12
The Diamond Development Initiative - Can You Dig It?
Tim Hughes1
South African Institute of International Affairs
I Tiro Hughes is the Programme Head of SAIl A's Governance of Africa's Resources Programme based in Cape Town.
Introduction
Formally established in Accra Ghana in October 2005, the Diamond Development Initiative (DDI) is a programme designed to build on the successes of the Kimberley Process (KP) and to address a challenge identified by, but not dealt with by the KP, in particular that of delivering the developmental benefits of diamond mining to the local level and in particular to the artisanal alluvial diamond digger. Thus the DDI is not Kimberley (2), but rather focuses on the nexus of production to sale within the diamond production pipeline.2 This point is important as there is reluctance amongst KPCS members to move beyond the mandate of the KP which is to halt the trade in rough diamonds mined in conflict zones. One interpretation of this resistance is circular in that it contends that countries within the KP lack the political will and commitment to broaden the mandate. The other is that Kimberley is simply not equipped to move beyond its mandate given that it remains a voluntary scheme underpinned by national legislation, but with no institutionalised secretariat or independent funding sources. There is merit to both arguments. It is clear that some governments and industry players are not only more Kimberley supportive and compliant than others, but also more fundamentally committed to the spirit of Kimberley which is to improve the overall governance of the industry. Venezuela for example is the only country that has not invited a Kimberley Process review mission.3 In 2005 Brazil's Kimberley Process certificates were found to be fraudulent leading to the suspension of all diamond exports from that country in 2006. In 2006 Ghana was suspended from the Kimberley Process pending a review mission and steps being taken by that country to become Kimberley compliant. More practically, perhaps it is understandable that producer countries have a far greater interest in Kimberley expanding its remit than non-producer trading countries. The point remains, however, that the DDI was spawned by the KP, but is not of the KP and faces its own particular challenges, unless the mandate of the KP is expanded and the DDI becomes a formal programme of the KP.
African artisanal alluvial diamond mining - the pathologies and potential
The extent of artisanal alluvial diamond production in Africa is significant, accounting for up to 15% of the continent's production and employing up to 1 million workers, (700 000 in DRC, 120000 in Sierra Leone and tens of thousands in Angola, Cote d'Ivoire and Liberia). Impetus for the initiative was propelled by a 2004 study conducted by the NGOs Global Witness and Partnership Africa Canada, 'Rich Man - Poor Man,4 which undertook an introductory analysis of artisanal alluvial diamond mining in Sierra Leone, Angola and the DRC. Whilst the study acknowledged the positive developmental impact of the diamond industry to countries such as South Africa, Botswana and Namibia, it
2 Simon Gilbert, De Beers Group External Affairs, 'Diamond Development Initiative Power Point Presentation', 23 November, 2005. 3 In October 2007 Partnership Canada Africa called for the expulsion of Venezuela from the Kimberley Process due to its failure to comply with basic reporting requirements. 4 Global Witness and Partnership Africa Canada, 'Rich Man, Poor Man - Development Diamonds and Poverty Diamonds: The potential for change in the artisanal alluvial diamond fields of Africa', 2004.
concluded that the picture for African countries engaged in artisanal alluvial diamond mining was "not a pretty picture". The research drew a number of conclusions:
• Artisanal alluvial diamond mining will never generate large amounts of revenue for the governments in question.
e Most artisanal diamond miners working in a 'casino economy' and hoping to strike it rich, actually earn an average of only a dollar a day.
• Given the large mark up at the first point of sale and the almost complete absence of a free market diamond economy in the digging fields, there are opportunities to increase the earnings of miners.
1& Real change could reduce the chaos and instability that the diamond fields spawn. At a minimum, diamonds could be the generator of decent incomes for hundreds of thousands of families, rather than the centre of unsafe, unhealthy, badly-paid piecework.
Whilst the first conclusion is demonstrably wrong, part of the challenge for the DDI is to address conclusions two to four.
In composition the DDI builds on the successful KP formula of tripartheid cooperation between the governments of diamond producing countries, the diamond industry and NGO/civil society formations and procedurally seeks to encourage, forge and strengthen trilateral partnerships between governments, business and civil society in the alluvial artisanal diamond mining sector. The Board of the DDI is currently chaired an NGO leader Ian Smillie of Partnership Africa Canada and his deputy is Dr Muzong Kodi of the London-based think tank Chatham House. The DDI Steering Committee comprises, inter alia, The World Bank's Communities and Small Scale Mining Secretariat, the Rapaport Group of Companies, the De Beers Diamond Trading Corporation, the NGO coalition Global Witness and Partnership Africa Canada. Significantly the 2007 G8 Summit in Heiligendam Germany also endorsed the DDI in its final declaration. The timing of the DDI is also propitious as the macro governance environment in alluvial diamond producing countries in Africa is slowly but significantly improving, with relatively peaceful and broadly legitimate elections being held in Liberia, DRC and Sierra Leone over the past two years. Although continuously postponing promised elections, Angola has remained stable and peaceful since 2002 and has recently recorded the fastest rates of economic growth on the continent.
Whereas the Kimberly Process is fundamentally concerned with the eradication of conflict diamonds and the establishment of a more peaceful African continent, the implicit working assumption of the DDI is that peace is a necessary but insufficient condition for development in Africa. The Diamond Development Initiative contends that where the conditions conducive to conflict persist, such as exploitative labour conditions, poor governance and illicit trade, the extraction and trade in diamonds has the potential to reignite and fuel conflict.
The DDI targets artisanal alluvial diamond diggers and miners as its primary beneficiaries, but is cognisant of the need to improve the conditions of women and the local communities dependent on and umbilically linked to diggers. If successful, this community-based bottom-up approach also holds the potential to significantly improve local economic and social development, as well as human security in alluvial diamond producing areas. Moreover, any successful initiative, if sustained, holds the potential to place the national economies of producer countries on a more sustained development trajectory.
The Diamond Development Initiative has three stated objectives:
• To gather and disseminate information on artisanal diamond mining
• To promote better understanding of, and possible solutions for:
);> Government regulation and mining regulation );> Distribution and marketing channels );> Organisational aspects of artisanal production );> Legitimate and transparent distribution channels );> Organisation among artisanal miners );> Free and open markets for artisanally mined diamonds
CIII To promote wide participation in the process, including governments, donors, industry and NGOs
The DDI is predicated upon the recognItlOn that the challenges to improving the governance of Africa's artisanal alluvial diamond mining and consequently enhancing the development of African producer countries, are highly complex, multidimensional and organically linked. Artisinal alluvial diamond mining occurs in areas that are uneconomic for large-scale producers and this has consequences. Whilst large diamond mining companies are financially stronger than many African governments and thus operate in a relatively unequal power dynamic, the converse also holds that large mining houses are subject to close public and media scrutiny, codes of corporate governance, shareholder and stakeholder activism as well as industry-wide codes, such as those of the International Council on Mining and Metals. By contrast, small-scale and arti s anal miners in Africa generally operate in a twilight zone of un-regulation and little accountability_
Digging for diamonds and development
Five broad imperatives informed the formation of the DD!. The first was the need to better understand, link and govern the relationship with between artisanal alluvial diamond mining and local formal economic, financial and banking systems. For as long as diamonds and in particular diamonds produced by arti s anal diggers in African
countries remain a fonn of parallel, grey or shadow currency, bypassing the fonnal banking system, the greater the likelihood that illicit and criminal activity will flourish. The use of diamonds as a parallel grey currency leads to tax evasion and the subverting of the formal economy. Given that most alluvial artisanal diamond mining in Africa takes place in three countries devastated by civil war, Angola, the DRC and Sierra Leone, any form of tax evasion or by-passing of the formal economy threatens the state's ability to govern, let alone embark on sustainable reconstruction and development programmes. Encouragingly however, the Kimberley Process has not only curbed the sale of conflict diamonds but has also helped to force out illicit diamond production. As a result, diamond revenues in Sierra Leone rose from a mere US$1 million in 2000 to US$ 142 million in 2005.5 In the DRC diamond revenues are now close to US$ 1billion per annum. In more practical and micro-economic terms the informal and grey market operation of artisanal diamond mining means that small scale miners are un-banked and fall outside of the fonnal financial system and are thus unable to access or secure microloans to develop their own operations or purchase equipment to make them more independent and less exploitable. The implications of the continuation of these chains of financial dependence are profound as it ensures the production and reproduction of acutely exploitative dependency relations between mine owners, the tributor system and workers/diggers.
The second area of challenge is that of improving the policy and regulatory framework governing artisanal alluvial diamond mining. The primary responsibility for the governance of the extraction of Africa's diamonds vests with African governments, yet the legislative, regulatory and licensing regimes operating in Africa remain uneven, inconsistent and opaque. Basic land tenure, property ownership and usage rights are often ill-defined or contested which is particularly problematical given the geographically diverse terrain of alluvial diamond mining. Existing land registry records are often outdated as well as being poorly surveyed and defined in rural West and Central Africa. Land ownership and usage is often subject to multiple claims from traditional leadership, local authorities, and commercial claims. For example, no geological survey of Sierra Leone's alluvial diamond fields has been conducted since the 1960s. Even in South Africa, the recent Richtersveld judgement in favour of local inhabitants forcibly removed from their land in the 1920s holds implications for the South African state-owned diamond miner Alexcor.
Moreover, even in cases where nominally sound mining policy and legislation has been passed, Ministerial capacity shortages remain the norn1 thereby reducing policy and legislation to a fig leaf masking the often harsh reality of artisanal diamond mining. 6
Transparency remains highly problematical as African governments remain notoriously guarded on matters of mining, minerals and revenues. Indeed with the exception of
5 Due to the cash-based, informal and 'grey' nature of much of the alluvial artisanal diamond mining in Sierra Leone, a significant amount of production is not officially recorded and thus potential revenue collection is far higher. 6 The brutal conditions under which artisanal alluvial miners operate under garimpo mining in Angola are described in Rafael Marques, 'Operation Kissonde: the Diamonds of Humiliation and Misery', Cuango, Lunda-Norte, Angola, 2006.
Botswana, South Africa and Namibia, resource rich African countries rank particularly poorly on the annual Transparency International perceptions index. Furthermore, despite recent peace settlements and the cessation of hostilities between warring factions in a number of diamond-rich African countries, former warlords have re-fashioned themselves as landlords, labour brokers and criminal entrepreneurs 7 controlling multiple aspects of artisanal alluvia diamond mining from cheap labour supply to middleman sellers. The artificially low prices paid to local producers by middlemen in countries such as Sierra Leone and the DRC also incentivises producers to by-pass these channels and smuggle rough diamonds illegally, but more profitably.
The third structural challenge confronting artisanal alluvial diamond mining in Africa and animating the DDI is the dearth of relevant information, technology and infrastructure available to improve the economic, financial and working conditions of small-scale and artisanal alluvial diamond miners. Artisanal diamond labourers typically lack even the most basic equipment such as shovels, picks and sieves and are 'loaned' this equipment by suppliers in the tributor system, which in turn is paid off by labourers handing over their diamond finds, should they be fortunate enough to make them. Artisanal diamond mine labourers lack as basic understanding of the true value of the stones they find and typically receive a pittance in lieu of payment compared to the 'true' value of the stones mined. Short of withdrawing their labour and risk being replaced by other exploitable labour, artisanal miners have little or no recourse to labour law or indeed basic human rights.
Artisanal alluvial diamond mining is highly labour intensive, but remains so by virtue of the low wage rates paid to artisanal mine workers. More than simply low wage rates, however, the conditions of employment of small-scale artisanal miners are often highly exploitative. The most vulnerable and exploitable of these are child labourers, which the DDI has given priority to tackling.
The fourth key area identified by the DDI is tackling the social and environmental impact of artisanal alluvial diamond mining. Given the climatic conditions of West, Central and Southern Africa, intensive labour activities, such as the arduous digging in river beds hold severe health implications for workers. In addition to the ever-present threat of collapsing diggings walls, workers are exposed to malaria, water-born diseases and infection. Due to the social organisation of labour and extraction around artisanal alluvial diamond mines, diggers are also exposed to prostitution and by extension, socially transmitted diseases including HIV I Aids.
Environmentally, whilst the major extractive multinationals have been responsible for some of most egregious environmental destruction in Africa, artisanal mining can itself
7 See for example, Gail Wannenburg, 'Africa's Pablo's and Political Entrepreneurs - War, the State and Criminal Networks in West and Southern Africa', South African Institute ofInternational Affairs, Johannesburg, 2006.
be highly deleterious to local ecosystems.8 This is particularly the case in the absence of a sound legislative and regulatory, monitoring and enforcement regime. Whilst multinational mining houses are subject to increasingly close scmtiny with respect to the environmental impact of their operations and social investment policies, artisanal mining is seldom subject to such scmtiny and controls. Indeed the geographically and topographically diverse and often informal nature of artisanal mining makes the regulation of such operations profoundly challenging. Furthermore, the post-mining restoration and rehabilitation of artisanal alluvial mining operations is almost entirely absent. Finally, apart from the 'labour opportunities' provided to local communities by artisanal diamond mining, there is little evidence of local communities significantly benefiting from, or integrating with, artisanal diamond mining. In fact, the contrary is often the case, with local communities being subject to dislocation, dismption, conflict, environmental degradation and relative underdevelopment.
The fifth area pre-occupying the DDI is that of improving security, in all its guises, around artisanal alluvial diamond mines and mining. In the unregulated, informal and historically conflict-ridden environment of artisanal alluvial diamond mining, illicit and criminal activity is often rife. Criminal networks pervade West, Central and Southern Africa and continue to use natural resources and commodities, with diamonds being a currency of choice, to fund their activities. This is not to deny the existence of criminal networks in well-regulated, governed and policed jurisdictions such as South Africa. As one South African mine company executive recently commented,
"Illegal diamond buying has always been a national sport in the Northern Cape (Province of South Africa), but it's now attracting a more violent kind of criminal and it's particularly dangerous for the small operators who cannot afford the security. ,,9
These networks typically also have regional and international dimensions and linkages and continue to use diamonds as a fungible currency for the purchase and exchange of weapons, dmgs, vehicles, property, legitimate businesses, or simply cash. IQ Moreover these criminal networks subvert local policing and customs officials via pervasive bribery and cormpt practices, chains of nepotism and cronyism. Furthermore, the economic, financial and logistical linkages between criminal networks and terrorist movements is now well-documented and the social economy around the production of alluvial artisanal diamond mining in West and Central Africa in particular make it an ideal link in such a criminal/terrorist helix. Thus a key objective and challenge of the DDI is to improve the security and governance regimes surrounding artisanal alluvial diamond mining.
The DDI case study - Sierra Leone
8 This environmental degradation is not confined to artisanal alluvial diamond mining. For example, the influx of some artisanal gold miners into eco-sensitive areas of the highlands of Tanzania is causing grave concern for local communities. 9 Brendan Ryan, 'A thief's best friend', Financial Mail, 14 September, 2007. 10 See for example, Alex Vines, 'Dousing the Flames of Resource Wars', South African Journal of International Affairs, Volume l3, Number 2, Winter/Spring 2006, SAIIA, Johannesburg.
One of the key challenges facing the DDI and the industry more broadly is to better understand and clearly map the artisanal alluvial diamond mining mode of production and exchange. To date this has been done in one DDI-commissioned country study in Sierra Leone,11 although other studies in the DRC and Angola are pending. Sierra Leone presents the classic case of the 'resources curse' in Africa, denoting a country rich in natural resources, yet acutely underdeveloped, in part, due to the poor governance of and conflict over its natural resources, particularly diamonds. This paradox of plenty is illustrated by the fact that Sierra Leonean diamonds are of consistently high quality with a run-of-mine carat value that is higher than almost all other diamond producing countries,12 yet the country ranks last of the 177 countries measured on the United Nations Human Development Index. Moreover, paradoxically and perversely, the Kono district, the heart of the country's diamond producing region, is the poorest nationally. Recent studies estimate that some 50% of all diamonds produced in Sierra Leone are still smuggled out of the country and diamonds continue to be smuggled into Sierra Leone from neighbouring Liberia. Nevertheless, like its previously conflict-ridden alluvial diamond producing counterparts, Liberia, the DRC and Angola, the Sierra Leonean diamond mining sector has shown healthy signs of recovery since the ending of the civil war in 2000. Indeed the Sierra Leone civil war propelled the formation of the Kimberley Process and the KP has repaid this debt by helping to ensure that the trade in the country's rough diamonds no longer fuels or incentivises conflict or civil war. Whilst the KP does not halt conflict or civil war in diamond producing countries, it greatly reduces the incentive to engage in conflict, be it greed or grievance driven. Indeed in the post 2002 peace agreement and political settlement era, the DDI report concludes,
"Most of the problems of today's diamond industry in Sierra Leone boil down less to wilful corruption and mismanagement than to challenges of governance and procedure. State capacity is still weak, and there is a culture of bureaucratic tardiness. Governmental oversight in almost every matter is still significantly limited." 13
For example, despite a marked increase in the number of mining, dealer and export licences issued increasing by more than 200% to some 2300 in 2004 alone, the Ministry of Mineral Resources employed a mere 110 Mines Wardens responsible for the mapping of mine areas, the issuance of licenses, regulating mining activities and ensuring environmental standards are adhered to. Mine Wardens starting pay is some US$300 per annum, lower than that of artisanal miners. In support of the Mine Wardens are some 200 Mine Monitoring Officers (MMO) who have no security of tenure, but are better paid than the Mine Wardens, receiving some US$50 per month. The governance challenge of the Mine Wardens, MMO's and Ministry is compounded by the fact that a mere 11% of the country's diamond exports are from industrial Kimberlite mining in the Kono District, with the bulk of production coming from the geographically diverse alluvial
11 Estelle A Levin and Lansana Gberie, commissioned by the Diamond Development Initiative, 'Dealing for Development - A study of Diamond Marketing and Pricing in Sierra Leone', March 2006. 12 Partnership Africa Canada, 'Diamond Industry Annual Review - Sierra Leone 2005'. 13 Partnership Africa Canada, ibid.
mines. Case studies conducted by the Global Witness and P AC teams in researching the 'Rich Man, Poor Man' report indicate that inspections by MMOs are often cursory and are subject to manipulation and bribery by local communities and traditional leaders.
Whilst the study is an invaluable first step in identifying, mapping an understanding the morphology and political economy of artisanal alluvial diamond mining in Sierra Leone, its findings, conclusions and recommendations are daunting. These include:
@ Artisanal alluvial diamond mining correlates quite strongly with local economic stagnation, inter alia, due to capital flight, absence of credit opportunities, absence of donor and NGO support for economic diversification programmes, predation on the part of the government with respect to extracting the maximum from the industry whilst supplying little benefit in return.
@ Frequent 'duping' in the industry in part because payment to diggers is discretionary and profoundly unequal power relations between diggers, miners and dealers. The law is unequally applied and indeed the parties to have markedly differentiated access to and benefit from it.
@ Declining returns from artisanal alluvial diamond mIllmg due to a lack of effective prospecting for potential new sites, new virgin land generally has deep gravel and is thus expensive to exploit and finally, the practice of the re-licensing and re-mining already exhausted or un-payable land.
The report makes no less than 24 thematic recommendations to improve the conditions for the organisation, production, financing and sustainability of artisanal alluvial diamond mining in Sierra Leone, ranging from the establishment of an effective cadastre system, to capacitating government ministries to finding sustainable alternatives to diamond mining. All of these recommendations are sound and well-reasoned, but what remains unclear is how to move from analysis, diagnosis and prognosis to implementation and effective action.
DD! challenges and prospects
Although the DDI is still embryonic, the objective conditions in Africa are increasingly conducive to its eventual success. Firstly, war, civil war and conflict on the African continent are at their lowest ebb since the 1960s. More particularly peace, albeit sometimes fragile and tenuous, has returned to the significant alluvial diamond regions of producing countries such as Angola, Sierra Leone, the DRC and Liberia. Although far from consolidated, electoral democracy in these countries shows signs of taking root, with the prospect of improved political and economic governance to follow. Secondly, pan-African programmes such as the New Partnership for Africa's Development (NEP AD) and its African Peer Review Mechanism counterpart are slowly elevating good governance and development up the agendas of an increasing number of African countries. Thirdly, after years of intensive public scrutiny and pressure, mining companies operating in Africa are moving towards greater transparency in their
operations. Sustainable partnerships between the corporate sector, African governments and civil society are increasingly the preferred business development model for sustainable resource extraction on the continent. Finally and perhaps most significantly, despite its limitations and evolving nature, the Kimberley Process has been effective in reducing the trade in conflict and illicit rough diamonds in Africa. Conflict diamonds now constitute less than 1 % of global supply, but the foundation of the impressive statistical success of the KP lies in increased local awareness and vigilance, national legislation, strengthened capacity amongst local border and customs officials, the benefit ofKP membership shared experience and the threat of sanction.
Despite this more hopeful and propitious environment, the DDI has its work cut out.
The DDI is at pains to emphasis that it is not a donor or funding body and that its strength lies in its combined expertise and co-ordinating role. Nevertheless whilst the body enshrines key players in the diamond pipeline, it lacks the locus standi of the Kimberley Process. This translates into a lack of funding and institutional capacity to achieve its stated objectives and also has no powers of sanction or enforcement. Secondly, the goals of the DDI are a harder sell, than those of the KP. The issue of development is a more nebulous and elusive concept than for example conflict resolution or peace-keeping. The stark graphic images of the limbless victims of Sierra Leon's RUF brutality held a particular resonance for the media and stakeholders, thereby galvanising industry-wide global action. Whilst the conditions of employment for the majority of artisanal alluvial diamond diggers are desperate, this is still some way away from the potency of the image of war and conflict. Simply put, to attract the type of attention and consequential support for its objectives, the DDI will have to judiciously manage an effective campaign of awareness raising, not just within producer nations, but globally. In so doing however, the DDI will need to deal with the potential for issue fatigue and the perils of 'mission creep'. Most fundamentally however, the DDI ultimately seeks to decisively alter the mode of production of artisanal alluvial diamond mining and in so doing alter practices that have persisted for centuries in some of the most difficult social, governance and environmental conditions. Unlike the KP, which targeted easily identifiable groups and governments, the DDI will have to deal with a chain of production, support and exchange from diggers, tributors, owners, middlemen, local communities and all tiers of government within producer countries. Furthermore, it is confronted with tackling grey, informal and illicit practices at the local level, with all its attendant challenges of monitoring and enforcement. Moreover, fundamental to the achievement of the DD Is objectives will be altering the pricing and value chain of diamonds at the point of production and first exchange or sale.
This is not an impossible task, but one that will require co-operation and commitment beyond just those directly involved in the diamond pipeline. Ultimately three factors will be key to the success or failure of the DDI. The first is the degree to which the Initiative can galvanise the sort of trilateral suppOli enjoyed by the KP, but for a far more targeted sector of the diamond pipeline and within a narrower range of producer countries. The second challenge is to develop policies that are tailored to the specific conditions on the ground in these fragile and vulnerable states. Such policies must be properly costed,
prudent and implementable, yet almost revolutionary in their impact. The final and most challenging imperative is that alluvial diamond producing countries must ensure that they give policy and budgetary priority to tackling the pathologies of artisanal alluvial diamond mining. This will require more than rhetoric and public declarations of support, but rather the development of sustained partnerships with producers, industry stakeholders, local communities and indeed the donor community. The task of governments is to govern and the responsibility for establishing and maintaining an environment conducive to the success of the DDI rests principally an ultimately on governments themselves.
******************
