Angola 2007 - Diamond Development Initiative

sive use in Brazil and Guyana) and advising on techniques to maximizeyield and minimize environmental damage. As Endiama’s knowledge ofthe garimpeiro sector increased, Endiama MPP could eventually even takeon the role of patrocinador, advancing capital to licensed garimpeiros inreturn for a share in the profits. Working with garimpeiros in this way,Endiama could bring a significant number of garimpeiros into the formallicensed sector.However, while these proposals, in conjunction with the continuedspread of formal mining concessions, hold out the hope for a reductionin the informal sector, CIPRED committee members and Angolan authoritiesshould accustom themselves to the idea that large numbers ofunregistered garimpeiros will continue to dig without permission onunregistered sites for years to come. Angolan authorities must developthe capacity to track where these stones are coming from.As a matter of some urgency, the CIPRED committee, as well as officialsfrom Sodiam and the two informal sector buying agencies, Ascorp andLKI, need to begin considering ways to bring the Kimberley Process controlsfor the informal sector up to international standardsAt a minimum, all purchases in the field, by all levels of buyers, should berecorded on standardized forms. These forms should be collated, and thedata they contain transmitted at regular intervals, either in hard copy andelectronic format, or preferably both, to a diamond statistics office inLuanda (within Sodiam, Endiama or the Ministry). In this way, Kimberleyauthorities will have a paper trail showing the movement of diamondsfrom point of first purchase to export.As the logical next step, Angolan authorities should then look into computerizingthis information in a specialized database. Brazil, Guyana, andLiberia have recently installed databases such as these for registering andtracking diamonds. With the forms and the data stored in Luanda,Angolan authorities can begin to track the purchases and sales of individualtraders, and develop a statistical profile of where the country’sgarimpeiro diamonds are coming from.Diamonds andDevelopmentGovernment RevenueThe diamond tax system in Angola consists of a combination of tax levies,royalties, and export duties, and corporate taxes. Many of these are setout in 1996 decree (Decree No 4- B/96 of 31 May) which sets the corporateincome tax rate for the mining sector at 40% (reduced in 1999 to35%), while giving generous write-offs for prospecting costs 25 and depreciationallowances for capital investment costs. 26 The decree sets royaltiesfor diamonds and other precious stones at 5%, and stipulates that dividendspaid by mining companies are subject to a capital gains tax, set in1999 at 10%.As the value of Angola’s formal diamond production has increased overthe past half-decade – from just under US$690 million in 2002 to justover US$1 billion in 2005 – the revenue accruing to the Angolan governmenthas increased as well, from US$45 million in 2002 to US$150 millionin 2005.In percentage terms, government receipts in 2005 represent just under14% of the total gross production. These figures do not include the 1.2%fee paid to Sodiam, or the profits paid to Endiama for its participation injoint ventures projects. A 2005 paper by the IMF suggested that theserevenues, as a percentage of production, were low in comparison toother African diamond producers such as Botswana. Even so, at US$150million per annum, diamonds are second only to oil in terms of naturalresource revenue contributions to the Angolan exchequer.To put this value in perspective, Angolan receipts in 2005 from the diamondsector were three times as much as was allocated under the 2005budget to all government spending in either Lunda Sul or Lunda Norte,the provinces from which the diamonds originated.Source: Endiama16