Diamonds shine brighter, but government revenues remain dull

Sierra Leone, a country whose name has long been synonymous with conflict diamonds, has improved transparency in its diamond trade, but still has a long way to go before earnings from the precious stones benefit all the country’s impoverished citizens, according to a new report. The Ottawa-based Partnership Africa Canada, which has undertaken regular research on diamond mining in Sierra Leone, and the Freetown based Network Movement for Justice and Development, released the second edition of their Diamond Industry Annual Review for Sierra Leone on Wednesday. Their report praises the government’s Gold and Diamond Department (GDD) which values diamonds for export and levies diamond export taxes, saying it functions, “with a level of transparency and professionalism unmatched by other institutions in Sierra Leone.” Official diamond exports almost doubled to 126 million dollars last year from $74 million in 2003, but the report said this owed more to external factors forcing diamond sales to be conducted through legal channels than a clampdown on illegal mining and contraband sales within Sierra Leone. “Hardly anyone, including government officials, attributes (the rise in diamond exports) to internal curbs on illicit diamonds mining and smuggling, both of which continue to thrive,” said the report. Citing figures from various sources, the report estimates that anywhere between $30 million and $170 million worth of diamonds were smuggled out of Sierra Leone last year. However, the government's direct tax take from the diamond mining industry remains small. Its three percent tax on diamond sales brought in less than $4 million last year. A quarter of that went to the treasury, another quarter went back to local government in the mining areas, another quarter went to pay for the running costs of the Government's Gold and Diamond Department (GDD) and the remainder went to pay external values, GDD Director Lawrence Ndola Myers told IRIN. Until Sierra Leone's civil war ended three years ago, virtually no diamond revenue passed through government hands. Instead, the gems paid for the guns and drugs that fuelled Sierra Leone's brutal 1991-2001 civil war. The shallow alluvial deposits of eastern Sierra Leone can be easily mined with a pick and shovel and the gemstones are easily smuggled out of the country's porous borders. The Diamond Industry Annual Review said the introduction of the Kimberley Process, an international control system to certify the origin of diamonds sold in the world market, was the biggest single factor pushing more gemstones from Sierra Leone through the legal trade route last year. The Kimberley Process Certification System was launched on 1 January 2003 by diamond-producing countries to develop an international certification scheme for rough diamonds, in order to prevent conflict diamonds - such as those mined illegally in Sierra Leone, Angola and the Democratic Republic of Congo - from entering legitimate markets. The report quoted Sierra Leonean diamond control officials as saying that the spectacular increase in official diamond exports in 2004 was also due to improved security situation in the country. Refugees and other people displaced internally by the civil war had returned to their home communities where they could now work the alluvial diamond mines without threat, it noted. The Revolutionary United Front (RUF) rebel movement had previously controlled the main mining areas in eastern Sierra Leone and had used illicit diamond sales to fund its war effort. The report also noted that the traditional route for smuggling contraband diamonds out of the country via Liberia had been shut down since former Liberian president Charles Taylor, the main external backer of the RUF, had been forced to quit power in August 2003. Although Sierra Leone's foreign exchange reserves have improved as more diamonds are sold through legal channels, the government itself derives little revenue from the mining industry and the thousands of men, women and children who get down on their hands and knees to find the gems still lead a difficult life. Dirty work Artisanal diamond mining accounts for 90 percent of the country’s diamond exports and is Sierra Leone's second employer after subsistence farming. The report estimated that 120,000 people work as diamond miners, but stressed that few of them strike it rich. “In addition to hard work, the life of a diamond digger is one of exploitation. Written contracts and terms and conditions of work are non-existent, child labour laws are not enforced, health and safety regulations are either non-existent or are ignored,” the report said. The Canadian-funded report depicted the Sierra Leone diamond economy as a “casino economy,” with most people gambling on finding a large diamond and diggers “betting” on a share of the “winnings”. Bubakar Ba Marra, a man in his forties with a large family to feed, is one of these. Every morning, he and hundreds of others like him trudge out of Koidu town, the centre of the diamond mining industry, towards nearby gravel pits, equipped with their shovels and sieves.

Bubakar Ba Marra in the middle with other artisanal miners

“I cannot read, I cannot write, I don’t have anything else to do other than mining to feed my five children and my wife,” Ba Marra told IRIN. "I sold one diamond for one million leones ($425) last year and I have found none since," he added. Ba Marra has been mining diamonds for 15 years. Many other miners start as children. The US-based Christian charity, World Vision estimates there are some 10,000 child diamond miners in Sierra Leone. Big bucks for the select few The contraband diamond trade, like the legal gemstone trade, is mainly controlled by the large Lebanese community in Sierra Leone. For decades that has had a virtual stranglehold over commerce in the West African country. “Large parts of the industry are … monopolised by a relatively small group of people who dictate the price of rough diamonds, reap most of the economic rewards and exploit those in the production chain below them,” the Partnership Africa-Canada report said. In 2004, a company owned by Hisham Mackie -- a Sierra Leonean-born Lebanese trader -- exported almost half of all diamonds that passed through the official process in Sierra Leone, it noted. “Sierra Leone diamonds are for the Lebanese,” one Sierra Leonean diamond exporter who left the country for Guinea because of ferocious competition from the closely-knit Lebanese community, told IRIN. However, the Canadian-funded report noted that the combined market share of Sierra Leonean diamond exporters, was on the rise, thanks notably to Andre Hope, a Sierra Leonean lawyer and businessman who ranked second with 19 percent of exports last year. Deep diamond deposits promise rich pickings Deep mining of high grade diamonds buried in Kimberlite pipes of rock far beneath the surface is still in its infancy in Sierra Leone. There is only one large industrial mining company in the country producing diamonds in this way and Kimberlite diamonds represented only 11 percent of official exports in 2004. But the prospects for setting up more of them are good, especially since Sierra Leone has diamond deposits of a consistently high quality “with an average run-of-mine carat value that is higher than almost any other diamond producing country in the world,” according to the report. Government officials told IRIN that several more international mining companies were preparing to establish operations in Sierra Leone. Kimberlite deposits were discovered in the late 1940s, but were not exploited because of the country's abundant and more easily accessible and alluvial deposits, which could be mined on the surface simply by sifting gravel in river beds. Deep mining operations, which require heavy investment, finally began in 2003 as peace returned after the civil war.

Kono Holding's kimberlite mining operation in Koidu

Koidu Holdings, a company which is 60% owned by Geneva-based Steinmetz Diamond Group, launched the initiative and has so far pumped $21 million into opening two Kimberlite diamond mines in Sierra Leone. It now claims to be the largest diamond mining venture in the country. By August 2004, Koidu Holdings had announced total exports of 46,000 carats, valued at $9 million. The company’s activities also benefit the state, with 40 per cent of its profits going to the government in the form of corporation tax, surface rent and royalties. A good start, with more to do “Clearly, Sierra Leone requires the investment that such companies can bring in order to develop the diamond deposits buried deep in kimberlite pipes,” the Partnership Africa-Canada report said. “Most of the problems of today’s diamond industry in Sierra Leone boil down less to willful corruption and mismanagement than to challenges of governance and procedure,” the report said. “State capacity is still weak, and there is a culture of bureaucratic tardiness. Government oversight in almost every matter is still significantly limited. Until there is a radical change in these respects, there will continue to be problems with the diamond industry.” But the government remains positive: “The talk that diamond is a cost to the nation no longer stands. Thing have changed. Now it is a blessing,” said Ndola Myers of the GDD.