South Africa’s Alexkor is one of the few state-owned diamond mining companies in Africa, a region that produces the majority of the world’s gems both in volume and value terms.
Unlike Endiama in Angola and ZMDC in Zimbabwe that are ‘cash-cows’ for the respective countries, Alexkor was a problem child.
It incurred losses between 2005 and 2009 despite being allocated R130 million ($13,2million) in state financial assistance in 2008/09 and R168 million ($17 million) in the three years preceding that.
Alexkor also recorded an operational loss of R6 million ($610,000) for the year to end-March (2010), although a reduction of R20.6 million ($2.1 million) on the loss incurred in 2009.
It incurred a loss of R16.4-million ($1.7 million) for the 2011/12 financial year, owing to what it called cost cutting measures.
“We anticipate that the Alexkor Richtersveld Mining Company JV will continue to incur losses for at least the next three years, as we enter into a phase of exploration,” South Africa Public Enterprises Minister Malusi Gigaba said at the time.
“No meaningful exploration has been conducted at the Alexander Bay operations since pre-2003, owing to the land claim instituted by the Richtersveld community.”
There was, however, hope for a brighter future when Alexkor issued a tender last January for the design, supply, construction and commissioning of a new alluvial diamond treatment plant to replace an aging facility after “techno-economic and management complications” halted its restart in 2006.
Analysts said at the time that the plant would enable Alexkor to re-establish a production node on the higher terrace of the Muisvlak mine.
The 1.36-million-tonne-a-year facility would wash, screen and securely concentrate the diamonds for transfer to the main sort house facility in Alexander Bay.
The new plant, the diamond miner said, would be used for a period of five to ten years, after which it would be relocated to another area.
However, any hopes of building a solely strong diamond company were thrown in the dustbin as the company announced last month that it would likely partner with emerging black coal miners to supply state-power utility, Eskom with 10-million tonnes of coal a year and lime for its desulphurisation plants.
This, in other words, showed that the firm no longer had confidence in diamonds.
The country’s public enterprises deputy minister Bulelani Magwanishe confirmed this as he said that South Africa’s diamond sector was in structural decline, with production having tumbled to about 7-million carats in 2012 from a peak of 15-million carats in 2005.
He said in its current form, Alexkor was not sustainable and it should "adapt or die".
Alexkor, which was yet to acquire coal prospecting or mining properties, would likely court controversy as critics argue that it was duplicating the mandate of another state-owned coal mining company African Exploration, Mining and Finance Corporation (AEMFC), which had been producing coal for Eskom.
"It looks as if several different departments are going into business on their own," Democratic Alliance mining spokesman James Lorimer was quoted as saying. "I think this is a confusion and I cannot see it ending well."
However, Magwanishe said there was no potential conflict between Alexkor and AEMFC.
"It is our responsibility as the state to ensure we are not involved in another energy crisis. Collaboration amongst state-owned entities to assist each other is very important," he said.
The deputy minister said Eskom needed about 60-million tonnes a year of coal and there was enough room for AEMFC, the private sector and Alexkor to supply it.
Although there is no rule that hinders Alexkor from diversifying its operations, stakeholders concerned with the growth of the industry, with the government playing a significant role are disappointed with the poor performance of the diamond firm and its possible departure from the sector that was dominated by private firms such as De Beers.
Given the losses that Alexkor had been making for some time it would also be fool-hardy for the South African government to continue flushing the taxpayers’ money down the tubes.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
