- The Washington Times - Wednesday, February 21, 2007

LONDON — The $60.5-billion-per-year diamond industry has welcomed a plan to halt the illegal “conflict trade” whose profits fund rebel groups in Africa’s civil wars. Sierra Leone’s turnaround is one example.

Five years after the end of Sierra Leone’s decade-long civil war, the eastern mining town of Koidu still bears the scars of conflict. Many of the roads leading from the town in the country’s eastern province turn into dirt tracks, no streetlights can be found, and most of the buildings have seen better days.

Despite the obvious lack of modern infrastructure, there is a buzz. The two hotels in town have regular business, and a branch of the bank in Freetown, the country’s capital, has opened its doors for the first time. Built on rich, alluvial diamond fields, Koidu again has become the center of the country’s diamond industry, and is attracting explorers from all over the world.

Hollywood messages

It was a different scene a decade ago. During the late 1990s, the country’s vast diamond wealth became synonymous with the trade in “conflict diamonds.” The Hollywood blockbuster “Blood Diamond,” which opened in December, is set against the chaos of the civil war in Sierra Leone.

The film tells the story of Danny Archer, played by Leonardo DiCaprio, an ex-mercenary from Zimbabwe who is on the trail of a rare pink diamond. Although the film has provoked questions about how much illegal trading continues, far from dampening diamond sales, it has given the industry an opportunity to emphasize changes that have taken place.

During an interview late last year, Jonathan Oppenheimer, a director De Beers group, which controls 40 percent of the diamond trade, said the film was not a negative development.

“The movie has been — let’s be blunt — a kick in the backside to get our act together, and I see it as a great opportunity to put out the facts and have people debate and apply them.”

At the Golden Globes award ceremony last month, for example, Beyonce Knowles and Jennifer Lopez turned up brandishing their diamond jewelry for the cameras. The stars are part of a multimillion-dollar marketing campaign by the industry titled “Raise Your Right Hand.” They agreed to wear diamond rings on their right hands in return for a promise from the industry of $10,000 each to the African charity of their choice.

Conflict-free status

Away from the red carpet, the industry deserves credit for cleaning up its act. The conflict in Sierra Leone triggered what has become known as “the Kimberley Process Certification,” backed by the United Nations. Formally adopted four years ago, it requires participating governments to ensure that each shipment of rough diamonds be shipped in a secure container and accompanied by a government-validated certificate.

Meanwhile, De Beers stopped all outside buying of diamonds in 1999 to guarantee the conflict-free status of De Beers diamonds.

Today, the industry says that less than 1 percent of diamonds on the market come from war zones, compared with about 4 percent in the late 1990s.

Nobody can guarantee that illegal trading does not occur because most of the diamonds in Sierra Leone are alluvial, meaning they are near the surface in present and former riverbeds, where villagers scratch the soil for precious stones. But most people flocking to Koidu these days are bona-fide Western investors.

Since signing on to the Kimberley Process in 2003, Sierra Leone’s revenue from diamonds has soared: It exported about $142 million worth of diamonds in 2005.

Reason for enthusiasm

James Campbell is one of the Western investors betting on the country’s diamond industry. The deputy chairman of West African Diamonds, a mining and exploration company newly listed last month on London’s Alternative Investment Market — the London Stock Exchange’s global market for small, growing companies — Mr. Campbell flew out to Sierra Leone for the first time late last month.

Upon his safe return to London, Mr. Campbell said that before he got there, he had visions of being bundled into a car on arrival and never stepping outside.

The reality, he said, was different. Although the country is war-ravaged, he never felt threatened and even went running every morning — something he never does in South Africa, where he lives.

The company operates from a house in the center of Koidu and intends to employ up to 60 people when it gets up and running.

“I came back feeling more enthusiastic than before,” said Mr. Campbell. “The country is desperate for development.”

Formerly at De Beers, where he helped set up the Kimberley Process, Mr. Campbell said any diamonds from West African Diamonds’ mines will go through the same process. The company also will comply with national legislation. He acknowledged that freelance digging is rife but argues that dramatic improvements have been made in recent years.

“In terms of volume and value [the problem of conflict diamonds] is tiny. Look at other industries like copper and gold — I would imagine it would be more,” he said.

‘Used for good’

Supporters of the industry say the issue of conflict diamonds overshadows the benefits diamond mining brings to the countries in which it is active. The World Diamond Council (WDC) reports that an estimated 10 million people are directly or indirectly supported by the world diamond industry.

In Botswana, where De Beers has formed a joint venture with the government and the industry represents one-third of the country’s gross domestic product, diamond revenues allow free education for every child up to age 13.

Eli Izhakoff, WDC chairman, said the industry has been a force for good in countries such as South Africa and Botswana.

“There is a good story to be told: how diamonds are used for good,” he said. Mr. Izhakoff conceded, however, that “even one diamond that penetrates the legitimate market is one diamond too many, because we do have zero tolerance for any conflict diamonds on the market. We are striving to make it perfect. We are not resting on our laurels.”

Despite the watchful eye of the WDC and the rigor of the Kimberley Process, critics say loopholes still exist. Conflict diamonds still come from rebel-held areas of Ivory Coast, skirting a U.N. embargo there, and are smuggled through Ghana or Mali. According to the United Nations, the value of these conflict diamonds is about $23 million.

Annie Dunnebacke, a campaigner on the conflict-diamond team at Global Witness, the advocacy group that alerted the world to the problem in 1998, said one of the reasons for the drop in the illegal trade is simply that a lot of the conflicts have stopped. Despite that, diamonds are still being smuggled out of countries such as the Democratic Republic of the Congo.

Global Witness recently screened a documentary by Sierra Leone filmmaker Sorious Samura called “Blood on a Stone,” which tells how illicit African diamonds continue to be smuggled out and sold.

Although “you are never going to stop smuggling,” she said, the industry can take action to improve the situation. Global Witness wants more government oversight of the diamond industry and better independent auditing of its processes.

Uncontrolled sources

Perhaps an even bigger challenge is how to control the diamond sector not controlled by the mining industry. Most formal mining is of kimberlites, “pipes” containing diamonds hidden beneath ancient volcanoes. They make for vertical hard-rock mines, are most often found in southern Africa and require large investments of capital and expertise.

A second source of diamonds, more often found in central and western Africa, involves alluvial deposits, where erosion over millions of years has scattered diamonds across riverbeds. Unlike kimberlite, such deposits are rarely of interest to big companies, but up to 15 percent of the world’s rough diamonds come from these informal digs, which are often unlicensed and open to corruption.

“The challenge is: De Beers is only 40 percent of the market. What about the other 60 percent?” asked professor Alyson Warhurst, who heads strategy and international development at Warwick Business School and has advised De Beers on best practice over the past five years.

“I don’t know of any other product that is so audited. Although one conflict diamond is one too many, the source of it is not the formal mining industry. They are part of the solution,” Ms. Warhurst said. What countries such as Sierra Leone need, say diamond-industry participants, is investment.

Said Ms. Warhurst: “Poverty needs to be addressed. Countries like Sierra Leone, need investment. It needs formal, legal, responsible investment.”

Linah Mohohlo, governor of the Bank of Botswana, insists that “tremendous success has already been achieved.”

“Even at the height of the problem in the 1990s, only 4 percent of the global output came from areas considered to be ‘conflict areas.’ So there is a lot of light at the end of a very short tunnel.”

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