This content was first published on IGR – Italian Gemological Review no. 11 in 2021. The information provided here is therefore current as of the original publication date.
A change in the leadership of the country, the privatization of the government controlled diamond industry, a stronger collaboration with the Russian giant miner ALROSA, the planned establishment of its own national Diamond Hub and Bourse, the discovery of diamond rough gemstones of exceptional size. Angola, currently the seventh world producer, unveils ambitious plans to boost the production of its diamonds, showing the world that the time when these gems financed the atrocities of the civil war is gone forever. And in the meanwhile under-priced exports have been stopped.
A cut to the past. Leadership in Angola is changing and its diamond industry as well
Those who are doubtful will have to change their minds. It is too early to evaluate to which degree Angolan expectations will be successful but the country is definitely changing its strategy and intends to make diamonds a pillar of its economic development, still based on heavy dependence (90%) on oil exportation. Diamonds in 2018 accounted for 3.3% of exports but if compared to depressed oil price they can count on a brighter future outlook as for profitability and potential.
The last signal was sent in November 2020 as SODIAM, one of the state owned diamond companies, detaining the exclusive right to sell diamonds internally, has opened the first store of its own for the sale of Angolan cut gemstones.
Seemingly, international qualified partnerships are now welcome, being the store a collaboration with the Indian company KGK1 and a number of diamond polishing and cutting factories have been started or are under implementation.
Summing up all this initiatives, by the end of 2021 SODIAM will no longer represent a heavy and dusty part of the public centralization apparatus but will work as a supervisor of a brand new diamond exchange, a free trade zone, a gemological academy and a technological research center.
Many changes and all in one shot but how and when did the course suddenly change? The main steps have been taken in the aftermath of the Decree 175/18 of 18 July 2018 by the new President João Manuel Gonçalves Lourenço (Figure 2), a former military, elected in September 2017. He opened the door to crucial and to some extent unexpected reforms in the governance of oil and diamond industries with the declared purpose to attract foreign investments, increase efficiency while reducing the state’s direct participation in mineral activities.
To shed light on this new age for Angolan diamonds it is necessary to take a few steps backwards and frame some decisive phases of the history of this country, until 1975 a Portuguese colony. Once independence was gained the constant divergences between the liberation movements led to the a civil war that ended its first phase in 1992 with MPLA party contested victory that resulted in an additional 10 year conflict between MPLA and contending faction UNITA.
Not surprisingly, diamonds are very much related to this conflict. The two Angolan fighting groups used the alluvial diamond resources of northern Angola to fund guerrilla and this practice resulted in a worldwide wave of outrage. Angolan conflict diamonds led to the first internationally shared responsible program in 2001, the Kimberley Process Scheme.
In addition to having financed guerrilla, diamonds in this mineral-rich country are also related to nepotism and corruption. After 20 years dominated by MPLA one-party political system, President Lourenço has been in office for three years and cannot be considered a character alien to the circle of power of this party. Nevertheless, his strategy on raw materials and diamonds openly collides with his predecessor José Eduardo dos Santos (Figure 3) who has ruled the country during and after the civil war. As a matter of fact oil and diamonds in Angola have been the keys of the national wealth of an a hyper-centralized regime created by dos Santos that delivered full power in the hands of the Presidency, his family and his entourage, whose large and well-resourced handymen often outranked the ministries and the managers of public administration. Therefore, it is no wonder that the diamond industry the new President intends to reshape has been for decades a feud and a mere family business.
No more oil export dependency, Angola’s diamond largest African reserves are an option for economic development. Alluvial deposits…
The diamond industry dates back to the colonial times and its economic potential shows interesting perspectives supported by solid geological data. This is a challenge for the newly appointed management team.
Angola probably has the largest diamond reserves in Africa, valued at 180 million carats, though only a limited part of the assumed diamond resources have been prospected. They consist of both alluvial and kimberlitic material. This dual geological characterization coincides geographically in a single region, the provinces of Lunda Norte and Lunda Sul where almost all diamonds are concentrated (Figure 4). This is reflected by different organizational models resulting in a more orderly and structured system in the Southern locations where deep exploitation of primary kimberlite deposits has been possible only in more recent times and in presence of capital intensive infrastructure, while alluvial deposits may also attract poorly equipped mining companies.
The secondary diamond reserves, between 80 and 120 million years old, were estimated in 2000 to be 40 million carats in the alluvial and terrace deposits found in the territories Malange, Uige, and further south, in Kwanza Sul, Huambo Bié, Kuando Kubango, Moxico Huila and Cunene and extend into the Democratic Republic of the Congo.
Dundo, Saurimo, Lunda Norte and Lucapa, in the Northern part of the Lunda province, are the heartland of the alluvial diamond industry, a highly sensitive area, exactly where the illicit diamond trade that fueled the decade of the civil war in Angola took place. This northern tract concentrates the secondary deposits in a social environment impoverished by the civil war and characterized for long time by activities of poorly organized garimpeiros as well as foreigners (mainly from neighboring Congo) in search of fortune2. The development strategy until a few years ago was merely conservative and the past Angolan government transferred much of its authority to private diamond companies that have since performed basic public functions of security, health and even border protection. Only more recently concessions have been granted to the artisanal sector and to qualified foreign companies, often in partnership with ENDIAMA.
One example of this collaboration is the Australian Lucapa Diamond Company that led to the production of superb diamonds at Lulo alluvial mine, a site that hosts the world’s highest dollar-per-carat rate for alluvial diamonds with 14 rough gemstone pieces exceeding 100 carats (Figures 5-6).
…and extensive kimberlitic pipes. The role of Russian ALROSA in Catoca giant diamond plant
On the other side Angola has over 700 known kimberlite pipes, including several with a very large surface area. The kimberlites are aligned along a SW to NE tectonic corridor, the Lucapa Trend, stretching from the SW of Angola into DRC territory and include the Mbuji-Mayi kimberlite district. Catoca, Camatchia, Camútuè and likely other pipes in the future such as Tchiuso, Chiri and Mulepe are the main mining areas. The kimberlitic pipes were first discovered in 1952 and mined since 1969 at a slower production trend than the alluvial deposits, all of them under the de facto monopoly of DIAMANG3, the mining colonial arm of Portugal that operated in collaboration with South Africa. Starting a joint venture with DIAMANG De Beers took interest in Angolan diamonds and was active in the exploration of the Angolan territory until 1975. De Beers’ involvement produced an accurate survey of the kimberlitic diamond potential but it would have been much more intense if in continuation with DIAMANG and if the political transition between colonial and independent Angola had been smooth.
Western huge diamond mining companies have not operated much in Angola, mainly because the colonial economic order had been severed and a new one could not yet be clearly envisaged. The Australian based BHP limited its range to exploration but soon abandoned in 2007. De Beers’ mining operations lasted only from 2005 to 2012 undermined by a negative business atmosphere in the country. This reluctance of the great mining companies to get involved is explained by the political orientation emerged at early postcolonial times when independent Angola was broadly inspired by Marxism and consequently by state controlled economy management models. So, six years after the independence declaration, Angola new leadership decided in 1981 to operate its diamond industry establishing the state-run company ENDIAMA as an exclusive concessionary of all mining rights. ENDIAMA’s primary property is Catoca, the seventh largest diamond mine in the world and the powerhouse of the Angolan diamond industry accounting for 6 million carats per year, the fourth largest kimberlite pipe for reserves (estimated at 140 million carats).
The Catoca mine (Figure 1), currently managed by a joint ventures between ENDIAMA, ALROSA and a Brazilian partner, evokes the influence of Russia over Angola’s diamond industry4. It was explored and activated in between the 80es and 90es, at the time when USSR was influential and assisted Africa through the Russia based Yakutalmaz PSA, lately evolved in ALROSA under Yeltsin privatizations of 1992. It was a tough construction work, conducted amid minefields in the difficult period of the domestic struggle while the area was guarded by paratroopers and Russian helicopters. The mining operations, started in 1997, today are expanding to new promising neighboring fields.
The new policy for diamonds is a war declaration to the former establishment privileges granted by sales below the market value
Apparently the renewed fervor of the diamond industry’s activity has developed a few months after President Lourenço’s appointment in September 2017. The situation of the whole national economy had come to a head and some strong decisions had to be taken. In raw material export based African countries, such as Angola, the new Presidency’s first move is often the appropriation of control over the mineral wealth. So Lourenço immediately removed Isabel dos Santos (Figure 7), daughter of former President, from her job as manager of the giant state oil company, SONANGOL. Thanks to her influential position she allegedly has enjoyed an enormous advantage from insider deals, preferential loans and contracts fueled by public money and assembled an empire of more than 400 companies and subsidiaries in 41 countries. This is not the place to determine whether corruption was the prerogative of a restricted clan related to the old establishment or rather a plague still far from being eradicated in the Angolan social context, as many observers point out in a heated debate that is developing in the country’s press in recent times.
What must be noted here is the fact that the new economic strategy, while targeting the reduction of corruption through a change in the mineral resources management, has laid the foundations for establishing a new economic climate with the results not long in coming. In a meeting with the minister for natural resources and oil, Diamantino Pedro Azevedo, representatives of the long time irritated diamond industry clearly expressed a disconcerting fact. The Catoca mine alone was estimating a US$ 464 million loss since 2012 due to the dos Santos government-imposed marketing system that obliged to sell production below international prices.
This unproductive diamond sale model, in place from 2012 to 2016, was based on “preferred customers”. On a yearly basis, a list of businesses qualified as preferred were allowed exclusive access at a fixed percentage of the Angolan diamonds production traded by the state controlled SODIAM at prices up to 24% below the international market.
In 2018, following a new Presidential Decree a base reference price was introduced to correct the malfunction and the diamonds transaction began to be carried out only if buyers were offering more than the established reference price or as much. In a few months over 120 companies registered in the centralized SODIAM customer portfolio. In the meanwhile evident positive effects appeared as total sales and tax revenues increased and new diamond cutting and polishing factories opened or were scheduled to open soon.
But the disruption of the old system based on the privileges granted to the entourage of the circle of power does not stop there. Gaining credibility on international markets is the fundamental need inspiring the new strategy. This was the only way to overcome the skepticism now rooted in the big players of industrial extraction, whose capitals are required to gain the lost ground in the systematic prospection of diamond basins and their cultivation.
To fix things at home, it is recommendable to start with getting out of isolation. On this purpose President Lourenco in April 2018 is in Moscow to discuss of greater involvement of Russia in Angola. Two months later he also paid an historic visit to Antwerp. The Belgian diamond business hub has been long substantially ignored by the Angolan marketing and just a mere 1% of its gemstones was sold there. “Due to our country’s policies – he stated in Belgium – we have not been able to benefit properly from our diamond resources. We have a great responsibility. It is time to reverse the status quo”. At this point a further provision was needed to streamline the sales channels so the diamond mining companies based in Angola were allowed to sell directly up to 60% of their production, with SODIAM acting as a single exclusive channel for the contract sales.
The definitive opening to global markets is marked by the Presidential Decree no. 143/20, dated 26 May 2020. ENDIAM is no longer the sole national concessionaire for diamond mining and its role is mainly concentrated as a mining company. SODIAM, rather than acting as a public monopolist of the diamond marketing operations, must ensure the implementation of a new diamond marketing project based on the role of the Angolan Diamond Exchange (Figure 8).
Conclusion. Diamonds tell us a lot about Angola
Perhaps even more than oil, Angolan diamonds show in transparency many aspects that typically also characterize other African countries gripped by the inability to base their development on multiple diversified resources and therefore forced to rely only on their own mineral wealth. Angolan diamonds, initially and first of all, are a direct legacy of a classic colonial exploitation model focused on monoculture, the specialized exploitation of raw materials. Once independence was achieved, diamonds were used as a sort of parallel currency to become later in the 90s the main financial source to fund the fighting factions.
Consequently, in such a context, Angolan diamonds have become the international paradigm of mining irresponsibility, a synonym of legally unacceptable sourcing of precious stones. Angola, also after the introduction and the application of the rules of the Kimberley Process, has experienced as much brutality as other African alluvial diamond rich countries. The lack of regulation has attracted thousands of small-scale miners, including many from neighboring countries, in conditions of instability, abuse and violence. Furthermore, it is no coincidence that the journalist who first denounced abuse and corruption within an African country was the Angolan Rafael Marques de Morais (Figure 9). He drew international attention to the fact that the exploitation of Angolan diamonds was benefiting a military elite more than supporting the growth of the domestic economy.
Both oil and diamonds have long been functional to the maintenance of a centralized regime that has prolonged the post colonial strategy. This establishment exercised direct state control over the extraction and distribution functions. Such centralized and monopolistic governance was encouraged by independent Angola’s first economic sponsor, the USSR, and resisted the dissolution of the Soviet empire, though with a different purpose, consisting in securing the privileges and interests of a family-based leadership related to the former president dos Santos and his entourage.
To start the cultivation of the very rich diamond reserves, President Lourenço must necessarily come out of isolation and gain credibility for the national diamond industry. The profound reforms under implementation intend to interface the international markets and no longer a few privileged partners. Large reserves of gems need large investments. Other players in the mining industry will probably intervene in the new Angolan economic environment, but these are unlikely to affect the primacy and expansion of the historically consolidated Russian-Angolan joint venture, directed by ALROSA.
Notes:
1 Together with KGK a 5 million US$ polishing factory was opened in Luanda while an estimated US$ 10 million diamond-cutting factory in Lucapa, Lunda Norte province is under consideration.
2 The Angola–Congo (DRC) border is approximately 2500 km long. In 2004, Angola hosted more than 500,000 Congolese and quite a number of them were working illegally in diamond mines in Lunda Norte province.
3 DIAMANG discovered and developed the Angolan diamond deposits over a period of sixty years until 1971 and has left very interesting memories and documents witnessing the early times of diamond exploitation in the world.
4 The Catoca mine owns reserves estimated at 120 million carats and is ALROSA’s largest mining initiative outside Russia. One of the first step of President João Lourenço was to give ALROSA a further 8.2% stake (worth US$ 70 million) in Catoca Mine. This deal was can be considered as a step taken to guarantee Russian interests at the time when reforms were being implemented involving international market as a whole.
Further references:
- One century of Angolan diamonds, retrieved on 10/01/21 at: https://xmbl.files.wordpress.com/2013/10/one-century-of-angolan-diamonds-hd2.pdf
- Le Billon, Philippe, Angola’s Political Economy of War: The Role of Oil and Diamonds, 1975–2000, retrieved on 10/01/21 at: https://www.researchgate.net/publication/240592136_Angola%27s_Political_Economy_of_War_The_Role_of_Oil_and_Diamonds_1975-2000
- V.V.A.A., Estudos no âmbito do setor de extração de diamantes em Angola e seus impactos socioeconômicos”, in: Revista Brasileira de Geografia Física, Volume12, pages1212-1240, June 2019
- V.V.A.A, História económico-social de Angola: do período pré-colonial à independência, retrieved on 10/01/20 at: https://www.researchgate.net/publication/327111904_Historia_economico-social_de_Angola_do_periodo_pre-colonial_a_independencia/citation/download
Article by Paolo Minieri, published on IGR – Italian Gemological Review #11, Winter 2020-21
