Currently, DeBeers is the obvious world monopoly on diamonds. A possible rival is the Brazilian based Odebrecht Mining Services, or OMS. This company was given mining rights to the diamond rich Cuango Valley, by the Angolan government. It just so happens that Cuango Valley is one of UNITA’s most powerful strongholds. UNITA could not be removed from the area and OMS continues to try and negotiate for the land. “If UNITA did withdraw from the Luzamba in the Cuango Valley, and the mining rights went to OMS, DeBeers would begin to lose its monopoly of diamonds.” (Lewis) The dispute over diamonds in Africa does not only involve groups such as UNITA and MPLA, but major corporations as well. These corporations can help stimulate the economy of Angola such as DeBeers by employing locals and stimulating business. If it weren’t for UNITA, Angola’s economy would definitely be in a better state.
Another tactic to curb the illegal sales of diamonds out of conflicted regions is a new certification plan. Representatives from major diamond producing countries created the plan, which certifies that all diamonds bought on the market, do not have origins from rebel groups. “Under the plan, all diamonds sold on the world market would have to be accompanied by a certificate confirming their origins. Estimates on the rebels' share of the $6 billion a year international diamond trade range from 4 percent to 15 percent.” (CNN) Plans such as these, guarantee the purchaser that the diamond being bought has a legitimate history. “The work [on the plan] was necessary, not only to stop the flow of money to rebel groups, but also to restore consumer confidence in the gems and ensure the survival of the diamond industry.” (CNN)
Recently, UNITA has made peace proposals to the Angolan government to end the civil war. The MPLA run government responded by saying that the ending of the war all depends upon the laying down of UNITA’s weapons. “Aid agencies say at least five-hundred-thousand people have died and about two-point-seven-million have been forced to flee their homes because of the fighting…UNITA has shown signs for some time of wanting to restart talks with the MPLA government after suffering a series of military defeats.” (BBC) If UNITA were out of the picture, who knows how Angola’s economy would respond. With no interference the Angolan economy could grow to be one of the most powerful in the continent.
The sad truth is that the dispute described above is only the conflict going on in Angola. There are several other African countries with similar but separate problems with diamond wars. Another country that is in severe conflict is Sierra Leone. “Between 1991 and 1999, the war claimed over 75,000 lives, caused half a million Sierra Leoneans to become refugees, and displaced half of the country's 4.5 million people.” (PACNET) While the conflict in Angola is based mainly upon a race for control of the government, the quarrel in Sierra Leone is fueled chiefly by money. “The point of the war may not actually have been to win it, but to engage in profitable crime under the cover of warfare.” (PACNET)
Up until the 1980’s DeBeers was directly involved with diamond trade in Sierra Leone. Now there are no DeBeers offices held in Sierra Leone but it is believed that many of the diamonds still being mined there come through DeBeers’ hands indirectly from other countries such as Liberia and Guinea. This is possible because diamonds can be smuggled out of Sierra Leone and into these other countries and then exported to places like Belgium for circulation into the world market.
Antwerp, Belgium is the world’s epicenter for diamond exchange. More than half of the world’s rough diamonds come through Antwerp, where all diamond trading is overseen by the Hoge Raad voor Diamant, or the High Diamond Council. This group’s main goal is to maintain Antwerp’s credibility as the world center for diamond trade. The HRD attempts to control diamond smuggling by recording the origins of the diamonds they obtain. There is a slight problem with this though. “The HRD records the origin of a diamond as the country from which the diamond was last exported. Therefore diamonds produced in Sierra Leone, say, may be officially imported and registered as originating in Liberia, Guinea, Israel or the UK, depending on their journey from one trading center to another.” (PACNET) This does not really help to stop the illegal smuggling of diamonds out of Sierra Leone. Although DeBeers claims that none of its diamonds have origins from Sierra Leone, there is no truly accurate way to tell.
An African nation that will be further looked into later in this report is Liberia. This country is though to be the world’s center for illegally smuggled diamonds. Diamonds produced in countries such as Sierra Leone, where there are diamond embargos, can be smuggled into Liberia and distributed into the world market under the false assumption that Liberia is their country of origin. There are many disturbing statistics that point to the truth of this matter. “While the Government of Sierra Leone recorded exports of only 8,500 carats in 1998, the HRD records imports of 770,000 carats. Annual Liberian diamond mining capacity is between 100,000 and 150,000 carats, but the HRD records Liberian imports into Belgium of over 31 million carats between 1994 and 1998 - an average of over six million carats a year.” (PACNET) It doesn’t make much sense that the actual amount of diamonds being produced in Liberia is far less than the amount of diamonds being exported.
In the mid 1930’s DeBeers was given exclusive mining rights to the entire country of Sierra Leone. “By 1956, however, there were an estimated 75,000 illicit miners in Kono District - the heart of the diamond area - leading to smuggling on a vast scale, and causing a general breakdown of law and order.” (PACNET) In 1968 Siaka Stevens became the prime minister of Sierra Leone. He was not an advocate of illegitimate diamond trade what so ever. “From a high of over two million carats in 1970, legitimate diamond exports dropped to 595,000 carats in 1980 and then to only 48,000 in 1988.” (PACNET) In 1985 Stevens left office and Joseph Momoh came to power. Constant wars have been going on in Sierra Leone for the past several decades. In 1991 the Revolutionary United Front (RUF) rebel war began and a military government replaced the president of Sierra Leone. Diamonds fueled the war and the constant chaos gave several diamond-mining companies a chance to step foot into Sierra Leone.
It is hoped that these companies can establish stability in the economy of Sierra Leone. The ventures of new companies in Sierra Leone could provide jobs as well as stimulate legitimate trade with other countries. The three largest of these businesses are Rex Diamond, AmCan Minerals, and DiamondWorks. In fact Rex Diamond has come to the aide of the government in times of need. “In 1998, Sierra Leone lost its only combat helicopter - a serious problem because the Soviet-built gunship had been the government's most effective weapon against the RUF. Zeev Morgenstern, Rex's Managing Director, and Serge Muller, the company's President, came to the government's aid by making an arrangement to supply engines, parts and ammunition worth US $3.8 million.” (PACNET)
Security problems have prevented many mining companies from getting much mining done. The RUF has put many operations on hold due to their frequent and unpredictable attacks. DiamondWorks solved this problem with their connections with several security firms. One in particular, Executive Outcomes (EO), forced RUF out of many large and important diamond-mining regions. “With 200 imported soldiers, air support, and sophisticated communications equipment, EO pushed the RUF back from Freetown within a week, and within another month had cleared the major diamond areas of Kono as well.” (PACNET) One reason that not many diamond-mining businesses have flourished in Sierra Leone is due to the fact that there is close to no security. In fact it is recommended by the government that foreign companies establishing themselves in Sierra Leone to provide their own protection. “The resurgence of internal warfare in 1999 brought another substantial drop in GDP. The fate of the economy in 2000 depends on the mid-1999 peace accord holding and the rebels reopening territory under their control.” (CIA Fact Book)
There is much debate over what should be done, security wise, in Sierra Leone. This diamond rich country could potentially become extremely prosperous if the proper policing was available. Organizations such as EO could be very helpful to the economy of Sierra Leone if they were permanently placed to hold rebel groups back from the new diamond producing businesses. Due to the fact that there is not a monopoly company in Sierra Leone, such as DeBeers, there is plenty of opportunity for smaller firms to establish themselves. “In the absence of a governmental capacity for self-protection, and in the absence of effective mechanisms for international protection, private security firms and mercenaries may be seen by some as the way of the future.” (PACNET)
There are other steps being taken in order to calm the situation in Sierra Leone. “[U.N. Security] Council members made the remarks in a statement following the first periodic closed-door review of a resolution adopted July 5 [2000] calling on all states to prohibit the import of all rough diamonds from Sierra Leone until the government comes up with a U.N.-approved certificate-of-origin regime.” (CNN) This plan will hopefully prevent the RUF from making profits off their illegally mined ‘blood diamonds.’
Another country that is involved in these diamond wars is Liberia. It is thought that the Liberian government has been involved in illegal activities dealing with the trade of arms for diamonds. The president of Liberia, Charles Taylor, has been accused of supporting the RUF for some time now. Taylor has been blamed for trying to profit from the civil war in Sierra Leone. “The United States has threatened to impose sanctions against Liberia for allegedly helping to transfer arms across its border to Sierra Leone's Revolutionary United Front (RUF) rebels in exchange for diamonds.” (IRIN) Of course Taylor denies these accusations.
Liberian President: Charles Taylor
Liberia is a country that has been socially and economically wounded by many years of civil war. “The years of fighting coupled with the flight of most businesses has disrupted formal economic activity. A still unsettled domestic security situation has slowed the process of rebuilding the social and economic structure of this war-torn country.” (CIA Fact Book) The civil war broke out in the year 1989 when The National Patriotic Front of Liberia (NPFL), lead by Charles Taylor, invaded Liberia. This invasion was utterly brutal due to the murders of hundreds of innocent civilians by the NPFL. Many native Liberians fled their home country to avoid being slain. This civil war was horrific and extremely tragic.
“Over 10 percent of the population, mostly innocent civilians were murdered; about three-quarters of the population became either refugees or displaced people; out of the 60,000 rebel fighters that were recruited by the warlords, about 60 percent were "child soldiers", and most of them are now suffering from "drug addiction,"- and "posttraumatic stress syndrome;" and women and girls were reported to have suffered the most: they were raped and murdered with impunity by all the warring factions.” (Tellewoyan)
The former government was done away with and the NPFL established the new government, the National Patriotic Reconstruction Assembly (NPRA). In 1996 an election was held and Charles Taylor came to be the president. As of now, his credibility as a trustworthy leader is in great question. Taylor claims that the civil war in Sierra Leone is not his problem but that of the British. Taylor was quoted: “The war in Sierra Leone is a war over diamonds, but not because Liberia wants diamonds. This war is happening because the British want the diamonds.” (Africa.com)
All in all, Liberia is a country in shambles. Its economy is in utter chaos and there is not much being done to restore it. “[Liberia’s] economy had started its downward plunge even before the war and the situation was further aggravated by the crisis…illegal mining of resources went on through out the war. All the warring factions had participated in illegal mining of resources.” (Alao) On top of that U.S.-Liberian relations are not doing so well either. Disputes over property rights have ignited arguments between the two governments. “Last Wednesday, Clinton banned Taylor, senior members of his government and their families from visiting the United States. In retaliation, Taylor issued his own instructions Friday denying entry visas to U.S. officials.” (Washington Post)
“Liberia has become a major criminal entrepot for diamonds, guns, money
laundering, terror and other forms of organized crime. The astoundingly high
levels of its diamond exports bear no relationship to its own limited
resource base. By accepting Liberian exports as legitimate, the
international diamond industry actively colludes in crimes committed or
permitted by the Liberian government.” (PACNET)
The countries described above all have extremely unstable and volatile economies. Their problems are rooted in disputes over control of land and diamond mines. On the other hand, there are countries in Africa that are not in the same situation as Angola, Sierra Leone, and Liberia. Nations such as Botswana and Namibia have very stable economies, which rely heavily upon diamond mining activities. How is it possible that some countries can fall into such turmoil, while others can be extremely prosperous when diamonds are a key factor in their economy?
“Botswana has the strongest economy in Africa, and also has the highest GDP/person in Africa. The dependence on diamond mining activities on Botswana’s economy is great.” (MBendi) Botswana lies immediately to the north of South Africa and is bordered by Namibia and Zimbabwe. Its lush landscape is extremely untamed and contains an astonishingly large variety of wildlife. The discovery of numerous diamond reserves in the late 1960’s brought upon great economic potential. “By the beginning of the 1980s, diamonds had well overtaken beef as the country's leading foreign exchange earner and in 1981, diamond exports accounted for 40% of total exports and rose rapidly thereafter to reach approximately 80% of total foreign exchange earnings by 1989.” (Botswana Gov’t Website)
Botswana exports to several nations including many European nations, South Africa, and the U.S. This beautiful African nation is known to many as “The Gem of Africa.” Many diamond mining oriented businesses have flourished in Botswana over the years. Debswana is a joint company of DeBeers and the Botswana government. This company has control over three very large and important diamond mines in Botswana. These mines account for the largest majority of Botswana’s production of approximately 20 million carats per year. Debswana employs about six thousand people and is Botswana’s largest employer. (MBendi) One of Botswana’s premiere diamond mines is located in Orapa. “[Orapa’s] giant kimberlite pipe was discovered by DeBeers geologists in the late 1960’s and the mine became operational in 1971…” (Joyce)
Namibia, formerly known as South West Africa, is another fine example of an economically stable country, which is heavily involved in diamond mining. The economy of Namibia is primarily market based. “Economic policies aim at sustaining economic growth, variety in the productive base and the attraction of foreign investors.” (MBendi) Although over the past several years, Namibia has seen a decline of mining as a major factor in their economy, it still plays an important role.
“Mining contributed 13% to Namibia’s GDP in 1999, of which diamond mining activities represented 9%. Mining products produce up to 50% of Namibia’s annual export earnings. Although the mining industry plays a vital role in Namibia’s economy, the mining sector has experienced a decline in growth over the past few years. This has mainly been as a result of several mining ventures closing down due to diminishing ore reserves and low commodity prices. Namibia’s main mining products include diamonds, uranium, gold, zinc, copper and lead.” (MBendi)
In this nation the state oversees all mineral mining activities. Licenses are issued to give investors rights to mine in certain regions. There are several different types of licenses, which can be obtained, including, Non Exclusive Prospecting Licenses, Reconnaissance Licenses, Exclusive Prospecting License, and Mineral Deposit Retention Licenses. Each license grants different rights to mining investors and are only valid for certain amounts of time. There are different mining taxes and royalties placed on mining companies as well. Tight government control and rigid mining regulations are obvious reasons why Namibia has been successful in its diamond mining ventures. Diamonds are slowly loosing their importance in Namibia’s economy but as of now are still an immensely important factor. Could tight regulation of diamond mining, in countries in conflict such as Sierra Leone and Angola solve their problems?
When one thinks of a true monopoly, an obvious name that comes to mind in the diamond industry is DeBeers. This company was established over one hundred and ten years ago, and since then has taken control over an immense portion of the diamond mining operations in Africa as well as other parts of the world. “[DeBeers] mines between them account for around half of the world’s output of rough gem diamonds by value.” (MBendi) Having so much power in the diamond industry gives DeBeers an advantage when it comes to the supply and demand for diamonds internationally. “The company's grip on the diamond market has slipped a bit from near-total dominance at mid-century, but it has continued to keep the price of gem-quality diamonds high by being both aggressive and flexible.” (NY Times)
Diamonds have an intrinsic value attributed to romance and love. DeBeers can be thanked for this label. “In 1938, De Beers hired a New York advertising company to convince millions of couples that the larger the diamond on an engagement ring, the greater their love. In the 1960's, a similar campaign in Japan created a diamond engagement ring tradition.” (NY Times) Would diamonds have the same image in people’s minds through out the world, if it weren’t for DeBeers? Not likely. In fact diamonds are not the rarity most believe them to be. They are greatly abundant in the nations they are mined from. The main reason for the disputes over diamonds is the demand for them internationally. “Together with the artificial perception of rarity, what makes diamonds profitable to more than 2.5 million miners, traders, cutters and wholesalers around the world — and what energizes the $50-billion-a-year retail diamond jewelry industry — is romance.” (NY Times)
The relationship between the U.S. and DeBeers has not been doing too well as of lately. DeBeers has violated several antitrust laws in the U.S. DeBeers has been accused of fixing industrial diamond prices in the global market. In fact many DeBeers executives will not enter the U.S. because of these disputes. Nonetheless, DeBeers continues to roll in the money from countries all over the world including the United States.
There are currently allegations that DeBeers bought illegal diamonds from Angola’s rebel group UNITA. “To maintain world prices, De Beers bought up a sizable amount of what UNITA was selling — although the company insists that it bought the diamonds on the open market without any direct dealings with the rebels, and that it stopped all buying when the embargo was imposed in 1998.” (NY Times) If DeBeers did in fact purchase ‘blood diamonds’ from UNITA, they would be in direct violations of several embargos and could potentially suffer major consequences. In response to these accusations DeBeers states that it will refuse to purchase diamonds that have knowingly originated in Angola, with an exception of one government controlled mine.
In March of 2000 DeBeers made a guarantee that none of it’s diamonds are purchased from conflicted regions. They claim that all of their diamonds come from mines they own in South Africa, Botswana, Namibia, and other non-African locations. DeBeers has been commended by several organizations for its new claims. However, it will be seen if DeBeers can stand up to its claims. “De Beers is part of the problem. In its efforts to control as much of the international diamond market as possible, it is no doubt purchasing diamonds from a wide variety of dubious sources, either wittingly or unwittingly.” (PACNET)
The Diamond High Council, or the Hoge Raad voor Diamant (HRD), is located in Antwerp, Belgium. “Eight out of 10 of the world's rough diamonds — about 125 million carats a year — pass through Antwerp's Diamond Center.” (NY Times) With so many diamonds circulating through Antwerp, it is virtually impossible to tell if a specific diamond may have been mined in an area of conflict. Most diamond traders in Antwerp don’t rely upon hard fact as to where their diamonds come from, but merely upon trust. Although a certificate of origin comes with most diamonds these are easy to forge and replicate.
The city of Antwerp is a thriving business center. There are thirty thousand people employed in diamond commerce and industry and Antwerp has an 85% share in the global offer of rough diamonds. (DMA) Of course there are no published statistics detailing the amount of illegally mined and traded diamonds that come through. The only protection against smuggled diamonds is a customs office. It is not very hard for a smuggler to avoid being caught by a customs official when crossing borders. “Neither the Government of Belgium nor the HRD have estimates of the quantity or source of smuggled diamonds. In addition, there are few active policies aimed at controlling diamond smuggling.” (PACNET)
Due to the lack of policing in Antwerp, the city has become the global capital for smuggled diamonds. As noted before, the only way in which diamonds are traced is by documentation of the last country from which the diamond was last exported. This nation does not necessarily have to be its nation of the diamond’s origin. “A major problem with the Belgian environment - as it pertains to Sierra
Leone or any other diamond producing country - is the lack of interest and
information on the true source of the diamonds entering the country.” (PACNET) In reality, the country of origin of the diamonds is not the top issue on the minds of diamond investors in Antwerp.
In conclusion, diamonds are a fuel for both economic prosperity and at the same time drive other economies into the ground. Countries such as Angola, Sierra Leone, and Liberia have suffered immensely as a consequence of being diamond rich regions, while nations such as Botswana and Namibia have become extremely stable economically. When it comes down to the basic question of how diamonds affect an economy, an answer is not easily found. Possibly the determining factor is the control of diamond trade. In countries such as Namibia strict government control has keep smuggling and illegal mining almost completely out of the picture. Nations such as Sierra Leone, which have extremely minimal policing of diamond traffic, smuggling and illegal mining, have led brutal civil wars.
A disturbing reality is that many people worldwide are not aware of the conflicts going on in these nations. Such violence and brutality should not go unnoticed by the global community. If more people were aware of the situation, action could be easily taken to solve the problems. These wars have been going on too long, and too many lives have been sacrificed for these rocks.
Monopoly companies such as DeBeers do not help the struggle one bit. In fact they aid civil dispute by engaging in illegal activities as well. “If De Beers were to take a greater interest in countries like Sierra Leone, and if it were to stop purchasing large amounts of diamonds from countries with a negligible production base, much could be done to end the current high levels of theft and smuggling.” (PACNET) Companies such as these overlook the conflict they often cause, just so they can make that extra money. The economic future looks quite grim for Angola, Sierra Leone, and Liberia. If they are to convert to economically sound nations it will take time and action. Strict policing must be implemented and rebel groups must be taken out of the picture. When one thinks about the value of a diamond, it does not seem worth the amount of lives that have been sacrificed for it.
