Underpricing costs Angola’s diamond gem millions

13 June 2018 | Business

The current marketing process, where diamonds are sold to 'preferential buyers', destroys the value for the producer and the government. Catoca presentation

Stephen Eisenhammer – Angola's Catoca, the world's fifth largest diamond mine, estimates it lost US$464 million over the past six years due to a government-imposed marketing system that obliged it to sell production below international prices, a company presentation seen by Reuters showed.

The figure was presented during a private meeting in March between the diamond industry and the minister for natural resources and oil, Diamantino Azevedo.

President João Lourenço has vowed to reform Angola's secretive diamond industry in order to increase production and improve returns as Africa’s second largest oil producer looks to diversify its economy.

Despite being the world's fifth-largest producer of diamonds, major international miners have largely shunned Angola due to unattractive investment terms.

All production in Angola must be sold through state-owned diamond trading company Sodiam, which makes the stones available to buyers of its choosing.

‘Preferential buyers’

Two industry sources with knowledge of the matter have told Reuters that under the previous government of Jose Eduardo dos Santos these "preferential buyers" were often politically connected and able to negotiate prices below fair value.

Producers are not able to sell their diamonds independently.

"The current marketing process, where diamonds are sold to 'preferential buyers', destroys the value for the producer (less revenue) and the government (less tax)," the presentation dated March 16 said.

Angola's state diamond company Endiama, of which Sodiam is a subsidiary, did not respond to telephone and email requests for comment.

According to the presentation, diamonds from Catoca were on average sold for 24% below market prices over the last six years up to and including 2017.

A spokesman for the ministry of natural resources and oil confirmed the presentation had been made to the minister.

"The minister declared the necessity to find a more balanced model in which everyone wins and the producers are not the most impaired," he said in an emailed response.

The spokesman declined to comment on allegations that preferred buyers were often politically connected individuals.

Shareholders

Russia's Alrosa and Angola's state diamond company Endiama each own 41% of Catoca, which produces three quarters of all Angola's diamonds. LL International Holding B.V. owns 18%.

Alrosa did not immediately respond to a request for comment. Reuters was unable to reach LL International Holding B.V.

"It does not stimulate producers to increase their production or invest in exploration," the presentation adds of the marketing system.

Last week, on a visit to the diamond trading city of Antwerp in Belgium, Lourenço said Angola would shortly unveil a new business framework for the sector that would help to attract investment and overhaul the current marketing arrangement.

Since taking power in September, Lourenço has moved to open up sub-Saharan Africa’s third largest economy, pushing a new investment law through parliament and introducing attractive new terms for the oil and gas industry.

Much of the country's diamond prospects remain under-explored due to 27 years of civil war and a closed, difficult business environment since fighting ended in 2002. – Nampa/Reuters

Similar News

 

NBL concludes wage agreement

12 hours ago | Business

Namibia Breweries Limited (NBL) – a subsidiary of the Ohlthaver & List (O&L) Group - successfully concluded its wage negotiations with the Shop Steward Committee...

Company news in brief

12 hours ago | Business

Old Mutual to sell Nedbank sharesSouth Africa’s Old Mutual Ltd said on Wednesday it would sell around 5.5 million shares in Nedbank Group Ltd to...

Ghana positive about Air Namibia Accra-London route

1 day - 18 October 2018 | Business

Air Namibia could introduce a scheduled flight from Accra, Ghana to London as from early 2019 once an agreement between the two countries has been...

Otjikoto remains a B2Gold heavyweight

2 days ago - 17 October 2018 | Business

Jo-Maré Duddy – The Otjikoto gold mine, majority-owned by B2Gold Corp, was the third biggest contributor to the Vancouver-based miner’s total production for the first...

Company news in brief

2 days ago - 17 October 2018 | Business

Pick n Pay H1 profit jumpsSouth African supermarket chain Pick n Pay Stores yesterday said half-year profit before tax jumped 19.1% as price cuts attracted...

Mutorwa reinstates Gawanas-Vugs

2 days ago - 16 October 2018 | Business

Transport minister John Mutorwa has back-flipped on his decision to fire Beverly Gawanas-Vugs from the Namibia Airports Company (NAC) board.Mutorwa fired the entire NAC board...

Company news in brief

3 days ago - 16 October 2018 | Business

B2Gold keen on any African assetsCanada's B2Gold Corp is “definitely interested” in any West African assets that Barrick Gold Corp may put up for sale...

New MD for Rössing

3 days ago - 15 October 2018 | Business

Richard Storrie has been appointed as the new managing director of Rössing Uranium Limited, effective 29 October 2018. He joins Rössing from Rio Tinto Serbia...

Otjikoto’s gold production above budget

4 days ago - 15 October 2018 | Business

B2Gold’s Otjikoto Mine in Namibia delivered another quarter of solid production in the past quarter, producing 42 403 ounces of gold, the company said...

The taxability of rental deposits received

4 days ago - 15 October 2018 | Business

A general pitfall we see being applied in practice is that landlords argue the fact that because they have an unconditional liability to repay the...

Latest News

Nail errant nurses - Haufiku

12 hours ago | Health

Health ministry permanent secretary Ben Nangombe has issued a directive that no nurses may use their cellphones while on duty, and that no health facilities...

No peace for Cheryl's family

12 hours ago | Crime

The police are still working around the clock to catch the killer, or killers, of nine-year-old Cheryl Avihe Ujaha although there has been a lack...

Recruiting the best staff

12 hours ago | Supplements

Below are some tips for employers on how to go about this often arduous task.Improve your candidate poolCompanies that select new employees from the candidates...

Taking Namfisa to new and...

12 hours ago | Supplements

Octavia Tsibes As the deputy CEO of prudential supervision at the Namibia Financial Institutions Supervisory Authority (Namfisa), Erna Motinga is responsible for strengthening its supervisory...

Our dismal public healthcare

12 hours ago | Columns

There appears to be no end in sight to the many and deep-seated problems at the heart of Namibia's public healthcare sector. It goes without...

A vivacious young woman

12 hours ago | Supplements

Born and raised in a small village called Kayira-yira, situated eight kilometres west of Rundu, Zonia worked very hard throughout her school years and moved...

Improving sustainability through change

12 hours ago | Supplements

Justicia Shipena Her key role is to help Namport deliver sustainable performance improvement by utilising people. Futher focusing on how change can influence, which includes...

Airport downgrade a major threat

12 hours ago | Transport

Analysts believe that if Hosea Kutako International Airport (HKIA) is downgraded by the International Civil Aviation Organisation (ICAO), it would lead to massive job losses,...

'Arrogant' Utoni under fire

12 hours ago | Government

Land reform minister Utoni Nujoma has been described as crude, dismissive and arrogant when it comes to dealing with the media.These were the sentiments of...

Load More