Diamonds have brought little benefit to Africa’s masses in
the 139 years since Cecil Rhodes bought his first South African mining claim. 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,
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
African jewelry design competitions and some jewelry manufacturing, neither of which
has had much impact as yet in major markets.
Cutting and polishing
“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
& 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
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 the local diamond industry 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
Diamond sorting moves
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
will transfer its London-based rough diamond aggregation and international
sales activity to Botswana next year.
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.
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.
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