This report is prepared within the framework of the Diamonds for Development programme (D4D). The D4D directly targets the role that mineral resources have played in conflict and can play for development.
D4D programme includes complementary activities at sub-regional and national levels for policy reforms and also activities at local/community levels to improve local governance. D4D also aims to improve livelihoods of diamond producing communities, thus demonstrating that with equitable, transparent and accountable management of mineral resources it is possible to reverse the resource curse and fight poverty.
ased on a series of visits to working diamond mines, interviews with diggers, mine owners, traders, exporters, government officials and NGOs, the report describes the current state of the diamond industry in West Africa, providing both an overview of the sub-region and detailed analysis of each country. It identifies possible ways of using diamonds as a tool for development rather than a fuel for conflict, including how to deliver a larger part of the revenue from diamonds to the miners themselves and to the rural communities that host them, plus strategies for making artisanal mine owners more efficient and profitable and less financially dependent on the traders who buy their stones. It also suggests ways of improving cooperation and harmonising diamond policy at the regional and international level.
Diamonds and conflict in West Africa
Diamonds helped fuel the civil wars of Sierra Leone and Liberia during the 1990s, prompting the UN Security Council to ban diamond exports by Sierra Leone between 2000 and 2003 and impose a diamond embargo on Liberia that is still in place.
Following the outbreak of civil war in Cote d’Ivoire in 2002, the existence of diamond mines in the rebel-controlled north of the country raised international concerns that diamonds could become a contributing factor to the conflict. The Security Council banned diamond exports from Cote d’Ivoire in December 2005.
However, peace returned to Sierra Leone in 2001, Liberia’s civil war came to an end in 2003 and the conflict in Cote d’Ivoire appears to have stabilised. Guinea, which repelled an attempted invasion of its diamond producing areas in 2000 and 2001, has so far managed to avoid internal strife.
Production and the workforce
Reliable figures on the number of diamonds mined and people involved in mining are extremely difficult to gather.The diamond industry in West Africa is secretive and poorly documented. Much mining takes place clandestinely and smuggling is rife. Mining ministry officials often differ among themselves when estimating the size of the industry. The numbers given by traders and NGOs are frequently based on inspired guesswork or self -interest. It is particularly difficult to assess diamond output in Liberia as the UN embargo on exports means that all mines in the country are operating clandestinely.
However, the information available indicates that the combined value of diamond production of Cote d’Ivoire, Liberia, Sierra Leone and Guinea is in excess of $300 million annually. Diamonds play a huge role in the economies of Sierra Leone, Guinea and Liberia, providing an important source of income in rural communities that otherwise rely on subsistence agriculture and casual employment to fortune seekers from all over West Africa.
About 90 percent of the sub-region’s current diamond output comes from artisanal mines. Gangs of diggers extract piles of gravel from pits in the ground up to 20 metres deep. They then wash it in sieves to remove the mud, sand and larger stones in the hope of finding a diamond among the small chippings that are left in the mesh.
The diamond industry involves mine owners, diggers, supporters and exporters. Mine owners have, or claim to have, the legal right to mine their plot of land and to own all diamonds found there. They employ diggers to work for them. Although there is no consensus on the number of diggers employed in the industry, it is probably somewhere between 250,000 and 500,000 men. The overwhelming majority are casual labourers who are paid mainly in kind, through the tributer system, which means that instead of a fixed daily wage, they are given a daily food ration and a small cash allowance plus a small share in the sale price of any diamond they find.
Most mine owners lack the capital necessary to work their claim so they rely on finance from a supporter (mostly small businessmen) who provides tools and food for the diggers, plus pumps to clear water from the pits in return for the exclusive right to buy all the diamonds produced by the mine. There is no independent source of finance for artisanal miners and so they are forced to rely on a system that they say cheats them because prices are fixed by the supporter. The situation of the bonded seller is a major problem.
The main exporters, who buy diamonds from intermediaries and handle the majority of stones exported to international markets, are Lebanese. They dominate the legal export trade in
Sierra Leoneand Guinea and the top end of the illicit trade in Liberia and Cote d’Ivoire. Export licences are expensive.
Incentives, control and regulation
Tax in Sierra Leone and Guinea is deliberately set low at three percent on exports and five percent on production in order to encourage traders to sell their diamonds openly and legally. Liberia is planning to adopt the same rate once UN sanctions are lifted. Tax in Cote d’Ivoire is, however, high. In all four countries, even clandestine miners without a government licence still end up paying ‘tax’ of some sort, to local chiefs or military commanders.
A well-managed and effectively run diamond industry would be in the interests of the region as it would facilitate the transfer of a share of the wealth generated by the industry to the poor. Fair taxation and licensing would provide an opportunity to finance development projects in rural communities that have coped with the social disruption and environmental degradation that mining for diamonds brings.
Artisanal diamond mining in West Africa is a high risk, individualistic, flexible and cash-led business that crosses ethnicities and borders. Financial incentives work much better than bureaucratic regulation when it comes to applying controls and policy in such a fluid sector. This report suggests that this should be kept firmly in mind when devising policy aimed at making the industry more equitable, as the industry has learned to operate smoothly both within and outside the law, including how to bypass the Kimberley Process. It argues that the present system of tributer labour and supporter-financed mines works, even in the most adverse conditions and that any policies introduced to distribute profits more fairly should build upon the existing system and work with it, rather than seeking to destroy and replace it.
The report explores a number of issues that apply to all four countries in the sub-region and identifies points for discussion by West African governments and the international community.
Improving the situation of the diggers
The diggers come from all over West Africa and have little prospect of meaningful employment. Many are former combatants from the sub-region’s civil wars. This highly mobile workforce lives in extreme poverty and is the most important target group to assist when it comes to using diamonds for development. The tributer system means that they are motivated by the hope of finding a big diamond that will make their fortune; in reality their chances of doing so are very slim. The conditions in which they work are dangerous and health and safety rules are rarely applied. Efforts to promote cooperatives and unionise diggers in the region have so far proved unsuccessful.
One of the ways to improve the living conditions of diggers is to raise their income, and the most obvious way of doing this would be to help mine owners increase the selling price of their diamonds so that diggers earn more with each stone that they find. In addition, it should be possible to negotiate minimum conditions of employment under the tributer system, to include working hours, food rations, cash allowances, sharing value of diamonds, health and safety, and sickness assistance. A third option would be to establish a regionally based trade union with autonomous local branches that would allow diggers to move between mines and effectively represent their voices and interests both at the local and international levels.
Empowering the mine owners
Although mine owners are often assumed to be real bosses of the artisanal mining industry they are often little more than front-men for the supporters – the diamond traders who finance their operations and demand in exchange the exclusive right to buy their stones. Few owners have the capital to spread their risk by working several different plots simultaneously and so most rely on investment from supporters. However, their earning point is limited by their obligation to sell their stones to the supporter at the price that he dictates. Even if a financially independent mine owner is free to sell to the highest bidder, price information does not circulate freely and they are often persuaded to sell their diamonds at a less than fair price.
The most effective way to increase the profitability of artisanal mines and improve the living standards of all those who work in them would be to engineer an increase in the selling price that miners achieve for their diamonds. This will be difficult so long as the miners remain bonded sellers to their financial supporters and unable to assess the real value of their diamonds, therefore allowing themselves to be cheated by dealers. A combination of strategies to improve miners’ knowledge of the market (e.g. training in diamond identification/valuation, provision of information, price transparency) and measures to make artisanal miners more efficient and profitable (training in mining techniques, forming cooperatives to buy/lease machinery), as well as introducing new sources of mining finance to compete with the supporter system would begin to address this.
Cooperatives as a solution
Cooperatives have a poor record of financial success in the diamond mining industry in West Africa, but they could usefully play a more limited role as a vehicle for helping small-scale miners to buy or lease heavy machinery for shared use. However, previous attempts at forming them in Liberia and Sierra Leone proved unsuccessful, for a combination of reasons such as the exclusion of diggers, problems with financing, unsuccessful marketing strategies and poorly chosen cooperatives with too few licences to be profitable.
Any future initiatives to set up cooperatives as a way of ensuring that miners and diggers benefit more from the diamonds that they produce must ensure that there is a well-defined structure with clearly defined roles and responsibilities and that the cooperatives are sustainable, large enough to spread their risks and located in areas where people have expressed an interest in forming them.
Cash and control for the mining communities
The wealth generated from diamonds has benefited only a small minority of individuals; the overwhelmingly large majority of the diamond-producing communities are desperately poor. They deserve to earn a fair share in this wealth, not least as they bear the cost of social disruption and environmental degradation that mining brings. They also deserve a degree of control over mining on land within their jurisdiction in order to preserve their interests. This is also in the interest of governments, as communities with a stake in mines on their land will enforce mining legislation, ensuring that mines are licensed and diamonds sold through legal, taxable channels. Failure to spread the wealth created by diamonds may result in conflict, as experienced in the Niger Delta over oil.
Arrangements in Cote d’Ivoire and Sierra Leone to give local communities a say in the granting of mining licences and a share of licence fees and revenues should be refined and extended where appropriate to Guinea and Liberia. Other measures aimed at spreading diamond-related benefits and controls could include allowing mining communities to receive part of the export tax levied on diamonds by central government to fund local development projects, ensuring that licence approvals and spending of revenues are handled transparently by committees of local representatives and levying a fee on mine owners for land remediation, charging mine owners with the responsibility for restoring the land after operations cease.
Central government – revenue and regulation
Although Sierra Leonean experience has shown that, even with a diamond tax of three percent it is possible both to cover the costs demanded by the Kimberley Process and return reasonable and meaningful revenues to the diamond mining communities. However it would unrealistic for West African Governments to expect artisanal diamond mining to generate major income for their treasuries. The key to raising larger state revenues from diamond mining is to promote Kimberlite industrial production, encouraging large producers whose operations are fundamentally different to those of the artisanal miners so there is no competition between the two sectors.
When mechanised mining companies compete for alluvial site with local artisanal miners, conflict emerges as has already happened in Sierra Leone. Governments, companies, INGOs and the UN must ensure that conflict sensitivity is a key component in their work if potential conflicts are to be avoided and lessons learned. A conflict-sensitive approach requires participatory analysis of any existing or potential conflict, good communications, strong local relationships and shared decision-making.
The regional and global dimension
Sierra Leoneand Guinea have adopted a uniform export tax of three percent and Liberia is set to follow suit. Cote d’Ivoire retains a much higher rate of taxes. International sanctions against diamond mining in Cote d’Ivoire and Liberia have failed, increasing the volume of smuggled diamonds flowing out of West Africa and undermining legitimate trade in Guinea and Sierra Leone. The Kimberley process has helped to ensure that a higher percentage of the diamonds produced by Guinea and Sierra Leone are sold through legal channels but it has not managed to ensure that each diamond certified can be reliably traced back to its mine of origin.
The workforce, including many ex-combatants, is highly mobile and moves across the region’s borders. Attempts by individual governments to exclude non-nationals from participating in the local diamond-mining industry would disrupt the legal production and marketing of diamonds.
A harmonised tax on artisanal diamonds in the sub-region would discourage smuggling. Governments might also consider harmonising the way that they structure and issue artisanal mining licences in order to ensure that local communities receive part of the licence fee and that remediation of land is assured once mining operations cease. As diamonds are not a significant factor in Cote d’Ivoire’s conflict, the international community should consider lifting the UN embargo on their export and devising an arrangement whereby diamonds produced in the rebel-held north can be sold legally, thus preventing them from being smuggled into neighbouring countries. Another point for consider is the adaptation of the Kimberley Process to allow it to account for rough diamonds that are cut and polished in the country of their origin, thereby increasing their export value. Concerns over the cross-border movement of ex-combatants could be addressed by closer cooperation between government security agencies and UN peacekeeping forces.
Diamonds and gold
Although the main focus of this report is diamond production, during the research process it became evident that the extensive artisanal gold mining in the sub-region shares many characteristics of diamond mining, including the tributer labour system and supporter-based finance system. Most of it is sold through unofficial channels, depriving governments of income and tax revenue and financing conflict and criminal activity. Although ‘uncontrolled gold’ have attracted much less attention and concern than ‘conflict diamonds’, it poses similar problems that require similar solutions. More research is required on artisanal gold mining in West Africa, in order to both accurately describe its scale and to identify strategies to make it an instrument for development in the region.