Professional Jeweler Archive: Diamonds for Good

January 2001

Diamonds/News


Diamonds for Good

Boycott campaigns against conflict diamonds could destabilize southern African nations where diamond revenue is used to improve life


The one thing that truly irks Linah Mohohlo is what she perceives as “Afro-pessimism” by the west. As governor of the Bank of Botswana, she has seen what properly managed diamond production can do for an economy and for the people of an impoverished nation. A well-conceived development plan, combined with a stable government, can hoist a nation out of poverty.

Mohohlo has seen Botswana emerge as a powerhouse in sub-Saharan Africa, marching well ahead of its neighbors with annual economic growth exceeding 10%. Botswana has been called the “African Lion,” a tip of the hat to the “Asian Tiger” economies. Botswana’s not-so-secret weapon: Diamonds.

So the spectacle of U.S. Rep. Tony Hall (D-OH) parading Sierra Leone’s children of conflict in front of Cartier’s New York City store in October was on Mohohlo’s mind in a recent meeting with U.S. journalists. “Why not parade some of our healthy boys and girls from Botswana in front of Cartier?” she asked. “Why not show the good that diamonds do?”

Her point: Not all diamonds are bad, despite the unspeakable horrors perpetrated on innocent children and adults in some countries where the rule of law is absent. “Human greed and a willingness to inflict suffering for personal and political ends have colored the world’s view of Africa,” says K.G. Moshashane, Botswana’s director of mineral affairs. “Sad to say diamonds, one of God’s most precious gifts to Africa and mankind, have been used as a tool of corruption, conflict and suffering.” But that’s not true in Botswana.

One of southern Africa’s healthiest, albeit fragile democracies, Botswana derives nearly two-thirds of its revenue from diamonds. Negative publicity about diamonds could dismantle its economy, as well as those of Namibia and South Africa, two other southern African democracies. Yet this fact is mentioned rarely by activists who threaten boycotts if the bloody civil wars in Angola, Sierra Leone and the Democratic Republic of Congo continue to be financed by diamond sales.

Last year, boycott concerns worried one of Africa’s most renowned voices. “The diamond industry is vital to southern Africa’s economy,” warned Nelson Mandela, African Nobel Prize laureate and former South African president. “We would be concerned that an international campaign does not damage this vital industry.”

De Beers spokesman Andrew Lamont says the issue is important in many ways: “Boycotts could be damaging to the jewelry industry and could decimate the economies of South Africa, Namibia and Botswana.” Here’s a look at countries whose fate hangs in the balance.

South Africa

Ever since diamonds were discovered in South Africa in 1866, the country’s economy has depended largely on them. Today, South Africa’s industrial base is far more diversified, though production of rough and cut diamonds still accounts for almost $1 billion annually. In addition, South Africa is in a state of change since the dismantling of apartheid. “Now that we’ve rejoined the human race,” South Africans are fond of saying, “there will be no stopping us.”

De Beers is undergoing momentous changes of its own following a strategic review of operations, many aspects of which dovetail with South Africa’s determination to change its mining laws, integrate blacks and whites and provide incentives for the disadvantaged. For economic and practical reasons, De Beers has begun to sell some mining properties, including its stake in the Marsfontein mine. De Beers encourages black economic empowerment groups and supports vocational technical training and the creation of laws that help developing businesses in the diamond industry.

Consider the following:

• Through recent agreements with the government, over 50% of De Beers’ rough diamond production in South Africa is sold through local cutters.

• Efforts to further South Africans’ participation in the benefits of the country’s natural resources are evident in De Beers’ support of jewelry design and manufacturing facilities. De Beers’ Shining Light Award for jewelry design is one such example. The competition, geared toward young, often economically disadvantaged talent, fosters appreciation of African symbolism.

• The South African diamond industry employs about 12,000 people; De Beers employs two-thirds of them.

• To a greater extent than other diamond-producing countries in the region, South Africa has vertically integrated its diamond industry. Johannesburg has the Harry Oppenheimer Training School, a diamond-cutting school run by De Beers and the Diamond Foundation of South Africa. Johannesburg also has a diamond sorting and valuation facility and a diamond bourse. “South Africa’s polished exports compete with Antwerp, New York City and Tel Aviv with the average cost per carat in the $30-$35 range,” says Kevin Lunt of the Diamond Development Co., Johannesburg.

Botswana

Before 1967, Botswana depended on subsidies from the United Kingdom and was known only as an agrarian, cattle-producing savanna. That all changed when diamonds were discovered in a remote area called Orapa. Richer mines soon followed, including Letlhakhane and Jwaneng, all owned 50/50 by the government and De Beers through a company called Debswana.

A recent expansion doubled Orapa’s output capability, making Botswana the biggest producer of diamonds in the world. Diamonds worth $1.7 billion dollars were mined in 1999, and the figure is expected to climb significantly. Diamonds account for 65% of all government revenue; over the years Botswana has been able to boast an unprecedented $6.5 billion in foreign exchange reserves. Not bad for a land-locked country with few other industries than tourism.

“The secret of Botswana’s success rests on twin factors,” says De Beers Chairman Nicky Oppenheimer. “Good resources and good governance.” He singles out Botswana as a model for war-torn diamond-producing countries in Africa. “Diamonds can be deployed for the benefit of a country as a whole rather than lining the pockets of the greedy and corrupt few,” he says.

Botswana understands its weaknesses too. It still faces 20% unemployment. Poverty, though much lower than before the start of diamond production, still encompasses 40% of the population. “In a way, our dependence on diamonds is our vulnerability,” says Keith Jefferis, deputy governor of the Bank of Botswana. Industrial diversification has not taken root yet in a country that has seen only 30 years of economic freedom. “As a result, 27% of government spending concentrates on education,” says Jefferis. “We want to look down the road at a skilled and diversified work force.” It’s clear Botswana still has problems to overcome, but it’s also clear diamonds will make the road smoother.

Namibia

Namibia represents De Beers’ success story in alluvial diamonds. The country’s diamonds once belonged to South Africa or Botswana. But through wind, rain and river erosion, the diamonds went on an arduous yet relentless journey west to Namibia, jostled and tumbling in the flow of the Orange River.

Some diamonds stopped their journey along the river bed and banks; others went on to the Atlantic Ocean at Oranjemund. Today, these diamonds are mined in the deep sea and along a 100-mile strip of beach. Almost all are gem quality.

Diamonds were discovered in Namibia in 1908; since then mining has occurred up and down the coast with little interruption. In 1994 De Beers and the Namibian government formed a 50/50 joint venture called the Namdeb Diamond Corp., through which the country produced 1.3 million carats of rough diamonds in 1999.

The government earns over 40% of its foreign exchange earnings from diamonds. Not surprisingly, Namdeb is also the biggest taxpayer and the diamond industry is the biggest employer in the country (some 4,500 jobs). Because Namdeb’s land-based operations are in decline, however, coupled with state-of-the-art technological advances in mining, the employment figure is expected to decline. For these reasons, efforts are under way to make Oranjemund a more diversified and attractive place to live.

By contrast, production at Namdeb’s marine operations is on the rise, contributing 40% of Namibia’s diamond recovery. By 2020, the figure should rise to almost 100%.
Meanwhile, Namdeb has taken on an extraordinary role as protector of the environment, an inherently difficult task because diamond mining has such an impact on its environment. Namdeb’s efforts at reclamation of mined areas and its efforts to protect the unique wilderness called the Sperrgebiet are unique in the diamond industry.

Protecting a Diamond’s Image

South Africa, Botswana and Namibia all find it essential to defend diamonds and position them positively for consumers. These countries form the core of De Beers’ business, and ties with the company are apt to get stronger, particularly in light of the conflict-diamond issue and De Beers’ recent strategic review. “We’ve come to the recognition that we can sell our own diamonds more efficiently and make more money at it than trying to sell someone else’s,” says Gavin Beevers, De Beers’ director of operations in Johannesburg.

It’s a clear reference to De Beers’ now-ended practice of open-market buying and the enormous stockpiling it once used to help control the market. Now that outside buying is largely over (other than from legitimate sources such as Russia and Canada), there’s a definite move toward efficiency at De Beers’ mines. “Our revenue per ton needs to go up, and our cost per ton needs to go down,” says Beevers.

De Beers is taking a long-term view of its interests in Africa and the role diamonds play in each country in which it conducts business. It also plans to prospect in areas where it’s not savory to mine at the moment; De Beers expects to be around a lot longer than rebel leaders or rickety governments.

In the meantime, South Africa, Namibia and Botswana have no room for Afro-pessimism. They’ll soon be inextricably linked to a powerful brand name for diamonds. They will do so via a company consumers the world over recognize: De Beers.


– Robert Weldon, G.G.

Two cutters at Rubinek Diamonds in Johannesburg, South Africa. Israeli owner Michel Rubinek says he has invested all his dreams in South Africa. His cutting factory teaches disadvantaged South Africans how to fashion diamonds.

Photo by Robert Weldon

Linah Mohohlo, governor of the Bank of Botswana, says her country’s goal is to make Botswana a good place to do business, encourage investment in a diversity of economic sectors and prioritize education of all Botswanans.

Photo by Robert Weldon

Namdeb, a joint venture of Namibia and De Beers, is implementing affirmative-action programs. Until recently, women were not allowed to work in hard-rock mining. Now, teams affectionately called “Bedrock Women,” vacuum pockets of diamond-bearing soil in bedrock. They have a much higher diamond recovery rate than their all-male counterparts.

Photo by Robert Weldon


Copyright © 2001 by Bond Communications