Stones of Contention

by Cleveland, Todd

Place of jackals and birds;

  Where Bushmen hardly go;

  Only howling jackals heard,

  Winds and sand do flow.

  Greedy man’s lust for wealth,

  Invades the place of solitude.

  —Anonymous poem posted at a diamond mine located along Namibia’s desolate coast in the early 1980s

  The diamond-fueled violence that consumed Angola and Sierra Leone stands in sharp contrast to the post-independence periods in Botswana and Namibia, the world’s first and seventh largest producers of gem-quality stones, respectively. Since assuming control, the governments in these two Southern African countries have utilized diamond profits to build democratic states characterized by pacific foreign and domestic policies. Stable, reasonably transparent nations such as Botswana and Namibia belie notions of African states as “kleptocracies” led by “presidents for life” who heartlessly count their riches while their subject populations starve. Today Botswana is classified by the UN as an “upper-middle-income country,” with diamond profits improving the lives of the vast majority of the country’s inhabitants. The assertion by former president Festus Mogae that appears above, alliteratively linking diamonds, development, and democracy, has thus far proven accurate. Africans in both countries are also benefiting from the job opportunities that the industry generates, as diamond mining is the leading employer in both settings. Moreover, although most Namibians and Botswanans continue to work as manual laborers in the industry, others have assumed leadership positions in the mining enterprises active in these countries.

  This chapter examines post-independence diamond developments in Botswana and Namibia, including the aggressive renegotiations of production agreements with De Beers and the utilization of the resultant revenues for broad-based national development. Whereas Namibia, which achieved independence from South Africa only in 1990, inherited a long-standing industry, diamonds weren’t discovered in Botswana until after the country achieved political independence in 1966. Yet, despite this important chronological difference, the two governments have both utilized their diamond revenues in remarkably similar, socially beneficial ways.

  Unfortunately, no simplistic formula exists to explain why some nations, such as Botswana and Namibia, generate “development diamonds” and others “blood diamonds”; there are simply too many variables. Yet the small populations of these two countries allow for greater per capita benefits from diamond revenues, thereby helping limit potential social discontent, while the difficult-to-access deposits in these settings have greatly assisted their governments in managing and controlling their respective diamond endowments. In turn, these factors go some way toward explaining why these two nations have been able to avoid the scourge of “conflict diamonds.”

  For all of these positive developments in Botswana and Namibia, neither is completely devoid of challenges. Ruling political parties have used diamond wealth to buoy their popularity and easily win election (and reelection), the highly industrial nature of modern mining has limited the overall number of jobs created, and poverty and uneven development remain ongoing concerns. In Botswana, access to deposits has generated tension between indigenous communities and the state, and in Namibia, smuggling remains rampant. These issues notwithstanding, Botswana and Namibia offer an important counternarrative to the “bloody” scenarios explored in the preceding chapter. In order to help amend the negative connotations associated with Africa’s diamonds, the industry would do well to highlight the positive developments in these largely peaceful nations—two countries that most diamond consumers have likely never heard of.

  Botswana: An “African Miracle”

  Botswana’s history of diamond production is somewhat unique in Africa. The country’s deposits were discovered not during the colonial period but only after it achieved autonomy from Great Britain. The timing could not have been better: Botswana became independent in 1966, and the expansive kimberlite deposits at Orapa were discovered just a year later. Thus, rather than inheriting a diamond industry that had been controlled by foreigners for decades, the mineral discovery was truly an economic bonus for the fledgling nation. The primary advantage of this scenario was that the country could start fresh, rather than reorganizing an existing industry, striving not to interrupt vital revenue streams, and remaining beholden to international capital. Yet the remarkably rapid rate at which Botswana developed economically and socially following the diamond discoveries is not attributable to fortunate timing alone—recall that Zimbabwe’s diamonds were also discovered after independence, but with markedly different results. Instead, the series of scrupulous, pragmatic, democratically elected governments that have overseen the country from the capital city of Gaborone from 1966 to the present deserve the lion’s share of the credit. Each administration has managed these diamond resources in a cautious, largely equitable manner. Today Botswana’s resources consist of four massive, deep, open pit mines, including Orapa, the largest such mine in the world, and Jwaneng, the richest diamond mine by value in the world, each of which is located in a highly remote, easy to police, area. Due to the prudent ways in which Botswana has managed these mineral deposits and developed both peacefully and rapidly—at a rate unmatched even by the so-called Asian Tigers—while situated in the most underdeveloped and conflict-ridden continent in the world, the country is rightfully known as an “African miracle.”[121]

  The Transformative, “Miraculous,” Early Diamond Years

  From 1885 to 1966, Botswana was a British protectorate, known as Bechuanaland. In 1964, Great Britain had acceded to Botswanans’ call for self-government, with the first elections held the following year and formal independence arriving in September of 1966. Yet beyond the natural excitement associated with the end of the colonial era, Botswanans had little else to celebrate. The new country ranked among the poorest in the world, with an annual per capita income of roughly only $80. Moreover, although Botswana features a relatively small population, at just over two million, the country is landlocked and also features an arid climate, which limits agricultural output. The country was also almost exclusively dependent on just three sources of revenue: the domestic cattle industry; remittances from migrant laborers in South Africa; and aid from the British government—not exactly an ideal economic foundation on which to build and develop the nation.

  The 1967 diamond discoveries changed everything. Due to low production costs and the high quality of the stones, virtually overnight the country found itself in a highly enviable fiscal position. Mother Nature had seemingly been kind to Botswana after all. The government immediately nationalized all subsoil mineral resources to ensure complete control over all future revenues. From 1966 to 1990 earnings from diamonds helped propel the country’s real GDP growth to a remarkable average annual rate of 10 percent, including 13 percent during the 1980s, while over the same period, real income per capita grew by 6.5 percent. These figures were not just impressive for an African nation; they rendered Botswana the fastest-growing economy in the world over these two and a half decades. This economic growth also had a strong social dimension, as the government applied the diamond wealth to advance the nation and its citizenry in a reasonably broad, inclusive fashion. For example, significant investments were made in the country’s road, water, and electricity systems, its educational structure, and its national health services. Consequently, according to the United Nations Development Programme’s Development Index, which combines both economic and social measures of development, including adult literacy, infant mortality, life expectancy, and access to clean water, by 1992 Botswana featured the highest level of human development on mainland sub-Saharan Africa. Moreover, into the early 2000s, Botswana’s per capita GDP of more than $6,000 prompted the World Bank to classify it as an “upper-middle-income country.”

  The diamond wealth encouraged Gaborone to pursue initiatives that would have been unimaginable during the early post-independence period. Perhaps most important was its decision to renegotiate the country�
��s mining contract with De Beers. In 1975, these efforts resulted in the creation of Debswana, a public-private enterprise owned equally by the Botswanan state and De Beers, hence the somewhat quirky corporate name. The new arrangement constituted a significant improvement on the 15 percent production share that the nation had previously held. Speaking about these developments, Peter Mmusi, the country’s former finance minister and vice president, had the following to say about the government’s approach to negotiations: “A purposeful government which acquires the expertise to deal with foreign companies on its own terms need not have a fear of domination by foreign companies, however large they may be. The important word is purposeful—and I believe our government has been able to put together strong negotiation teams, has backed them up with well-worked out negotiating mandates, and has then overseen the implementation of our major mining agreements with detailed care.”[122]The nucleus of the “purposeful” government’s negotiating team was the highly effective Mineral Policy Committee (MPC). This group consisted of four permanent secretaries representing the key ministries involved and was complemented by representatives from other ministries and also by domestic and international technical experts. The MPC’s strategy was to assemble a team of senior local officials, supported by a group of expatriates with technical knowledge, to negotiate with De Beers’s experienced representatives. The continuity of the MPC’s membership was also a key to its success, as several of its members served for periods of up fifteen years. Although Botswana held the chips—its mines would eventually outpace all others in the world and the output would come to constitute roughly two-thirds of De Beers’s overall production—the diamond behemoth had rarely, if ever, been pushed around in this manner, let alone by a recently sovereign African nation.

  The year after Debswana’s creation, the increased diamond revenues that Botswana was enjoying provided the economic foundation needed to introduce its own currency, the pula. Even as early as 1972, Botswana’s government had been able to fully finance its recurrent budget, and in 1983, it began running an overall budget surplus. By the mid-1990s, the country’s foreign exchange reserves totaled some $4.8 billion, providing it with over two years of import cover and the financial base necessary to ensure the stability of the pula. Even though government spending rose by an average of 11 percent a year in real terms between 1970 and 1995, the country was still able to develop its social infrastructure without accumulating any significant foreign debt—a virtually unique accomplishment in sub-Saharan Africa. Moreover, Botswana has been able to avoid borrowing against future mineral earnings, a practice that many resource-rich African governments have too readily embraced. Consequently, the country is able to endure the inevitable fluctuations in commodity prices without having to institute drastic measures while waiting for prices to (re)stabilize.

  The 1990s and 2000s: Continued Success, but with Some Cautionary Signs

  Throughout the 1990s, the massive profits generated by Botswana’s diamond industry continued to facilitate rapid development, while never threatening political stability or an end to multiparty elections. Into the new millennium, Debswana was producing over 30 million carats per year, generating revenues of over $3 billion—approximately one quarter of the world’s rough diamonds by value. In the midst of all of this success, though, a series of worrisome, diamond-related structural challenges and issues had begun to emerge. For example, after having replaced beef as the country’s leading foreign exchange earner by the early 1980s, by 2001 diamond exports accounted for roughly 87 percent of this type of income, more than doubling the 1981 rate of 40 percent. In other words, as “brilliant” as the diamond revenues had been, the country was growing dangerously dependent on a single resource for its development. Moreover, with the emergence of “blood diamonds,” the entire industry—and, thus, Botswana’s economy—newly came under attack, its survival seriously threatened. Meanwhile, disadvantaged sectors of the country’s population were increasingly and outspokenly criticizing the government for saving too much, an exceptional complaint in sub-Saharan Africa. Not everyone, apparently, was benefiting to the fullest extent possible from the country’s considerable diamond wealth. Finally, international NGOs had begun to take notice of the government’s rather heavy-handed approach to long-established indigenous communities in areas that featured significant tourist potential and promising, though untapped, diamond deposits. Although Botswana has thus far weathered most of these storms, as long as the country continues to rely so heavily on a single commodity, it will remain both economically and socially vulnerable.

  The Economic Disadvantages and Dangers of a Single Commodity

  Although Botswana has experienced stunning, diamond-fueled growth, the country’s economy has not diversified in any meaningful way since the initial discovery of the deposits. By the late 2000s, for example, diamonds were accounting for roughly 30 percent of GDP, 70 percent of export revenues, and 50 percent of government revenue. Even formerly vibrant industries, such as agriculture, continue to wither. For all of the mineral success Botswana has enjoyed, it has failed to spill over into other sectors and has, in some ways, hindered the country as it transforms from a rural, pastoral society into a more industrialized one. For example, the diamond industry employs less than 5 percent of Botswana’s working-age population and thus has limited ability to help attenuate the high levels of unemployment in the country—even today, less than a quarter of Botswana’s work force is formally employed. For those citizens who are fortunate enough to land a job on the mines, these positions offer reasonably high rates of pay; loyalty bonuses for uninterrupted work; affordable housing for any accompanying family members; and opportunities for children to attend school. Yet because these benefits are so attractive, work seekers are drawn in large numbers to the mines, to the neglect of other industries and sectors, thereby obstructing economic diversification. To try to contain the damage, the government has capped wages on some of its mines, resulting in laborers earning far less than they would in South Africa. Yet even this drastic measure has had little effect on the country’s ongoing reliance on a single commodity, leaving the economy uncomfortably vulnerable.

  The Threat of “Conflict Diamonds,” Even Where There’s No Conflict

  Although Botswana’s diamond mines have never featured drugged children wielding AK-47s or, for that matter, fierce battles involving armed insurgents of any sort, the country was not immune to the uproar surrounding “conflict” or “blood diamonds.” NGOs’ public awareness campaigns, including World Vision’s “Dying for a diamond? So are thousands of innocent children,” threatened to cripple the industry worldwide and, therefore, Botswana’s economy. Most global consumers of diamonds were unfamiliar with the monumental differences between, for example, Sierra Leone and Botswana, and, instead, simply heard “Africa” and assumed the worst. In response to the international tide that was swelling against African diamonds, Botswana went on the offensive, hoping to protect its industry and ensure its survival.

  In order to contrast Botswana’s stones with the “dirty” or “bloody” diamonds produced in other African settings, the government strove to inform global consumers that its stones were 100 percent “clean.” To this end, in 2001, Botswana launched the “Diamonds for Development” campaign, which showcased the country’s progress and illustrated the “good” that mineral assets can facilitate. This initiative was largely a public relations maneuver, but given the importance of the industry to Botswana’s economy, the government deemed it critical foreign policy. During the official announcement of the campaign, which deliberately paralleled the unfolding Kimberley Process, President Festus Mogae implored audiences to distinguish between “conflict” and “clean” diamonds: “If this is not done, there is a great danger that mistakes could be made that would result in destroying the trade in diamonds whilst the problem of conflict remains. I truly believe that it would be a tragedy for Africa if the splendid ambition of putting an end to African conflicts were to result
in the targeting of diamonds as a symbol of all the complex causes of strife on the African continent. We must use the sharpest surgical instruments and any other methods required to slice out the tiny cancerous growth of conflict diamonds within the world diamond trade.”[123]Shortly afterward, Mogae more explicitly defended the importance of the diamond industry for his own country, cautioning that “Botswana supports international efforts to outlaw conflict diamonds, as we believe a single conflict diamond is one too many, but Botswana’s diamonds have always been conflict free. . . . The good that diamonds do for countries like Botswana must be recognized and not jeopardized.”[124]Not surprisingly, Namibia and South Africa—fellow diamond-producing African nations that were also generating “conflict-free” stones—joined this chorus, as did key elements within the global industry. Thus, even as these entities were playing active roles in the development of the Kimberley Process, they were also embracing Botswana’s creative rebuttal to the NGOs’ unfavorable campaigns.

  At the heart of the “Diamonds for Development” (counter)measure was a litany of social and economic benefits that diamonds supplied for developing nations in Africa. By repeatedly highlighting diamond-facilitated enhancements in health care, housing, education, employment, security, stability, and liberal democracy, Botswana’s officials sounded as if they were campaigning for political office as they fought to safeguard the industry. For example, while in Washington, DC, in June 2001 to promote “Diamonds for Democracy,” Mogae emphasized that “every time you desist from purchasing diamond jewelry you are probably cutting funding available to provide clean drinking water for a rural village in Botswana or to build schools in the deprived urban centers in South Africa.”[125]

  In hindsight, it appears that Mogae’s dramatic efforts constituted time well spent, as even during this challenging period Botswana’s diamond industry continued to flourish, without experiencing any notable interruptions. Moreover, the implementation of the Kimberley Process in 2003 ensured that consumers could easily discern between “clean” and “dirty” stones, formalizing a crucial distinction that Mogae and others had long been stressing. By the late 2000s, the threat seemed but a distant memory. In 2009, US Secretary of State Hillary Clinton could be heard at a press conference virtually echoing Mogae’s words from earlier in the decade. “When you buy a diamond from De Beers, part of that money still today goes to help build and maintain roads and clean water systems in Botswana. You can drive anywhere in that country and you can see services that have been paid for by a legal framework, strong regulations, and a national consensus that the money from the Earth and its riches should be spent on the people of Botswana.”[126]Instead of passively observing a threat that could have potentially derailed the country’s burgeoning economy, the Botswanan government aggressively and successfully confronted it, head on.