Mineral beneficiation may be harder than meets the eye, failed local diamond beneficiator Mohseen Valli Moosa has indicated.
His diamond beneficiation company received some R150-million in development finance from the State-owned Industrial Development Corporation (IDC) and the provincially run Gauteng Enterprise Propeller, but has ceased operating and is now heading for voluntary liquidation.
The one-time South African Member of Parliament and the brother of former Cabinet Minister Mohammed Valli Moosa said local mineral beneficiation would only succeed if it was supported by a pipeline of guaranteed raw materials and long-term funding that allowed for marketing and retail development alongside production and beneficiation.
In a statement prepared for Mining Weekly, which covered the launch of African Romance in 2007, Moosa said that a decision had been taken to place the company, WakeGem, which traded as African Romance, into voluntary liquidation.
The diamond-cutting and beneficiation company obtained R97-million from the IDC and more than R50-million from the Gauteng Enterprise Propeller.
It set out to add value to diamonds that would be sourced directly from local mines.
Moosa said that African Romance had experienced a significantly negative trading and operating environment since the global financial crisis of 2008/9, which had affected the diamond industry as a whole, including the giant De Beers.
He said that the company was only a year old when the downturn took place and did not have the resources to recover from it.
Other critical factors that contributed to the poor financial performance of the business included the lack of adequate funding for marketing, trading and retail development, the high cost structure of funding and operating diamond-cutting businesses in South Africa compared with India and China and the severe lack of a dependable supply of rough diamonds from the major diamond producers in South Africa.
The absence of a dependable supply of rough diamonds was a major cause of the closure of the company after it had been unsuccessful in becoming a De Beers sightholder.
In addition, the State Diamond Trader had not been able to supply polishable rough diamonds at competitive prices to South African producers.
“Unfortunately, beneficiation will only succeed if there is a pipeline of raw materials that is guaranteed and if the funding is able to support a long-term time horizon which allows for the development of marketing and retail strategies alongside production and beneficiation.
In the absence of such support, despite all the best intentions of government agencies and development funders, beneficiation is unlikely to succeed,” Moosa said.
The IDC told Mining Weekly that the company’s failure would be the subject of an independent forensic audit, following the IDC’s own audit last year, which led to the company’s restructuring and cessation of operations on December 14.
“We are hopeful that such investigation will serve as a learning experience of the kind of support that beneficiation projects will require in order to succeed in South Africa,” Moosa said.
IDC services sector divisional executive Katinka Schumann, who served as chairperson of African Romance, is still on leave, but IDC spokesperson Neo Mokhesi said that the independent forensic review was expected to begin soon.
African Romance originally operated out of attractive premises in the heart of Sandton’s central business district but relocated to Bramley and then Wynberg, where, on December 13, a day before operations ceased, an armed robbery reportedly took place.
When Mining Weekly featured African Romance on its cover in 2007, following its launch, Moosa expressed the view that the brand had the potential to, in time, stand alongside global giants like Gucci and Cartier.
Mining Weekly reported then that Moosa’s mining subsidiary, WakeMin, had an interest, as the lead black economic-empowerment partner, in 82 diamond exploration endeavours, and that African Romance distributed stock sheets and inventory to selected bulk buyers in Antwerp, Dubai and New York.
Former Department of Mineral Resources director-general Sandile Nogxina, now South Africa’s ambassador to Mexico, attended the launch, where he described the company as the actual- isation of an African dream and urged other South African enterprises to follow its example.
At R60-million yearly revenue, African Romance was said to be exchange-rate-proof and Moosa saw a near-term turn-over potential of R200-million a year.
The R40-million invested in 2007 reportedly gave the then 120-employee company the capacity to polish 3 500 carats a month on a single-shift basis.
The operation had modern machines that were said to be able to do in minutes what conventional processing took hours to do, a barcode inscription system tracking every diamond from mine to manufacture.
It was a facility that set out to combine high technology with indigenous talent.
Then, in June last year, Lenasia-born Moosa, an attorney who had made a study of diamonds in Antwerp and at the local Harry Oppenheimer Diamond Training School, in Johannesburg, told Mining Weekly that the South African diamond industry faced serious upstream and downstream challenges, and now the company – which also had three retail outlets, one which was at OR Tambo International Airport – is to be liquidated.