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The Stuff of Legends

Diamonds and development in southern Africa

By Marcus Noland | November 2006

Marcus Noland and J. Brooks Spector

© Business Leadership South Africa

EXECUTIVE SUMMARY

The impact of diamond mining on economic growth and development—especially in Africa—is attracting considerable international attention. This is occurring in the context of three years of global experience with the Kimberley Process Certification System (KPCS), designed to monitor and regulate the worldwide sales of rough diamonds.

This study establishes four propositions. The first is that the diamond industry has been a positive force for development in southern Africa. It has created jobs, earned foreign exchange, and contributed to the development of infrastructure available to all. historically, the industry's cartelised structure has extracted rents from relatively wealthy consumers in North America and Europe and transferred them to relatively poor producers in southern Africa. Of course, the owners of the mining giant De Beers are not poor by any stretch of the imagination, but the partial public ownership of corporate assets in Botswana and Namibia, post-apartheid initiatives in South Africa such as the black economic empowerment (BEE) programme, and unionised workforces in all three countries mean that the benefits of diamond mining are increasingly broadly shared.

The second proposition is that jewelery, among the most profitable segments of the industry, is a non-essential luxury, and that consumer concerns over 'conflict diamonds' therefore pose a long-term threat to the industry. Ironically, the non-competitive structure of the industry, and its dominance of a single firm, De Beers, has made it easier to address this emerging threat (and associated third-party ethical concerns) quickly and decisively. Despite the absence of conflict diamonds from southern Africa, these countries have been in the vanguard of addressing this issue.

The third proposition is that the key to 'conflict diamonds' is not diamonds as such, but violent political conflict. Trade in conflict diamonds is a fraction of what it was just a few years ago, partly due to the Kimberley Process, a multilateral effort to eradicate the illicit trade in diamonds, and partly due to progress in resolving political tensions in several African countries. Because political conflict is an enduring feature of the human condition, the conflict diamond problem can never be permanently resolved, but systems can be—and have been—created to diminish substantially the role of diamonds in encouraging conflict and financing political disputes.

The fourth proposition is that the diamond industry, civil society, and the public sector share the challenge to strengthen the Kimberley Process Certification System (KPCS) aimed at eliminating trade in conflict diamonds, and enhancing the related Diamond Development Initiative to regularise artisanal production and bring small diggers into the system.

External Link: The Stuff of Legends

Read More: Economy, Ethics, Human Rights, Africa

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