South Africa: De Beers Denies It Skipped Duty of R1bn

(Business Day)
Mining giant De Beers yesterday vigorously defended itself in Parliament against suggestions that it evaded paying about R1bn in export duty by allegedly exporting a stockpile of rough diamonds to London in 1992 without the necessary authorisation. The company's directors were called before Parliament's standing committee on public accounts (Scopa) yesterday to answer allegations that it exported 20-million carats of uncut diamonds worth $822m without an exemption certificate just before the 1994 democratic elections. With an export duty of 15%, this would have entailed a liability to the state of about $123m plus interest. In fact, De Beers paid no tax on its exports. The committee has for several years been trying to resolve the issue, but it succeeded in getting De Beers to submit relevant documents - such as correspondence and certificates - only when company representatives were called to appear before it yesterday. Scopa chairman Themba Godi said the committee was "sceptical" as it had taken De Beers such a long time to provide the relevant documents. African National Congress (ANC) MP Vincent Smith, who chaired the meeting, said the committee believed there was something "untoward" in the exports. It would not let go of the matter and would finally present a report to Parliament on it, he said. At issue is whether an "agreement" reached between De Beers and the South African Diamond Board (SADB) in February 1993 was legally binding. Legal opinion obtained by the auditor-general's office suggested the agreement was not legal because it was not signed by either party. The board's resolution noting the agreement was also not signed. However, De Beers commercial director Bruce Cleaver said the company's view was that the 1992 "arrangements" - including a letter by the SADB's then CEO and the company's subsequent written confirmation of it - constituted a legal, valid agreement. This was despite the fact that the annex to a CEO's letter containing the terms and conditions of the agreement was not signed by either party. Lengthy negotiations preceded the deal, which changed the way diamonds were exported to London. A quantity was re-imported for local cutters. The agreement had been reviewed twice before being amended in 1998. Also in dispute was the quantity of diamonds exported in 1992. Cleaver disputed the figures of the minerals and energy department. De Beers figures showed it had diamond stock of 1,6-million carats in that year. Cleaver insisted it was a "misconception" to believe the corporation had exported a huge stockpile which it had built up ahead of the elections. But the board, an executive in the auditor-general's office, Wallie van Heerden, and minerals and energy director-general Sandile Nogxina all said De Beers had exported a stockpile in 1992. Cleaver insisted there were no material spikes in the amount of diamonds exported in 1992 compared with previous and subsequent years. He said De Beers had comprehensive exemption certificates to prove this. Minerals and energy department figures showed a total of R1,7bn worth of diamond exports in 1991, R4,7bn in 1992 and R1,8bn in 1993. De Beers was responsible for the bulk of them. If 20-million carats were exported, this would be double SA's annual production of 8,4-million carats in1992. It would mean De Beers had indeed exported a stockpile. De Beers and Van Heerden agreed to meet to discuss the export figures.