"Blood" diamonds have long been a problem for Angola, but now that the government controls mining areas, the real issue is increasing investment
Angola currently ranks sixth amongst the world's diamond producers and, in terms of gem quality, mines some of the finest diamonds on earth. It has the potential to climb even higher now that the country's political and economic landscapes have dramatically altered.
The most significant change in terms of diamond production is the loss of UNITA's grip on mining areas. The United Nations estimates that UNITA smuggled about $100 million worth of diamonds out of Angola in 2000; now the government is controlling a resource that had been used principally to fuel rebel activity.
The imposition of tough U.N. sanctions on "conflict" or "blood" diamonds has also given the government the opportunity to strengthen its control of the sector. Certificates of origin are now required to verify that gems have been mined only in areas under government control.
According to Kramash Mordechai of the Angolan Selling Corporation (ASCORP), the company now handling all official diamond marketing activities in Angola, "Blood diamonds are not significant in Angola anymore because UNITA no longer controls any diamond producing areas."
The end of the "blood" taint, together with a recent radical overhaul of state-run diamond bodies has breathed new life into the industry. In early 2000, the government completely restructured its diamond sector with the role of the monopolistic state enterprise, the Empresa Nacional de Diamantes de Angola (ENDIAMA) reduced to that of a prospecting company.
In its place, the government set up a new streamlined state diamond company, the Sociedade de Comercializaao de Diamantes (SODIAM), with a 51 percent stake in the newly created ASCORP. The remaining 49 percent stake in ASCORP was allocated to two foreign companies, one run by Russian-born Israeli businessman Lev Leviev, who already plays a central role in Angola's diamond industry. De Beers Consolidated Mines, the world's leading diamond company, was already out of the picture, having lost exclusive marketing rights to Angola's diamonds in 1995.
Now the challenge is to expand the local skill base. According to SODIAM Managing Director Manuel Calado, "Our aim is not only to export rough diamonds, but to start cutting and polishing them here in Angola. That is why we decided to invite foreign partners to join ASCORP – we need their expertise."
Government revenue from diamonds has increased significantly since ASCORP was set up. Diamond revenue has lept from $10 million in 1998 to $739 million in 2000, with ASCORP buying approximately $1.1 million worth of diamonds per day in 2000.
Although the state diamond bodies have been restructured and are working more efficiently, the government faces a number of other challenges. "We must endeavor to impose taxes on all diamonds produced within the country, including those mined illegally," says Deputy Minister for Geology and Mines, Antonio Sumbula. "We must reinvest diamond revenues into local development projects, thus improving life for Angola's impoverished population."
However, it is not only rebels who mine diamonds illegally. Tens of thousands of garimpeiros or unlicensed miners exist in the country, panning for alluvial diamonds on a small scale. Apart from the many Angolans engaged in illicit mining, at least 350,000 foreigners are involved. The government hopes its new certification system will help to minimize the impact of these unlicensed miners.
The authorities are also attempting to clamp down on diamond trafficking. "The government has tightened the controls at the airport so it is now much more difficult to come to Angola with cash to buy diamonds and then leave the country with your pocket full of gem stones. People are scared of doing this, so hopefully more sales will be made directly to ASCORP," says Kramash Mordechai.
Kimberlite pipe dream
The diamonds currently being exploited in Angola only represent the tip of the iceberg. Most are alluvial diamonds produced in the northeastern Lunda provinces. However, some 300 diamondiferous kimberlite pipes have been identified in the country, several of which could be mined profitably. Kimberlite pipes are diamond rich geological formations similar to those found at Kimberley in South Africa.
At present, only one kimberlite mine is active – that of Catoca in the province of Lunda Sul. The Catoca mine, which entered its initial phase of production in 1998, has one of the largest kimberlite pipes in the world. Catoca is a joint venture between the Angolan government, with a 32.8 percent stake; the Russian company Alrosa, also with 32.8 percent, Brazil's Odebrecht Mining Services, with 16.4 percent; and Lev Leviev's Daumonty, with 18 percent. The Catoca mine produced about 1.2 million carats in 1999, but following the installment of new equipment in 2001, it is expected that output will increase to over two million carats a year, worth about $165 million.
Other companies also have mining concessions in the Lundas. One of the largest is DiamondWorks, a Canadian company which operates in Lunda Norte. It has controlling interests in three diamond concessions, including the productive Luo area. DiamondWorks currently exploits alluvial diamonds, but is exploring the possibility of mining Luo's Camatchia and Camagico kimberlite pipes, estimated to be two of the largest in the world.
The diamonds are clearly there, and they are no longer compromised by conflict. But now the pressing need is for investment and expertise so that the country can fully benefit from one of the hardest currencies of all.
