section 82(b). ↩

  8. Section 82(d) read with section 25(1). ↩

  9. Section 82(a) read with section 18. ↩

  10. Section 18(a). ↩

  11. Section 18(b). ↩

  12. To ‘beneficiate’ means to polish, or set a diamond in any article – tool, jewellery, anything. ↩

  13. Section 18(c). ↩

  14. Section 18(d). ↩

  15. Section 18(e). ↩

  16. Section 18(f). ↩

  17. Section 82(a) read with section 20. ↩

  18. Section 82(c) read with section 22. ↩

  19. Section 22(a). ↩

  20. Section 22(b). ↩

  21. The South African Diamond and Precious Metals Regulator. ↩

  22. Section 22(c). ↩

  23. Section 50. ↩

  24. Section 83(b). ↩

  25. Section 82(a) read with section 19. ↩

  26. Section 19(1)(a). ↩

  27. Section 19(1)(b). ↩

  28. Section 19(1)(c) and section 19 (1)(d). ↩

  29. Section 20 read with section 21 read with section 26. ↩

  30. Section 82(a) read with section 21. ↩

  31. Section 82(c) read with section 24. ↩

  32. Section 24(a). ↩

  33. Section 24(c). ↩

  34. Section 24(d) read with section 26(e). ↩

  35. Section 24(d) read with section 26(h). ↩

  36. Section 24(c) read with section 26(a). ↩

  37. Section 24(d) read with section 26(h). ↩

  38. Section 24(d) read with section 26(e). ↩

  39. Section 24(b). ↩

  40. Section 20A. ↩

  41. Section 82(c) read with section 22 and section 23. ↩

  42. Section 77. ↩

  43. Section 77(1)(a). ↩

  44. Section 77(1)(b). ↩

  45. Section 77(1)(b). ↩

  46. Section 77(1)(c). ↩

  47. Section 77(1)(d). ↩

  48. Section 83(a). ↩

  49. Section 83(b) read with section 44. ↩

  50. Section 48(1)(a) and (b). ↩

  51. Section 48(1)(bA). ↩

  52. Section 48(1)(bB). ↩

  53. Section 48(1)(d). ↩

  54. Section 83(b) and (d). ↩

  55. Section 83(b) read with section 52. ↩

  56. Section 56(1). ↩

  57. Section 83(d). ↩

  58. Section 83(d) read with section 56(2). ↩

  59. Section 83(d) read with section 57. ↩

  60. Section 83(d) read with section 57(3). ↩

  61. Section 84(a) read with section 60(1)(a) and 60(2)(a). ↩

  62. Section 84(a) read with section 60(1)(b) and 60(2)(b). ↩

  63. Section 84(a) read with section 69A. ↩

  64. Section 84(b) read with section 70. ↩

  65. Section 83(c). ↩

  66. Section 30(2)(a) and (b). ↩

  67. Section 30(3) and (4). ↩

  68. Section 83(e). ↩

  69. Section 83(b) read with section 33. ↩

  70. Section 83(b) read with section 35(1). ↩

  71. Section 83(d) read with section 36(1). ↩

  72. Section 83(d) read with section 38(2). ↩

  73. Actually, the Regulator is a juristic person – that is, a corporation with a board. It has not less than 14 members, a chairperson and so on. ↩

  74. This is called the Kimberley Process Certification Scheme, agreed to in 2000 by the United Nations General Assembly. ↩

  75. Section 78(1). ↩

  76. Section 85(a). ↩

  77. Section 79. ↩

  78. Section 85(b)(i). ↩

  79. Section 85(b)(ii). ↩

  80. Section 85(c). ↩

  81. Section 85(d)(i) read with section 79(2)(c). ↩

  82. Section 85(d)(ii) read with section 79(2)(c). ↩

  83. Section 85(e). ↩

  84. Section 85(f). ↩

  85. Section 85(g). ↩

  86. Section 85(h). ↩

  87. Section 84(c). ↩

  88. Section 86(a). ↩

  89. Section 86(b). ↩

  90. Section 86(b)(A). ↩

  91. Section 86(b)(A). ↩

  92. Section 86(c)(i). ↩

  93. Section 86(c)(ii). ↩

  94. Section 86(c)(iii). ↩

  95. Section 90(1). ↩

  96. Section 90(1)(a). ↩

  97. Section 90(1)(b) read with Section 90(2). ↩

  98. Section 90(1)(c). ↩

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