Guilt Trip

Power

The war in Sierra Leone is about power. It is about who controls the country, how they control it and what they do with their control. The primary forces at work are military, political and economic power. The Lome peace accords are designed to enable the country to transition from military control to political control. In other words participants in the conflict, including and especially the rebels, are being encouraged to transform their military power into political power; to transform their military organizations into political organizations; to fight with votes instead of guns.

The problem in Sierra Leone is that the only way to transform military power into political power is through the use of economic power. The parties to the conflict need the money and benefit of the country’s economic resources in order to get votes. Significantly, the only source of short-term economic power in Sierra Leone is diamonds.

The government cannot rule the country if they do not have control over the country’s economic resources (i.e. diamonds). At the same time the rebels will not give up their arms and control of the diamond areas if they are not given an opportunity to benefit from the economic resources they are giving up. There is a strong perception
that he who controls the diamonds will control the country.

The current stalemate between the government and the rebels is in fact a stalemate over how to fairly share the economic benefit of Sierra Leone’s diamonds. The Lome peace accords recognized that the key to peace in Sierra Leone is a negotiated agreement about how to share the countries economic resources. It created a commission that includes all parties to the conflict as well as representatives of civil society. Significantly, the chairman of this commission is the former rebel leader Foday Sankoh. To a large degree the current hope for peace in Sierra Leone rests on the ability of the commission to negotiate control over the countries diamond resources.

The Real Problem

While the framework for a negotiated settlement of the war in Sierra Leone has been provided by the Lome accords, the ability of the parties to negotiate a settlement is being undermined by the illicit diamond trade. Simply put, Sierra Leone’s diamond industry is totally black market, underground, illegal and corrupt.

Hundreds of millions of dollars of Sierra Leone diamonds are being traded on the world markets without any benefit going to the government, or people, of Sierra Leone. Official 1999 Sierra Leone diamond exports came to $1,244,825.

The real problem facing Sierra Leone is not merely how to share diamond resources among warring factions, but rather how to stop the illegal diamond industry from stealing the country’s resources. But it goes beyond that. The bastards are not just stealing Sierra Leone’s diamonds, they are trading them for guns.

Guns which are used to kill people to keep the war going, which assures that the government will not be able to control the illegal trade, assuring that the bad guys can continue to steal the diamonds. The real challenge facing Sierra Leone and the world diamond trade, is how to stop this horrific murderous cycle of illegal diamond activity.

Solutions

The problems of Sierra Leone are so great and discouraging that one hesitates to suggest solutions. This is particularly true of individuals such as myself who have a limited understanding of the complex socio-economic political issues of Africa. There is always the fear that the best intentions may lead to the worst conclusions.

Yet, in spite of these concerns, it is my firm belief that the situation in Africa is such that we must adopt a proactive attitude towards the resolution of problems. We cannot sit back and write off the problems of Africa as unsolveable — the human suffering is simply too great.

Upon reflection of my meetings in Sierra Leone last week I believe that there is a genuine desire by all parties to solve the countries severe diamond problems. While there is concern about how to fairly share the market, there is also a strong consensus that the diamond markets must be legitimized to stop the plundering of the countries resources by outsiders.

I believe that while there are solutions to the real problems facing Sierra Leone, these solutions are not simple oreasy to implement and they only offer limited relief in the short term. They are however fundamental.

They provide an alternative to the cycle of illegal diamond activity and put the countries diamond industry back on a legitimate track. While it is not our intention to present a complete overview or detail specific solutions at this time, we can highlight the primary elements of a possible solution.

The overall concept is to provide economic solutions to political problems. In other words, to create and promote positive economic forces that compete against negative socio-economic political forces. The idea is to create legitimate, efficient and competitive diamond markets that pay higher prices than illegal markets and thereby drive the flow of diamonds through official channels.

We have two important tools in our war against illegal diamonds: Transparency and beneficiation. Both tools are consistent with the development of a sustainable cycle of competitive economic activity and they strongly support the development of efficient downstream social and economic development. Furthermore, they create an environment which is extremely antagonistic to political and economic forces involved in illegal activity.

Pricing Transparency

The concept of pricing transparency is that competitive world market price information be made readily available to sellers in the regional markets. In other words sellers would be able to obtain unbiased information about the true value of their diamonds. In the case of public tenders the sellers would know the price that buyers paid for specific assortments of diamonds. Often such information will not be perfect due to the highly subjective nature of diamond evaluation but it will open the door to improved price discovery and market efficiency.

Market Access

The ultimate goal of pricing transparency should be to reduce the diamond price differential between Sierra Leone and the world markets. This can be done by significantly improving market access for Sierra Leone goods. Alluvial diamond miners at the co-op village level should be able to have their diamonds sold in the international markets. Obviously, the smaller the spread between Sierra Leone prices and world market prices the less incentive for bribes and other illegal activity. Furthermore, the higher the price level in Sierra Leone the less incentive there is to sell through unauthorized channels.

Sourcing Transparency

Of primary concern is the utilization of legitimate diamond distribution channels for illegal diamonds (i.e. diamonds whose revenue is used to purchase arms). It is therefore critical that all diamonds bought in an approved system be subject to rigorous disclosure regarding sourcing. The suggested model for Sierre Leone is therefore limited because it would insist that diamonds eligible for the program be limited to those coming from known sources at the co-op village level.

Economic Benefit

The stated goal of the model is to benefit the local indigenous African population. This means that diamonds would not only be acquired at the villiage level to assure that revenue was not being dedicated to arms but also to ensure that the revenue was used to benefit the local population. Given the current situation in Sierra Leone it is advisable that some revenue be allocated for emergency community projects and small loans for diggers.

Social Benefit.

It is highly advisable to in corporate any program of diamond benefits within the context of a larger benefits model that addresses the overall health and social needs at the co-op village level. Optimal diamond benefit will occur if revenue is directed to a specific area that is capable of absorbing and multiplying the economic benefits.

Limited Scope

The program should not try to solve all of Sierra Leone’s diamond industry problems with one model. Neither should it try to monopolize the country’s diamond industry. Instead a limited pilot program should be implemented in various regions of the country so that the full impact of the model including any unintentional consequences could be discovered before broader implementation. The model should be able to coexist with other possible solutions.

Please note these initial suggestions are provided to stimulate discussion. Readers are encouraged to participate in an online discussion forum at www.diamonds.net/conflictdiamonds.

Taking Responsibility

The diamond industry must address the fact that illegal diamonds from Sierra Leone and other war zones are in fact finding their way into the diamond marketplace. While the industry in general cannot solve Sierra Leone’s problems it can, and must, take realistic measures to assure that illegal diamonds are excluded from the marketplace.

The argument that it is impossible to ascertain the origin of specific diamonds is very interesting, but it does not negate the responsibility of our industry to take steps that restrict the flow of illegal diamonds. One step our industry should take is an industry-wide system of voluntary disclosure regarding the non-conflict sourcing of diamonds.

De Beers decision to certify the non-conflict nature of the diamonds they sell on every invoice opens the way for other mining companies to provide similar certification on their invoices. It also opens the way for subsequent buyers to state — "The diamonds sold under this invoice have been certified by the seller as being non-conflict diamonds." Such disclosure based on an affirmative statement by the seller could be passed on through the entire diamond distribution system.

The idea is that the diamond industry needs to tighten its standards. The days when one could simply take the position — "I don’t know where my diamonds are coming from" — are drawing to a close. The time has come for us to band together and make sure that we can be trusted to ensure the legitimate origin of our diamonds and the legitimacy of our diamond industry.

The bottom line is that our industry must stop dealing with questionable diamonds. If you don’t know where or from whom the diamond comes from — don’t buy it. We must no longer deal in grey diamonds.

Now many of our readers might find the above suggestion a bit over-the-line. Perhaps I can better explain the problem of conflict diamonds by bringing the issue closer to home.

Consider the market for stolen diamonds and jewelry. Now we all know that these markets exist in a limited way, but no decent, legitimate or even semi-honest diamond dealer would ever consider buying stolen diamonds.

When you buy a stolen diamond you encourage the thieves to go out and steal another diamond. You endanger your own life and you destroy the security of your business.

Now let’s say a $250 million a year market for stolen diamonds developed on 47th Street. Lets say hundreds of salesmen and jewelers across the U.S. were being killed every year by diamond thieves. What do you think the response by our industry would, or should be?

Would we walk around saying there is no way to tell if a diamond is stolen and just let the thieves market prosper? By the way — how is it that our industry is able to self-regulate in a reasonable manner against thieves, but not against conflict diamonds? Is the life of a black in Sierra Leone worth less than the life of a diamond dealer or jeweler in the U.S.?