CAPE TOWN — The number of diamond cutters and polishers had plunged from about 3,000 in 2008 to just around 300 due to mines producing fewer rough gems as the world financial crisis had caused a dip in demand, South African Diamond and Precious Metals Regulator GM Simon Sikhosana said this week.

He told a meeting of Parliament’s mineral resources committee on Tuesday that SA’s diamond output had plunged from more than 15-million carats in 2008 to 9-million last year and there was a possibility of a further drop. "The (financial) recession has caused the industry to scale down (on output) and obviously the cutting and polishing industry has to suffer. We (SA) can’t have too many cutters and polishers."

Mr Sikhosana said that if the producers could ramp up production of rough diamonds then there would be more cutters and polishers.

By law all South African diamond miners have to make available 10% of their top carat diamonds to the State Diamond Trader, which may then sell them to other dealers and traders through a tender process. The main aim of the arrangement is to encourage emerging participants in the sector. "Even the State Diamond Trader has limited access to production because 10% of less is less," he said.

Mr Sikhosana said the pool of diamonds that the regulator sold through a tender process had shrunk as De Beers’ — the world’s largest diamond miner — contribution to the pool had dropped to less than 50%.

"The country is now producing less diamonds than it used to and now has to import them," he said.

Mr Sikhosana said the production shrinkage would hinder the transformation of the local diamond sector because it pushed up prices, and as a result larger buyers continuously outbid the smaller ones.

The beneficiation of minerals produced in SA is one of the central economic plans of the government, with Gauteng having expressed an intention to run beneficiation hubs.

However, committee chairman Frederick Gona said events in the diamond sector were unique to it. "The diamond business is different to all the other minerals and so it would not affect the (overall) minerals beneficiation," he said.

Democratic Alliance MP Hendrick Schmidt accused the regulator of not helping transformation in the sector.

"We have a reduction in diamond cutters and polishers. We should have not less, but at least the same number in a transformed industry," he said.

President of the World Federation of Diamond Traders Ernie Blom agreed that the number of cutters and polishers had fallen drastically.

Mr Blom said the local industry was hobbled by structural problems such as the high cost of cutting and polishing, and red tape, including the charging of VAT on the process when other countries did not.

"In SA it costs between $65 and $80 per carat to cut and polish. In India it is $15 and in China it is $25," Mr Blom said.

De Beers spokesman Tom Tweedie said employment had fallen in other diamond centres as well.

"The number of cutters and polishers in Israel has plunged from 10,000 to just more than 1,000 and in Belgium there are hardly any cutters and polishers left," he said.