Angola: Industrial diamond mining continues to gain ground over the traditional sector.

1 December 2008

Luanda, Angola, 01 Dec – Industrial diamond mining in Angola continues to gain ground over the traditional sector, in accordance with government plans, yet an abrupt substitution could affect Angolan production.

The warning comes from the Canada Africa Partnership (CAP) in its latest report on Angolan diamond production, at a time when a government commission, CIPRED, is looking at ways to drastically reduce traditional mining.

“Despite its strong performance and significant economic contribution, the traditional sector is seen as an undesirable anomaly by Angolan authorities” and has been losing stature in terms of total Angolan output, said CAP.

Quoting statistics from the state-controlled Endiama, CAP said that the percentage of traditional production of the total volume has gone from 17 percent in 2005 to 11 percent in 2007, while the industrial sector has grown from 83 percent to 89 percent, 8.599 million carats, in 2007.

Last year, the industrial sector represented 74 percent of the total (8 more percentage points than in 2005), US$935.84 million, while the traditional sector saw its share fall from 34 percent in 2005 to 26 percent in 2007.

Total Angolan production reached US$1.272 billion, according to the same source.

Given that traditional diamond mining has a market value substantially higher than industrial mining, an effective “stifling” of traditional methods could represent a marked fall in the value of production, perhaps by as much as US$ 300 million, according to CAP.
In the twelve month period to April this year, around 20 new joint ventures were set up for diamond exploration in Angola, representing an investment of over US$ 100 million.

“Investment and research activity in Angolan diamond mines continues apace, with no apparent lack of interested overseas companies,” says the organization’s annual report.

According to the organization, the regular participation of Angolan political agents in the capital of these joint ventures, which are granted certain concessions for the exploration of precious stones, is not only still happening, but has become more widespread.

“The percentage given to ‘insiders’ seems to be growing. In previous years, it was between 10 and 15 percent of the joint venture. In the 20 contracts signed up to April 2008, this percentage rose to between 25 and 40 percent of the project,” says the organization.

While the big investors are maintaining the size of their stake, at around 35 to 45 percent, now the government controlled Endiama has stakes lower than 28 percent, and in one case as low as 13 percent.

The annual report also takes into account a meeting that took place in May this year between Luandan authorities and some non-government organizations from the sector, including CAP, seen as a “promising sign” that Luanda “is starting to see the benefits of confronting its critics” within the sector, despite previous joint initiatives having been unsuccessful.

In 2007, Angola was the third biggest African diamond producer, behind Botswana and South Africa.

Angolan production is currently worth US$ 1.27 billion, 10.5 percent of the world total, according to Kimberley Process statistical data. (macauhub)