HomeBusiness and policyAngola diamond trading policy reform improves competition, transparency

Angola diamond trading policy reform improves competition, transparency

The reforms introduced by the Angolan government through the new Diamond Trading Policy has brought about positive results in both gross revenue and tax revenue.

The reforms that were made to the legal framework of the diamond trading system included the implementation of the new Diamond Trading Policy, approved by Presidential Decree nº175 / 18, of 18 July 18  2018.

According to Angola’s national diamond trading company SODIAM EP, the new Diamond Trading Policy has had an exponential growth effect in tax revenues from the sale of diamonds, as well as brought about competition and transparency to the sector, which did not exist until then.

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Moreover, the diamond marketing model in force from 2012 to 2016, was based on the system of the so-called preferential customer and on a pre-authorized and pre-ordered direct sale procedure. In effect, under the terms of the legislation then in force, the previous Head of the State, in each year, approved by dispatch, both the list of companies with the status of preferential customer and the percentage of production that these customers could buy.

These preferential customers enjoyed the right of exclusive access to the market, being the only ones who could buy diamonds from SODIAM. In addition to this exclusive access privilege, preferred customers additionally enjoyed the right to buy at preferential prices, with a discount, on the market value of the diamonds they purchased.

Between 2012 and 2017, eight companies operated exclusively in Angola, under the status of preferential customer, and from 2013 to 2017, the companies IAXHON, RELACTANT and ODYSSEY, together, acquired more than 50% of the diamond production.

Having noted that this model was significantly damaging to public finances, the current Angolan government approved in 2018, through Presidential Decree No. 175/18 of 27 July, a new Diamond Trading Policy, which did away with the preferred customers model and implemented new ways of selling diamonds.

These new diamond sales models adopted under the new Diamond Trading Policy comprise the systems of sale by contracts (sights), auctions/tenders and spot.

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Meanwhile, the client application process has become dynamic and transparent, with the implementation of an online platform at www.sodiamsales.com that allows the registration of customers directly.

The validation of applications takes place after a due diligence process is carried out in accordance with international compliance standards, to ensure that due checks of international requirements in terms of financial standing are made, and to prevent unlawful acts of money laundering and financing terrorism.

The negotiation process currently takes place as follows:

a) The base sales reference price is previously defined, by agreement of the main players in the process: Producer, SODIAM and independent evaluator;

b) The purchase of production by the customer is only effective if its offer is equal to or higher than the base sales reference price.

As a result of the implementation of this set of measures, the diamond trading system saw several improvements and positive aspects, namely:

  • Currently, more than 120 companies are registered in SODIAM’s customer portfolio;
  • Three new diamond polishing factories were opened;
  • While in 2016-2017 gross revenue grew only 2.3%, in 2017-2018 it grew 10.8%, totaling US$1.22 billion; and in 2018-2019 it grew by 6.2%, totaling $1.29 billion. These figures mean an average growth of 8.5% each year.

In addition to the contracts under the 60% sales quota on the responsibility of mining companies, in May 2019, 12 purchase and sale contracts were signed – including four polishing factories – with the validity of 2 years, which will remain in force until the end of the first half of 2021.

On August 13, 2019, the process of admitting new contractual customers was closed, until the contracts currently in force have ended.

Presidential Decree No. 175/18, of 27 July, provides that the current Diamond Trading Policy is submitted to an evaluation period after one year of its implementation, and its results must be evaluated and presented within a period of 180 days.

Depending on the results obtained, some adjustments may be necessary to accommodate the emergence of the future Diamond Bourse, according to SODIAM EP.