Angola’s First Diamond Auction

Angola held its very first diamond auction at the end of January, where 35 companies were invited to bid for seven stones. Angola is the world’s fifth largest producer of diamonds, and having an auction like this helps to make the sector more profitable for both the producers and the state. The diamonds have been by the Lulo project, which is operated by Lucapa in the north-eastern province of Lunda Norte. The diamonds have all been selected for their rare size and quality. Among the stones that were auctioned are a 114-carat diamond and a pink 26-carat gem.

WHAT WAS SIGNIFICANT ABOUT THIS AUCTION?

In a recent speech, the Minister of Mineral Resources, Diamantino Azevedo said “It’s our conviction that the final result of this auction will show to our society and the wider world our total commitment to transparency and innovation in the commercialisation of diamonds in Angola”.

This auction is particularly special because Angola used a sealed system to conduct the process. Under this system, interested parties had to submit their offers electronically without knowing what others have bid. Azevedo claims that this model is proven to achieve the highest price possible. This method of auctioning is just one of the many wider reforms currently being put into place concerning the commercialisation of diamonds in Angola.

It has been welcomed in particular by producers, who will now likely receive a higher price than they had previously. Before the introduction of the electronic auction, diamond producers had to sell through an opaque government marketing system to buyers selected by the Angolan state process. It was argued that this strategy resulted in prices well below international levels.

The introduction of this type of auction is helping Angola to begin to take proper advantage of their own natural resources. Much of this still remains under-explored, mainly due to a 27-year civil war and a business environment that remained difficult to enter even after the fighting ended in 2002.

WHAT’S NEXT?

Now, as these new reforms continue to drive the industry forward, Angola has vowed to increase diamond production and per carat value. This will hopefully enable them to begin to diversify their economy away from oil dependence and become a top 3 diamond producer by 2021. Indeed, Sodiam (the state-owned diamond trading company), have recently announced that they plan to hold at least six diamond auctions a year. This is to encourage more investment in this potentially lucrative industry in the future.

KRISHNA KADIWAR

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