Sightholders Pay DTC $50 Million in Services Fee
January 25, 06
Yesterday was the last day for Diamond Trading Company (DTC) Sightholders to turn in their first payment for the Value Added Services (VAS) they received from the DTC during the second half of 2005. Sources close to De Beers estimate the total value of the payment at around $50 million.
VAS consists of two main components: Core Services and Growth Services. Core Services are those the DTC dubs “supply planning tools”. They include what could be considered the basic elements of DTC’s services to its clients, the Sightholders:
- Two and half years of supply,
- The Intention to Offer (ITO),
- Consistency of boxes,
- The client extranet,
- A dedicated account management service,
- And a third party verification of Sightholder profiles.
This package is not elective and is part of the cost of being a Sightholder.
Growth Services are tools provided for business growth and development. They include seminars, workshops and generic advertising material at client requests. This package is elective and the charges will probably be per item. To date Sightholders were not charged for the Growth Services.
The VAS charge is a fee for the total package of services. The fee is proportionate to the size of the Sight, starting at a flat fee of $180,000 for the first $15 million of annual supply, and climbing up in brackets of $15, $25, $50 and $100 million, up to $400 million. Fees are set on a sliding scale, from 1.9 percent for the lowest bracket, down to 1.6 percent for the highest bracket.
Sightholders were not happy with this fee, calling it a tax when it was introduced by Gareth Penny in a presentation last March.
The total due is the sum of the flat fee plus all the bracket fees up to the bracket of rough diamond supplies the Sightholder received during the year.
For instance, the fee for an annual Sight of $45 million will be $742,500. This is how it is calculated:
| Base fee for the first $15 million | $180,000 |
| 1.9% for the first bracket ($15-$30 million) | $285,000 |
| 1.85% second bracket ($30-$50 million) for the remaining $15 million | $277,500 |
| Total | $742,500 |
The total fee in this example comes out as 1.65 percent of a $45 million annual Sight.
According to IDEX Online estimates, DTC sold over $3.275 billion worth of rough diamonds since VAS went into effect in the second half of 2005.