Bloody Diamonds

Among the first things to be put on the back burner in a recession are feel-good operations designed to portray industries' ethical or socially conscious faces. Nowhere, perhaps, was this clearer than in the diamond industry as 2008 gave way to 2009.
Diamond mining is in a bad state with prices of unpolished gems anything from 40% to 50% lower on the year in established markets such as that of Antwerp — price falls that have left all but one or two of the rich mines run by De Beers in South Africa and Botswana operating at a loss.
Nobody needs gem diamonds, no matter what the advertising guff might say about their symbolising eternal love. And when the credit crunch that has hammered consumers' discretionary spending is also murdering the ability of diamond traders and cutters to buy and warehouse rough stones, then it's small wonder that sales volumes and prices have collapsed.
In southern Africa the response by De Beers and its associates has been conventional — mine closures with employees sent on enforced extended holidays. In Namibia the dredgers that churn up the ocean bed in search of gems have returned to port. In South Africa even the still-profitable Venetia mine has sent its employees on extended holidays from December 15 to January 12.
In Botswana the profitable Jwaneng mine, too, has gone for an extended closure for most of January. And these developments do not take into account the cost of the group's ill-starred foray into Canada.
The official De Beers line is that retrenchments are not being planned — yet. But as soon as the year-end sales figures are available, the company says, decisions will have to be made.
The outlook is hardly enticing for a country such as Botswana, which derives four- fifths of its foreign earnings from diamonds. How it will fund ambitious social and developmental projects is an open question.
But let's return to the original proposition that feel-good programmes are among the first to be put on the back burner when trading conditions become tough. It certainly appears to be happening with the Kimberley Process, set up under UN auspices and including governments of diamond-producing countries, diamond producers themselves and NGOs. Its remit was to help ensure that conflict or blood diamonds did not enter the market, with signatory governments verifying that gems crossing their borders were not produced to finance civil wars or attempts to overthrow governments. Official certification was the name of the game.
Which is all fine and dandy, but the whole thing falls apart when diamonds are used to fund a government's war on its own people.
This is precisely what is happening in the failed state north of the Limpopo. Robert Mugabe and his cohorts have turned the military loose on the artisanal diamond miners — let's ignore the question of whether the miners are illegal or not — to loot what is available in the east of the country. It is an old game for governments of failed states.
With precious few assets left to pillage in Zimbabwe, the Mugabe regime cannot afford to pay the army on which it relies to hang onto power. Some years ago, Mugabe sent his troops into the Congo — ostensibly to help quell an uprising, but in reality to loot diamond and precious metals resources to cover army wages and to line the pockets of politicians back home in Harare. Now it is doing the same, telling the army to find its own wages near the eastern town of Mutare.
Countless people have been killed or robbed in government-sponsored military activity. And the diamonds now being extracted by soldiers are leaving the country through Mozambique and South Africa without any Kimberley Process certification, just as when the illegals were scratching the diamonds out of the ground.
Now, NGOs such as Global Witness and Partnership Africa Canada — two participants in the Kimberley Process — are calling for Zimbabwe's participation in the Process to be ended.
The response from parts of the industry has been that such a move would hurt a legitimate operator, Rio Tinto, whose 78%- owned Murowa mine is remote from the zone of government-sponsored violence and whose sales can legitimately be certified as conflict-free. Some 1500 jobs could be lost and it could mean the end to local social spending by Rio Tinto if Murowa had to be closed because of a blanket ban on certification of Zimbabwean diamonds.
Nobody seems to have asked Rio Tinto whether it might like to close the mine in the face of falling gem prices, government peculation and the near impossibility of running mines in Zimbabwe.
The Kimberley Process is barely six years old and, since its inauguration in 2003, it has been able to claim, reasonably, that 99% of internationally traded rough diamonds are conflict-free. Calls for Zimbabwe to be removed from the Kimberley Process are a major test. How participant companies, countries and NGOs respond will, to a considerable extent, help further define the Process's reputation.
But with the world's diamond industry distracted by having to cope with the recession, will much attention be paid to yet another African trouble spot