Making Diamonds Part of the Solution Bemidji MN

As diamond market leader, De Beers is often held responsible for the difficulties that diamonds cause, even when they occur in countries where De Beers doesn't operate. Although De Beers has long funded development projects in the countries where it mines, it is now reaching out beyond them to fund projects that seek to improve the lives of alluvial miners, the most exploited segment of the industry. In this interview, Stephen Lussier, De Beers executive director of external and corporate affairs, discusses corporate responsibility, the role of diamonds in development, the challenge of the Kimberley Process, beneficiation, diamonds' impact on the environment, and the three things that retailers need to know about diamond mining.

Modern Jeweler: What does corporate responsibility entail? Does it have to do with the way business is conducted or with responsibilities beyond business, like charitable contributions? How do you think De Beers demonstrates it?

Stephen Lussier: To De Beers, corporate responsibility quite simply means running our business in a way that makes a real and lasting contribution to improving the lives of people in the communities in which we operate. Working principally in the developing world, this is of great importance. De Beers is extraordinarily proud of the role diamonds play in the countries we operate in: Botswana, South Africa, Namibia, Tanzania, and shortly, Canada.

MJ: Can you talk about De Beers' participation in the Diamond Development Initiative?

SL: While we have no commercial activities in these areas, De Beers is deeply concerned about the working conditions and exploitation of small-scale informal alluvial diamond diggers. We believe that this situation needs to be addressed immediately by governments, international aid agencies, NGOs, and the diamond industry.

In many countries where small-scale informal alluvial diamond digging occurs today, working conditions are part of a very complex socio-economic problem stemming from years of civil war and conflict. These countries face fundamental problems of extreme poverty and a lack of basic infrastructure, education, and healthcare. The working conditions and exploitation of small-scale informal alluvial diamond diggers are a consequence of these issues. De Beers is keen to help find solutions that generate wealth, build infrastructure, and help redevelop countries that are home to small-scale informal alluvial diamond digging. It is currently working in two key areas to help make a difference:

De Beers is collaborating with governments, the World Bank, NGOs such as Global Witness and Partnership Africa Canada, and trade associations such as the International Diamond Manufacturers Association, to address poverty and development of small-scale alluvial diamond digging through the Diamond Development Initiative.

De Beers, in partnership with the government of Tanzania, Williamson Diamonds Limited, local NGOs, and international organizations, has recently established the Mwadui "Community Diamond" partnership pilot project in Tanzania. The project will commit the resources and skills required to generate practical solutions needed to alleviate poverty and protect human rights amongst small-scale informal alluvial diamond digging communities in Tanzania.

MJ: De Beers announced it will donate $2 million to that project to help provide informal miners in Tanzania access to fair-market pricing and healthcare. Why would you get involved in dealing with informal miners, the most challenging diamond sector? Is this project a model that might be replicated in other countries?

SL: We firmly believe that diamonds are part of the solution to overcome extreme poverty and lack of infrastructure in some countries in Africa. The regeneration of the small-scale informal diamond digging sector is one of many steps in the redevelopment of countries that are recovering from conflict such as Angola, Sierra Leone, and the Democratic Republic of Congo. Diamonds are an important natural resource that can bring lasting benefits both to the diggers and their families and to economic development. These benefits are already being realized in the major diamond producing countries such as Namibia, Botswana, and South Africa. We are piloting this in Tanzania as it is the one country where De Beers has a formal mine and where informal diggers also exist.

MJ: How is the diamond industry to be rated, as a whole, for the way it leaves the earth?

SL: Diamond mining is less harmful to the environment than most other extractive activities. De Beers aims to be a global leader with respect to sustainability and environmental performance by the end of 2009. ISO 14001 certification is in place at 12 of our 13 major mining operations. Mining companies often secure licenses for large areas of land in anticipation of an economically viable deposit being developed. A comparatively small portion of this land is actually disturbed by mining activities.

At the end of 2005, our mining activities had disturbed just 4.4 percent of the total mining license area in which we operate. In terms of climate change, our specific conservation areas absorb more carbon than the carbon we emit through our mining operations. In the marine environment our mining activities have disturbed just 0.05 percent of our total mining license area. In 2005, we spent more than $3.1 million on the rehabilitation and restoration of terrestrial and aquatic ecosystems. Environmental management programs in place at each of the mines and exploration areas include restoration plans for these different forms of land disturbance.

MJ: Many of your customers have opened cutting factories in Botswana and South Africa. How important is it that the diamond industry add value in countries where diamonds are mined?

SL: De Beers fully understands and supports governments' aims to develop a sustainable, local downstream industry. In South Africa, we believe more can be done to encourage local beneficiation, and to increase black economic empowerment in the diamond industry, and look forward to engaging the department of minerals and energy on ideas and proposals to develop its diamond industry. Underlying this is the desire to add value to South Africa's mineral resources, to create jobs and to promote new entrants into the diamond beneficiation industry.

Last May, we announced an agreement to establish Diamond Trading Company Botswana, a 50/50 partnership in Botswana between De Beers and the government of Botswana, which will sort and value all of Debswana's diamond production. DTC Botswana will carry out local sales and marketing activities, working closely with its customers to support the establishment of diamond manufacturing operations in Botswana. De Beers will fully fund construction of a new building that will house this exciting new partnership in Gaborone at a cost in excess of $83 million.

We also announced that we intend to bring diamonds from around the world to be "aggregated" by DTC International in Botswana, an activity that was previously carried out in London. This reflects the importance of Botswana as the world's leading diamond producer and the role of government in creating the right environment for business in the country. The development of a local industry has the potential to add real value to the country, supporting new jobs, upgrading the infrastructure, and serving as a catalyst to attract other international businesses to Botswana.

MJ: The Kimberley plenary session of November concluded with 14 major initiatives and covers everything from the chain of warranties to the conditions of alluvial miners. It can be said that diamonds today are the world's most audited natural resource. What are the challenges to the process' future, and how close are we to eradicating conflict goods from the chain?

SL: I think it is fair to say that the Kimberley Process is a remarkable and unique achievement, involving the successful cooperation of many governments, non-governmental organizations, and industry. As a result, 99.8 percent of the world's production of rough diamonds is now considered to be conflict-free. We would be the first to admit that it is not a perfect construct and the continued development and refinement of the process is considered necessary by all. At the meeting, three key areas of concern were highlighted. First, the enforcement of controls on the movement of diamonds within borders. It must assure stronger controls on diamonds as they travel from mine to export, especially in countries where diamonds are mined in open or alluvial settings. It's a critical step in preventing illicit diamonds from entering the legitimate supply.

Second, there must be better management of trading statistics. The gathering of data about rough diamonds leaving and entering participant countries must improve and be professionally managed. This will help the system better identify irregularities in trading patterns that might signal the movement of conflict diamonds. Third, there must be funding for effective management. To remain credible, the Kimberley Process must have the means to support itself. Funding is needed to support statistics gathering, to monitor individual countries' systems, and to respond quickly to weak links and violations of the rules.

MJ: Africa is the world's poorest continent, per capita, yet the richest in natural resources. Do you think there is anything to the talk of a resource curse?

SL: It is true that in recent years, and in some of the most richly endowed countries, natural resources, especially those most easily exploitable, have also served as a source of conflict as corrupt governments and rival warlords have fought for ownership of the spoils. It has become easy, perhaps too easy under these circumstances, to blame Africa's natural wealth for Africa's poverty. It is important never to forget that natural resources are morally neutral, they can be a potential source of good or ill, depending on the measures taken to protect them against the greedy and the corrupt, and so ensure that their benefits will accrue not to a corrupt few but to all.

An IMF report, published in June 2006 entitled "Did Botswana escape from the resource curse?" acknowledges that resource-rich economies tend to fail in accelerating growth, but that Botswana has experienced the most remarkable economic performance in the region. The management of its natural resources has provided an outstanding model for others to follow. This, together with the prudent and responsible use of its diamond taxes and revenues to provide roads, schools, and hospitals, has enabled it truthfully to claim that its diamonds are for development. Fiscal prudence, certainty, open democracy, and respect for the rule of law have made Botswana into an African success story. It is a cause for regret, and in some cases tragedy, that other countries have failed to follow its example and adopt a mining regime that is both predictable and transparent.

MJ: Amnesty International has said that the Kimberley Process is only as strong as its weakest link. What is the pipeline's weakest link and what can the industry do about it?

SL: We believe that the Kimberley Process has been remarkably successful but more work needs to be done to ensure that where there are weaknesses that these are addressed. There are more than a million diamond diggers and their families who live and work in absolute poverty, outside the formal economy, in countries struggling to recover from the ravages of war. The Diamond Development Initiative is a unique effort to address their problems, bringing NGOs, governments, and business together in a common effort that aims to convert diamonds from a fuel of war into an engine for development.

Leading NGOs have also highlighted a lack of compliance with the system of warranties amongst some retailers. That is why the World Diamond Council launched a major campaign to educate consumers and the trade about important diamond-related issues. Their new web site, www.diamondfacts.org, offers information about diamonds, from facts about the history of the trade, and the social and economic benefits diamonds provide nations, to reporting on how the industry is grappling with various challenges including conflict diamonds. For the trade, WDC has developed a conflict diamonds confidence pack. It is essential that retailers are able to assure concerned customers that the diamonds that they are selling are certified to be from sources that are free from conflict, and that they acknowledge that they are an important part of the industry-wide initiative to ensure confidence and desire for diamonds.

MJ: What is the one thing that you hope every American retailer knows about diamond mining and can communicate to their customers?

SL: That diamonds make a difference in three key ways: 1. The diamond industry, directly and indirectly, employs 10 million people. 2. As one of its major resources, diamonds are helping transform Africa and the lives of its people. 3. Diamonds and diamond revenues are making a huge difference in Africa by providing jobs, building hospitals and roads, and funding education. The diamond industry contributes over $8 billion per year in revenue to Africa.