Diamonds Are A Country's Best Friend?

Last week Veronique, our guest house caretaker, came to work in the morning with exciting news.  A large diamond (it has been compared to a hockey puck) had been found in the Kono District, about 100 kilometers north of Kenema.    It weighed 706 carats, the second largest diamond ever found in Salone.  The top honors go to the “Star of Sierra Leone” which was discovered on Valentine’s Day, 1972, That one sold for 2.5 million back in 1972.  Everyone is wondering what this one will sell for and how the riches will be used to improve this impoverished nation. In the past, diamond mining benefits have enriched private companies and corrupt officials more than the country’s people.

Pastor Momoh's Find

Pastor Emmanuel Momoh, the discoverer of the diamond, is an independent miner.   He will get a percentage of the sale with government and income taxes deducted.  Pastor Momoh said that he gave the diamond to the government in the hopes that the development of the Kono District over the past 30 years (electricity, improved roads) could be continued. “I believe the government can do more, especially at a time when the country is undergoing some economic challenges,” he said.

Star of Sierra Leone

I could not find out from internet sources what share of the 2.5 million dollars the government of Sierra Leone received from the sale of its largest diamond. That diamond was discovered by the alluvial diamond mining company Diminico which was jointly owned by the government and  De Beer’s Sierra Leone Selection Trust Limited. The diamond was bought by famous jewel dealer Harry Winston and sold, as most diamonds back then were, by the Central Selling Organization (CSO) which was also controlled by the De Beers syndicate. De Beers had a monopolistic hold on diamond marketing.  The skeptic in me tends to think that Sierra Leone did not make out very well on the deal.

Alluvial Mining in Sierra Leone

The history of diamond mining and trading in Sierra Leone is checkered to say the least. It began in 1935 when De Beers took out a national lease on diamond mining operations for the next 99 years. However, illicit mining operations and diamond smuggling flourished as huge profits could be realized. In 1956 indigenous people of Sierra Leone were given the right to own alluvial mining licenses outside the lease area as well as trading licenses.  The number of illegal operations also increased with this action. By 1965 a there had been a large shift from agricultural work to independent mining. Before the start of the civil war in 1991, an estimated 250,000 people, 14% of the country’s labor force, made a living in the mining and quarrying sector.

In 1968 prime minister Siaka Stevens of now independent Sierra Leone, nationalized the De Beers mining operation forming Diminico. The result of nationalization was the plummeting of legal diamond trading in Sierra Leone from 2 million carats in 1970 to under 50,000 carats in 1988, a drop of 97.5%. After Stevens’s retirement in 1985, Joseph Momoh took office and the illicit diamond trading increased.  It is generally agreed that by 1991 Momoh’s government was corrupt. The civil war broke out not coincidentally in the diamond mining region of the country.  The ten-year brutal war was definitely fueled by the riches stemming from diamond mining in the east.  This was Sierra Leone’s own diamond curse.

By now, the cost of conflict diamonds is fairly well known.  The 2006 movie, “Blood Diamond” did much to popularize the problem. The efforts of a coalition of NGOs led to the Kimberly Process Certification Scheme of 2003 which attempted to keep illegal rough diamonds off the market.  However, it appears that by 2011 many of the Scheme’s backers, such as Global Witness, have withdrawn their participation because of its lack of enforcement.  Illegal diamond trading is still a small, but viable part of the world-wide diamond business.

Proportional graph of Sierra Leone exports from 2006.

Sierra Leone is among the top-ten diamond producing nations. Minerals made up 79 percent of total export revenue in 2008.  Diamonds accounted for 46% of that revenue. Still, Sierra Leone loses significant revenue that could be earned from taxes and licensing agreements. Research suggests that 50% of Sierra Leone’s diamonds are smuggled annually.  With good institutional reforms, Sierra Leone could increase mineral exports seven-fold by 2020.

Perhaps our diamond story will indeed have a different and happy ending.  Trevor Nance, reporting for Forbes, writes,

            The newly found diamond, after being presented to the president, was locked in Freetown's central bank vault where it awaits official valuation and accreditation as a conflict-free diamond under the Kimberley Process. The government's stake in the diamond sale will be used to fund development projects nationwide. The president has given “clear instruction to the Ministry of Mines that the evaluation, sale and distribution of the proceeds must be done in the most transparent manner.”  Koromo concluded that the diamond was, ‘a gift from God, and it will be a terrible thing if anyone tries to do something criminal with it.”

Only time will tell if the actions of the government will be true to the president’s words.