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Expand 01. What is a “Good" Job?01. What is a “Good" Job?
Expand 02. Job Strategy or Growth Strategy, Which Should Come First?02. Job Strategy or Growth Strategy, Which Should Come First?
Expand 03. How to Tackle Youth Unemployment?03. How to Tackle Youth Unemployment?
Expand 04. Should Jobs Good for Development be Targeted?04. Should Jobs Good for Development be Targeted?
Expand 05. Building Skills, Which and How?05. Building Skills, Which and How?
Expand 06. How Can Entrepreneurship be Fostered?06. How Can Entrepreneurship be Fostered?
Expand 07. How Can Economies Move From Low to High Productivity Jobs?07. How Can Economies Move From Low to High Productivity Jobs?
Expand 08. How Can Job Policies Improve Social Cohesion?08. How Can Job Policies Improve Social Cohesion?
Expand 09. Should Policies Protect People or Jobs?09. Should Policies Protect People or Jobs?
Expand 10. Is Global Job Competition Here to Stay?10. Is Global Job Competition Here to Stay?
Expand 11. Should Policy Makers Embrace Informality?11. Should Policy Makers Embrace Informality?
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Last modified at 1/18/2013 10:37 AM by JKP Admin
To spur private sector development and the creation of good jobs, should policy makers aim to level the playing field for all firms or to target interventions to particular locations, areas or firms?  What are factors to consider that may affect the choice?  How can we learn from past experiences with industrial policy, efforts to spur structural adjustment, incentives to attract foreign direct investment and innovation policies?

Africa creates jobs in the diamond industry

 

The diamond-rich countries of southern Africa are using natural resource and industrial policy to directly boost employment and skills development in downstream activities in the diamond sector. This is in addition to significant state revenue generated by the stones each year: in 2011, De Beers paid $1.5 billion in diamond taxes and royalties to African governments.

 

For most of the past 139 years since Cecil Rhodes bought his first mining claim in Kimberley, South Africa, diamonds have brought little benefit to Africa’s masses. The bulk of the $8.5 billion worth of diamonds mined in Africa each year are still in the rough when they exit the continent to make money for people elsewhere along the value chain. While 43% of all diamonds come from Africa, most are cut and polished in India or China and traded in Antwerp in the Netherlands, with design concentrated in the U.S., India and China.

 

Since the 1990s Botswana, South Africa and Namibia have insisted that companies wanting access to their diamond resources must train and employ local people in cutting and polishing a portion of the stones. The companies also sponsor southern African jewelry design competitions and some jewelry manufacturing, neither of which has had much impact as yet in major markets.

 

Cutting and polishing in Africa

“Beneficiation”, a term African countries use to describe their demand for greater benefit from the diamond business, was formalized in 2007 according to the just-published De Beers Report to Society. Since that time, the company said, over US$5.3 billion of its stones have been processed to some degree in Africa and other producer countries, mainly at the cutting and polishing stages. De Beers says that in 2011 20% of its diamonds went through some degree of processing within Africa.

 

The company says beneficiation has created 5,500 direct manufacturing jobs in producer countries since 2007. That doesn’t seem much relative to all the benefits that African diamonds generate for non-Africans. A Bain & Company report prepared for the Antwerp World Diamond Centre says there are 700,000 to 800,000 diamond cutters in India, supported by state subsidies, and another 30,000-50,000 in China and Thailand. About 10 million people are employed by the industry worldwide, according to the industry website diamondfacts.org The failure to create a meaningful number of jobs in the downstream diamond business in Africa may underlie the push by South African unions to nationalize mines.

 

High production costs in Africa

Productivity will have to improve if more jobs are to be created in diamond manufacturing in Africa. The cost per carat of cutting and polishing a stone is about US$10 in India, $15-$20 in China and $40-60 in South Africa, according to the Bain report.

 

Unfortunately the report doesn’t suggest what comparative advantage underlies India’s dominance in processing diamonds. Is India’s industry bigger than Africa’s because the former has better access to the latest technology? Because of a critical mass of skilled Indian workers with decades of experience? Because it has successfully fuelled Indian brides’ appetite for wedding diamonds? Understanding India’s success will be a key part of building a competitive diamond processing sector in Africa.

 

Diamond sorting moves to Namibia

One new development may have the potential to transform Botswana, the single largest producer of diamonds in the world, into a leading diamond trading and manufacturing hub. As part of a sales agreement with the government, DeBeers will transfer its London-based rough diamond aggregation and international sales activity to Botswana next year.

 

Development diamonds, not blood diamonds

The diamond industry has realized that keeping even a minor portion of the value chain in Africa can help them counter the infamy of “Blood Diamonds”. That 2006 movie depicted the reality, revealed by the NGO Global Witness and others, that diamonds have been used by illegitimate authorities to brutally grab or maintain power in Sierra Leone, Angola, Ivory Coast, Liberia, the Democratic Republic of Congo, Congo Brazzaville and Zimbabwe.

 

The industry wants to align its image with the notion of “development diamonds” rather than “blood diamonds”. Research by the Shand Group shows that more than three-quarters of consumers care about their diamonds’ origins, how they are mined and the story behind each piece of jewelry that tells them how it is special. Being able to weave into their advertising and public relations the stories of small-town and rural Africans who sort, cut, polish and sometimes design jewelry is now a bonus for the industry. Mining giant Rio Tinto, for example, has just launched its ‘Diamonds with a story’ marketing initiative, using the tale of a stone’s provenance as part of their sales pitch.

 

Helping artisanal miners

The companies also work with the Diamond Development Initiative to support improvements in working conditions for 1.5 million artisanal and small-scale miners who dominate the African and South American diamond extraction business. The initiative also helps that more benefits from mining diamonds will accrue to these miners who live in abject poverty. ​

Responses received via social media

One response has been received to this Wiki post via social media. Twitter userTheissue27 said​ policymakers should target specific interventions to create solutions.