Constitutional Court narrows free market for small diamond producers

AfriBusiness is disappointed in a Constitutional Court ruling that narrows the free market for small diamond producers in South Africa by allowing the Department of Mineral Resources to enforce section 20A of the Diamonds Amendment Act, 2005 (Act No 30 of 2005). The section prohibits any unlicensed person from assisting licensed diamond producers in the viewing, selling or purchasing of unpolished diamonds in any other place than a diamond exchange and export centre.

“Previously, producers could sell diamonds at so-called tender houses. This allowed small diamond producers to meet with larger international buyers who send experts to these houses to assist producers in selling their unpolished diamonds for market-related prices. Section 20A halted this practice completely,” says Armand Greyling, Law and Policy Analyst at AfriBusiness.

The matter was pursued by the South African Diamond Producers Organisation (SADPO) on behalf of its members and supported by AfriBusiness. The parties argued that section 20A was an infringement on small diamond producers’ constitutional rights to property (section 25) and freedom of trade and occupation (section 22) in that they were not allowed to freely sell unpolished diamonds to the highest buyer. An order in favour of SADPO was made in the North Gauteng High Court. However, following an appeal, the Constitutional Court overruled the High Court’s finding and declared section 20A a means of regulating the diamond producing sector in a legal and valid manner.

“This is a dire blow to the free market. Government has succeeded in overregulating the diamond sector to such an extent that we may see a decrease in small diamond producers. We are seeing a continued onslaught by Government in various sectors to overregulate every aspect of business,” Greyling concludes.

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