Angola: Uncertainty over diamond plans

JOHANNESBURG, 7 March (IRIN) - Plans by the Angolan government to regulate its troubled diamond industry have left the mining giant De Beers out in the cold, and the status of its Cuango Valley operation in doubt, industry sources told IRIN.
The first step in the government's ambitious strategy to overhaul its leaky diamond industry was to set up a state-owned company, Sodiam, as the sole purchaser of all diamonds produced in Angola. What remains unclear is the position of Sociedade de Desenvolvimento Mineiro (SDM) which supplies De Beers with diamonds from its Cuango Valley concession. At full production, SDM is expected to produce US $100 million of alluvial diamonds a year.

De Beers, which is building a US $30 million sorting facility in Luanda, announced last year that it would stop buying all Angolan rough diamonds - even with government certification - except those supplied by SDM. De Beers spokesman Tracey Peterson told IRIN there was "total chaos" in the industry, and De Beers was committed to not purchasing diamonds from the rebel group UNITA in line with UN sanctions. With peace, and proper regulation to halt smuggling, De Beers would be "glad to talk to the Angolan government on buying their diamonds".

However, according to a recent critical report by the London-based Action for Southern Africa (ACTSA): "Despite the public credit De Beers received from this move, diamond industry sources pointed out that De Beers in fact largely pulled out of Angola when they heard that they would not be a partner in the new diamond trading system."

De Beers, which accounts for 65 percent of world diamond production, had been looking to occupy a prime position in the government's new diamond trading mechanism, sources told IRIN. Instead, in a surprise move, Sodiam went into partnership with the Angola Selling Corporation, ASCORP, headed by maverick Israeli businessman, Lev Levieve. Also involved are other foreign businessmen linked to senior Angolan officials.

Levieve has pledged to increase the government's diamond revenues by 1,000 percent, and buy Angola's entire diamond production - a move Peterson described as "hard to believe". So far, the government earns only around US $15 million a year from diamonds, out of a production estimated as worth US $1 billion.

Despite Angola's immense diamond wealth, war and mismanagement have succeeded in turning it into one of the world's poorest countries. But according to ACTSA, the new regulations could enable the government to increase tax revenues, and cut back opportunities for UNITA to sell diamonds abroad. The report calculates that UNITA netted at least US $150 million from illicit international diamond sales in 1999, the year after the UN emargoed UNITA sales.


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