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Unlicensed experts not allowed to assist in trade of diamonds‚ Constitutional Court rules

Gavel
Gavel

The Constitutional Court has declined to confirm a high court order which declared that a section of the Diamond Act was unconstitutional.

Section 20A‚ which was put in place in 2007‚ stated that no licensee may be assisted by a non-licensee during the viewing‚ purchasing or selling of unpolished diamonds at any place where unpolished diamonds are offered for sale‚ except at diamond exchange and export centres (DEEC).

 Before the insertion of the section into the Act‚ a number of South African Diamond Producers Organisation (SADPO) members had developed a mode of operation at their licensed business premises.

Parcels of unpolished diamonds from local dealers were offered on a tender basis to other South African dealers.

Non-licensed “experts”‚ who attended on behalf of prospective foreign buyers‚ “assisted” the licensed purchasers.

Section 20A put an end to this practice.

Aggrieved by this‚ the organisation approached the high court in Pretoria to declare the section unconstitutional.

The high court ruled in favour of the organisation.

However‚ the Department of Minerals and Energy and the South African Diamond‚ Minerals and Precious Metals Regulator appealed to the Constitutional Court.

They said the purposes of section 20A were to tighten the regulation of the diamond trade and to eliminate illegal activities that were occurring in the diamond trade.

However‚ the organisation stated that producers and dealers were deprived of 30% of the market value of diamonds they sell.

This was because Section 20A prohibited a key part of the price-forming mechanism; the unlicensed expert assistance.

 Without this assistance‚ producers and dealers were unable to obtain the prices they were previously able to obtain‚ and suffered a loss of 30% compared to the prices they were previously able to obtain‚ the organisation argued.

In a unanimous judgment by Justice Sisi Khampepe‚ the Constitutional Court said nothing in the way of empirical evidence for this alleged drop in price was included in the papers.

 She said the more involvement unlicensed persons were permitted to have in the process of buying‚ selling and exporting unpolished diamonds‚ the greater the risk of illegal transactions going unnoticed.

 “It is plausible that it would be easier for the state to control and monitor diamond trading if all persons who engage in the trading process outside the DEECs are at least known to the state through a licensing process.”

 

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