26.10.2004 General News

The Big Diamond Rip-Off

By Chronicle
Listen to article

-how PNDC man ditched Ghana's largest diamond company -The dubious sale and smuggling Chronicle intelligence has picked up information that the precarious situation of Ghana Consolidated Diamonds (GCD) Ltd, the largest diamond mine in sub-Sahara Africa can be pinned to the reckless political manipulation of the divestiture process during the PNDC regime.

Investigations indicate that during the divesture, Mr. J.A Danso, then PNDC Secretary for Lands and Natural Resources, acting upon the approval of his bosses, ignored all laid down rules and the experts' advice and handed over GCD Ltd to NEWCO.

NEWCO, which took over GCD in 1991, was jointly owned by Lazzare Kaplan International (LKI), INCO Ltd and the Government of Ghana.

The government of Ghana retained 20% shares in NEWCO while LKI and INCO picked 40% shares each from the deal.

Chronicle gathered that Precious Mineral Marketing Company (PMMC) headed by Mr. K.A Quansah, raised concerns about arrangements by the PNDC government to obstruct PMMC from monitoring or taking stock of diamonds that were to be exported by NEWCO.

Despite the protestation by the PMMC and its Board that such an action was against the Diamond Decree (NRCD 32), the then minister and his government refused to pay heed to the advice. Later, Mr. Quansah was later chased out of PMMC while the Board of Directors was also dissolved.

In an attempt to silence officials of the PMMC, Mr. Danso, on March 31,1992, announced the formation of a four-member Committee of Enquiry chaired by Mr. Larry Adjetey, to look into the affairs of the PMMC.

Other members of the committee were Mr. T.A Cudjoe, who was then with the National Investigations Committee (NIC), Mr. Tawiah-Akyea, Export Promotion Council and N.K Alomatu, Audit Service.

Among other things, the committee was to identify the companies that PMMC had sold diamonds to, beginning from 1986 to 1992 and establish the mode and procedures for selling GCD diamonds by the PMMC.

Again, the committee was tasked to investigate whether the mode and procedures for diamond sales ensured transparency, competition and the best prices available on the market.

Chronicle gathered that during the divestiture, experts had warned the government about LKI and INCO Ltd, but it ignored this advice and handed over the GCD to the company.

The government agreed also to allow NEWCO to export all the diamonds it was to produce at Akwatia without passing through PMMC, which was empowered by law to monitor every diamond that left the shores of Ghana.

This directive, Chronicle learnt, did not go down well with PMMC and its board members because the signals were all over the place that such arrangements were likely to pave way for officials of NEWCO, especially the LKI and INCO to deplete the diamond reserves at GCD and bolt.

In-spite of several promptings, PMMC officials failed to persuade the then PNDC government to rescind its decision and consider the future of the mines. This led to the dismissal of the Managing Director of the PMMC, Mr. Abeka Quansah and the dissolution of the company board.

In his final words before he left office, Mr. Quansah, on November 11, 1991, wrote to inform Mr. Danso that, “We are completely at a loss how the government directives can be reconciled with the diamond marketing agreement as stated in the Heads of Agreement signed on August 22,1991 with clear statutory provisions on the law i.e The Diamond Decree NRCD 32 of 25 February, 1972.”

“It appears to us that you may have overlooked the fact that the directives contravene the existing laws on the export of diamonds from Ghana and we would wish to suggest that the matter is referred to the Attorney General and the PNDC secretary for Justice for clarification,” Quansah wrote.

The PMMC Board also, on November 11,1991 in a letter signed by its Ag. Secretary, Mr. D.Y Kumasi, stated that, “We wish to express great concern and reservations at the directives contained therein for, apart from the directives being at variance with the Diamonds Decree, NRCD 32 of 1972, as is pointed out by the management of the PMMC, the moral, political and economic implications of carrying out the directives cannot be over emphasized.”

The PMMC board added, “before the establishment of the Diamond Marketing Company (DMC), diamonds were being mined in Ghana and marketing was free for all without any government control. The loss of valuable foreign exchange to Ghana on account of this policy cannot be quantified.

Suffice it to state it was huge, for, under-invoicing, various forms of transfer pricing, smuggling etc, were very much in evidence.”

“ The Board is of the strong opinion that the level of governmental control exercised by the PMMC since 1963 should be maintained since diamond is a non-renewable resource.” It added as well that, this resource is in the national interest and so maximum returns must be achieved in the sale of Ghana's diamonds.

Despite all these protestations and warnings, the PNDC government refused to reason with the experts. Through this arrangement, LKI and INCO, which promised to revive the GCD through injection of capital equipment, back-stepped its promise after taking over GCD and started to mine portions of the diamond reserves that had been strategically left at the GCD.

Within a matter of months, the company managed to deplete the mines and bolted, abandoning the mines to its fate.

Since that act, the GCD has not been able to get back on its feet while much effort was not made to revive the mines through injection of capital.

GCD, which has been extracting diamonds for more than 50 years, operates on a 240 sq. km diamond concession. The United Nations' evaluation of the GCD from 1980-1982 estimated the diamond reserves at Akwatia to be more than 15 million carats and unstudied reserves, another 15million carats.

In spite of its wealth of reserves, the GCD is currently engulfed with serious financial predicaments.

Its production has reached an all time low of 12, 000 carats per month but insiders say operating expenses require production of about 20,000 carats per month to break even.

Insiders have, therefore, called on the government to look for a genuine partnership with a well established company to enter into a joint venture for capital injection into the mine in order to get back to serious operation to create jobs and earn foreign exchange for the company since no serious company is willing to purchase GCD at divestiture.

ModernGhana Links

Join our Newsletter