By Ronit Scheyer

The South African jewelry industry is facing a threat to its viability. In an effort to drive beneficiation and promote the development of enterprise, the government has in the past year tightened the requirements for jewelry manufacturers applying for a business permit.

The permit is issued by the government, through the Department of Minerals and Energy, to those who purchase and work with precious metals, such as jewelry manufacturers, dentists and artists, who are required to hold an up-to-date license in order to do business. The permits must be periodically renewed – in the case of this year, by June 2009.

Although the permit, which is unique among countries with gold jewelry manufacturing centers, has been in existence for some time, the qualifications for receiving or renewing a permit were recently tightened by the South African Diamond and Precious Metals Regulator (SADPMR). Among the new qualifications is a requirement that about 26 percent of a business must be owned by a Black Economic Empowerment (BEE) partner and that a five-year business plan must be submitted.

For some businesses, like a new R100 million ($13 million) jewelry manufacturing facility recently established in Kimberley, whose development was enabled in part by R14.5 million ($1.88 million) in development finance from the Industrial Development Corporation, such requirements are easily fulfilled. The facility – Gold Chain Technology – is a joint venture between Italian-owned Q-Quality International, a Northern Cape community trust and BEE investment company Solandra Investments. This is also just the type of venture the requirements aim to encourage, thanks to its BEE partner and its plan to train 460 local employees in jewelry manufacturing and design within five years.

There is, however, another side to the story. For smaller companies, those with one or two people – a single individual or a father and son enterprise, for example – the qualifications to receive a permit have become prohibitive. “The new regulations have made it impossible for a one-man jeweler to get a permit,” said one independent jewelry manufacturer who asked to remain anonymous.

He explained that the new requirements would prevent him from renewing his permit and thus put him out of business. He spoke with an attorney who concluded that what the SADPMR is requiring is in fact against the law. The jeweler then approached the Regulator’s office with the information and was told that this legal verdict was incorrect.

The Regulator’s office, according to the independent, then told him not to apply for the permit, because he didn’t qualify and wouldn’t be issued one. This particular jewelry manufacturer has been working in his current, independent, capacity for ten years, and the reply effectively puts him, together with hundreds if not thousands of others, out of business.

Jewelry industry bodies, along with some independent members in this mostly white business sector in South Africa are calling on the government to revise the requirements for licensing, in order to ensure that it doesn’t do more harm than good in its enthusiasm to address issues of enterprise development.

For example, South African Diamond Board President Louis Selekane confirmed that the Jewellery Council of South Africa, which declined to comment on record, has submitted a proposal both to the policy makers and the board of directors of the SADPMR. At the government level, the SADPMR has been ordered to carry out a complete review of the process – specifically of the implementation of the mining charter and the BEE requirements, although as of October, nothing had apparently been changed. .

“We continue receiving applications for jewelry manufacturers, refining, beneficiation, import and export permits of precious metals. We have so far thus not refused any applications,” Selekane commented. “The SADPMR is only mandated to regulate and promote the beneficiation/value add of diamonds and precious metals in South Africa, in accordance with the existing policies and legislation as promulgated.”

“We are confident that the Regulator will help and guide the industry to comply with the new legislative requirements,” Selekane concluded.

In the meantime, some in the industry are submitting their applications, hoping for a miracle, while many have no choice but to wait things out.