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Diamond production on the rise: the state's diamond corporation, Endiama, is about to begin its own independent production as part of a general strategy to double the volume of diamonds mined. Neil Ford reports.

The Angolan government is putting relatively little effort into economic diversification and nation building in its attempts to gradually move the economy away from a war footing.

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In the short term, the government's main aim is to maximise its oil, diamond and possible gas reserves. Massive investment by the oil majors should ensure that oil production doubles over the next few years, while some progress finally seems to be being made in the gas sector.

During Angola's long civil war, the government relied on oil revenues from offshore fields to fund its military campaigns, while the opposition Unita movement was supported by income from diamond mines in the interior. Since the end of the war, however, Luanda has tried to bring the mines under government observation. While private mining companies are active in the country, the government is able to benefit financially from their operations.

Moreover, the state owned national diamond company, Empresa Nacional de Diamantes de Angola (Endiama), is becoming much more active in exploration and production in its own right.

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Endiama was set up to take over the state's diamond sector interests from the colonial era Diamang company. It initially relied on contractors to carry out the actual mining work but the company's development was held up by the civil war.

Production from Endiama's first independent mining operation, in the Camanjanja region of Lunda Norte Province, is expected to begin shortly. The company's director of public relations, Sebastiao Panzo, says that production in other areas will begin during the course of this year.

Foreign and domestic private sector investors have returned to the country following the cessation of fighting. The Ministry of Geology and Mining has issued prospecting and exploration concessions to firms that are prepared to work alongside Endiama.

According to Endiama, the company will take the largest equity share on all alluvial ventures and a majority stake on all kimberlite projects.

In March, Endiama announced that it expected Angolan diamond production to almost double from about 6.5m carats a year in 2004 to 12m carats a year by 2006 or 2007 at the latest. This would generate revenues of $2.2bn a year, making Angola the third biggest diamond producer in Africa, behind Botswana and Democratic Republic of Congo (DR Congo), but ahead of South Africa. It would also become the fifth biggest producer in the world.

Six new mines or mining areas are currently under development by Endiama's new production subsidiary, Endiama E & P.

Although such rapidly increasing output may be partly fuelled by the development of new mines, it is mainly an indication of the extent to which the state diamond company has brought the industry back under its control.

Crackdown on illegal operations

However, it is difficult to assess the extent to which the boom is the result of post-war recovery. According to the government investment agency, Agencia Nacional para o Investimento Privado (Anip), diamond production averaged 4m carats a year over the past decade, but it must be difficult to produce accurate figures because of the clandestine nature of many mining operations during that period.

According to the government and Endiama, Angolan diamonds are now produced under the guidelines laid down by the Kimberly Process, although the government concedes that illegal mining and smuggling is still costing the country up to $375m a year.

The UN estimates that 250,000 illegal miners and others involved in illicit diamond production have been deported from the country as part of the government's drive to crack down on illegal operations. Moreover, some critics still complain that there is too little transparency in the sector and that working conditions are appalling.

In many cases, the company operates as part of a consortium. Most recently, Endiama E & P took a 39% stake in a venture to mine for alluvial diamonds in Lunda Norte. Local firm Xilo Cuilo and Mac Diamond of Belgium complete the consortium with stakes of 23% and 38% respectively. In a second area, the three partners are to mine for kimberlite diamonds. In addition, a series of short term exploration concessions was announced in March.

The Ministry of Geology and Mining gave Endiama the go-ahead to set up another joint venture with private companies Whitestone, Apollo and Ciefil. This was followed by the award of concessions to Endiama E & P and Sonland Mining on the Lulu prospect and Endiama E & P and Rosa & Tetalas on the Send scheme in Huila Province.

Endiama's activities extend far beyond diamond mining. It holds a monopoly on the trade in diamonds, in addition to export and valuation of even artisanal production. The company also plans to build a new diamond cutting centre to ensure that more of the benefits of the trade are kept within Angola itself. Apart from its mining interests, Endiama is also involved in the insurance, banking, construction and property sectors.

In the longer term, however, the company may need to focus on its areas of core interest. The diamond sector can make a sizeable contribution to the reconstruction effort and so it is vital that Endiama makes the most of the resources at its disposal.
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Title Annotation:ANGOLA
Author:Ford, Neil
Publication:African Business
Geographic Code:6ANGO
Date:May 1, 2005
Words:856
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