World Report

The world’s fourth largest diamond producer, Angola is now using the sector to fund reconstruction and social progress

Manuel Sousa Calado, Chairman of Endiama

n 1995 The Economist magazine estimated that Angola was the world’s largest – and least developed – mineral treasure trove. The truth is that even the Angolan government does not know the full extent of the resources they are sitting on. But one thing is clear, Angola has abundant deposits of diamonds, iron, gold, marble, granite, copper, lead and quartz, to name a few. Now that the war has ended, benefits from the country’s mining industry can be filtered through the government into the hands of their rightful owners – the Angolan people, while still providing lucrative opportunities for foreign investors. Diamond exports alone totalled nearly £438 million in 2004, of which the Angolan government will receive an estimated £38 million in tax revenue. Furthermore, it is estimated that only one percent of Angola’s diamond deposits have been explored. Drawn by such promising figures and the country’s mining potential, a string of foreign companies have now set up base in the country, representing an impressive roster of international names such as South Africa’s Trans Hex, Russia’s Alrosa, and Portugal’s Grupo Espirito Santo, whose confidence has been boosted by government efforts to regulate and improve transparency in the sector.

“During the war we did not know where the diamonds were coming from or where they were going. We only knew that they returned here in the form of guns,” comments Manuel Sousa Calado, Chairman of Endiama, the state diamond company. He says that this prompted the government to create the diamond-purchasing parastatal, Sodiam (Society of Commercialisation of Diamonds in Angola). Since new legislation was passed in 2003, all legal sales of Angolan rough diamonds must be carried out through this agency. An export certification scheme consistent with the Kimberly Process has also been established to identify legitimate production and sales, and more recently, the government has created the Corpo de Seguranca de Diamantes, a security agency in charge of the storage, classification and transportation of the country’s diamonds. Mr Sousa Calado estimates that Angola lost some £2.7 billion in diamond revenue during the war. He says, “We want the world to know that our diamonds, besides being beautiful, are now diamonds of peace, and they are contributing, and will continue to contribute, to the government’s main objective of helping the Angolan people.”

Angola is the world’s fourth largest diamond producer and has both kimberlite and alluvial diamonds. The Catoca Mining Project in the province of Lunda Sul, the world’s fourth largest kimberlite operation, currently accounts for 70 percent of Angola’s official production. The mine is operated by Endiama in partnership with three foreign companies. The recent construction of a second treatment centre at Catoca is expected to double annual production capacity to five million carats this year, which would suppose annual profits of more than £55 million. The Lunda Norte and Lunda Sul regions in the northeast of Angola host the country’s richest alluvial diamond fields and several medium- and large-scale alluvial ventures are in operation.

Estimates say only one percent of diamond deposits have been explored

State company Endiama has laid the foundations for making the diamonds of peace contribute to the nation’s comprehensive development strategy.

Companies in the country are now stepping up production and exploration. Alrosa pledged a new investment of £46 million last year, Grupo Espirito Santo is committing a further £137 million, and De Beers wants back in. New projects are proposed in both Lunda Norte and Lunda Sul provinces. Endiama’s production arm, Endiama Prospecting and Production (EPP), is now up and running, and the company hopes to soon double its current production of roughly six million carats per year. This marks a turning point in the company’s history, as it will be the first time that it will be working independently without other partners. EPP is planning to develop three new projects in Camanjanja, Muanza and Kacuilo. Endiama is also intent on constructing a £2.7 million diamond treatment plant and has recently signed an agreement with Alrosa to partner in the project.

For Mr Sousa Calado, this means that there will also be increased funding for new social development projects, a top priority for the government within its national reconstruction framework. Indeed, Endiama has already been internationally recognized for its efforts in the field, and was last year awarded the Quality Crown Award for its contribution to positive transformation in the communities surrounding mining areas. The award was presented by international marketing corporation Business Initiative Directions. Mr Sousa Calado comments, “All the companies involved in the diamond industry are active in social development in the region where they are exporting diamonds. This is included in their budgets. So far we have built schools, hospitals, roads and dams; we have created housing for the 23,000 workers in the sector; and we have invested in public utilities and electricity generation.” He concludes, “We also do our best to minimise forced relocations of people living in mining or potential mining areas.”