Angola Plans to Correct The Way Its Rough Diamonds Are Sold

Rough Market
02/07/2018 14:45

Angolan President João Lourenço has vowed to reform Angola’s diamond industry, increasing its transparency in order to facilitate the exportation of goods, attract foreign investment and increase government revenue from the country's natural resources. Yesterday, Reuters claimed it had seen a draft decree showing that Angola is planning to introduce a new system for selling rough diamonds, it having come to light that a government-imposed marketing system obliged diamond producers to sell their goods below international prices, a policy said to have cost the Catoca mine nearly $500 million over the past five or six years. The plan includes setting the price of rough diamonds against an international benchmark and giving producers greater influence to select their own buyers.

According to Reuters, the decree said there was a “considerable difference between the country’s potential and the (diamond) industry’s actual impact on the national economy." Catoca is said to be obliged to sell through state-owned diamond trading company Sodiam, which often chose politically connected buyers able to negotiate prices below fair value. The new legislation looks to fix this by allowing producers like Catoca to sell up to 60 percent of their production to companies of their choosing, including to their own trading divisions, breaking Sodiam’s total control to select buyers. In another significant change, the new system will price stones according to a benchmark based on a sample of typical nationally-produced stones, along with an evaluation using a price list “in line with the international market”.

Reuters reports that Angola will also introduce sales sessions for pre-approved diamond buyers, along the lines of “sights” held by diamond group De Beers, while particularly rare stones will be individually sold via auction. The planned legislation also foresees stricter oversight by the Ministry of Natural Resources and Oil, previously kept at arm’s length by Sodiam and its parent Endiama, which had great influence under previous president José Eduardo dos Santos. According to the draft decree, the Ministry will have the power to appoint independent evaluators to intervene in any disputes and set more transparent criteria by which Sodiam selects buyers, giving priority to polishers and jewelry makers over middlemen that just resell the stones.