Diamonds are Forever–Commanded by a Cartel

Diamonds are Forever–Commanded by a Cartel

"Diamonds are forever," nearly everyone has heard of this numerously displayed slogan in a wide variety of media, but many have failed to identify from where diamonds come, the mining techniques, and the large responsibility required to produce them. Based in South Africa, the diamond company De Beers Consolidated Mines Ltd. has created the famous slogan that is seen and heard by millions of consumers. The diamond cartel currently owns hundreds of subsidiaries which enable them to maintain a large market share. However, because of its past marketing methods and the civil wars that destroyed Angola, De Beers should not be allowed to distribute its diamonds to the world unless its practices are radically altered.

De Beers is a company with a long line of history. The cartel was started out of a battle for control of newly discovered areas rich in diamonds in South Africa. De Beers was formed about one hundred and ten years ago and was incorporated by founder Cecil Rhodes (De Beers History Online). In 1859, there were reports of diamonds discovered on the Vaal River in South Africa, but no one had evidence relating to these reports until Erasmus Jacob found Eureka (21.25 carats) on the Orange River (De Beers History Online). Erasmus Jacobs and Barney Barnato, a diamond seller fought against each other to gain exclusive control of the sites until April when they ceased fighting and partnered to form De Beers Consolidated Mines Ltd (De Beers History Online). This partnership enabled the company to dominate the volatile diamond market that it still controls today.

De Beers has arguably become one of the most powerful mining companies not because of superior products, but because of monopolistic values. On the path to success, the diamond cartel gained wealth from buying surplus diamonds, and mines from unstable countries: Namibia, Botswana, Zambia, Angola, Sierra Leone, and the newly established Democratic Republic of Congo. Most notably, Angola has endured the trials of war, famine, genocide and land mines, and serves as a prime example of the damage caused by the diamond industry.

In order to understand the effects of the diamond industry, a brief history is of importance. A man named Jonas Savimbi, a rebel leader is Angola's infamous leader because of the atrocities he performed to Angola through his rebel movement. In his beginnings, Mr. Savimbi found the current government party the Movement for the Liberation of Angola (MPLA) insufficient for the needs of his fellow country men. Thus in Muangai, a city in the highlands, he summoned for a meeting for the greater community, and it was there that he created the National Union for the Total Liberation of Angola (UNITA) in March of 1966 (Simpson, par.15). UNITA's main purpose was to eradicate the existing government under President Dos Santos.

Mr. Savimbi was on a mission to oust the current government, and he did so at no expense. The opposition sparked a civil war that lasted for over 35 years. During this period, the economy plummeted and caused mass displacement of inhabitants to surrounding countries. The economic downturn caused many people to lose their jobs, and later brought about a countrywide famine. Thousands of citizens died, and thousands emigrated to neighboring countries in hopes of food and better lives. The UNITA rebel movement hurt the countries on multiple levels. According to the Angola Peace Monitor, "On one occasion UNITA soldiers attacked an orphanage and took 60 children and a teacher hostage. Two teachers and a doctor were also reported to have been killed" UNITA did not care about human casualties, thus causing the country to give in to their demands. UNITA used diamonds as a way of financing the cost of ongoing wars, regardless of government control. However, in the beginning of Mr. Savimbi's rule he was admired by supporters who did not know of his hidden motives.

Ironically, during a time when Mr. Savimbi's actions were unknown, he had support from former U.S. presidents: Ronald Reagan, George Bush senior, as well as the country formerly known as the Soviet Union. After the civil wars ceased, the MPLA government made a treaty with UNITA which came to be known as the Lusaka Protocol. Both sides agreed on having elections to predict the newly independent country's president and the end of illegal diamonds. After the election the current president Dos Santos was named as the winner. Mr. Savimbi became furious, broke the peace agreement, and re-ignited the war. He re-took the mining locations previously used by his organization and started selling more diamonds to fund a new purchase of 60 tanks from Ukraine, as well as training for soldiers sent to Morocco (Fennell, par. 6). Eventually, the war begun to slowly cease, but it marked the rise of corruption within the government as they too had ulterior motives. After 36 years of chaos, Mr. Savimbi's long awaited death arrived when he was violently killed by government troops. Following his death, UNITA's strength gradually decreased. Due to the iron fist of De Beers, they have manipulated and controlled the entire diamond production of certain countries.

Although De Beers has maintained a strong image, their deceitful tactics to control diamond mining led them to Angola among other unstable countries. This company was once the primary purchaser of Angolan ‘blood diamonds' or ‘conflict diamonds'. The diamond cartel once bought diamonds from Angola despite the numerous civil wars that destroyed the country. De Beers defended their story saying that they bought the conflict diamonds in order to preserve raw diamond prices. It was not until the middle of the year 2000 when they resigned their position in Luanda, Angola (Scott-Joynt, par 26). This was their basis for buying during economic growth, and selling during economic recessions (Sherman par. 31). The civil wars in Angola commanded a large number of publicity in the world, and people slowly realized that the diamond giant De Beers had buying offices in Angola. De Beers was in no shape to allow the wars to associate the diamonds to bad feelings because it is an industry based on good feelings. Thus, their first move was to close down their diamond purchasing offices.

With huge responsibility placed on De Beers to stop conflict diamonds, they placed a ban on diamonds from Angola. This ban did not stop Mr. Savimbi from retaining and attracting new customers, it just meant finding new means of getting his diamonds to customers. At one point, the diamond cartel bought $700 million in raw diamonds from Angola, most without proper certification (Sherman, par. 20). The United States soon became aware of the situation and consulted with other nations to alleviate the problem thus they created the Kimberly process, which made diamond sellers and purchasers equally accountable for legitimate certification of raw and finished diamonds.

Drafted by the U.S. government, the Kimberly process defined ways of finding legitimate origins of diamonds, while decreasing conflict diamonds. The United Nations described the process as "A way to establish a paper trail from the mine to the retailer". First, the raw diamonds are attached to a Kimberly process certificate, and then exported to participating companies all the way to the retail buyer. The certificate validates the parcel's compliance, and a confirmation receipt is sent to the relevant exporting authority and kept for a period no less than three years . This is a step in the right direction; however, conflict diamonds do not always evade this process. Conflict diamonds can easily be mixed with other diamonds by black market dealers and sold. Corrupted government officials can also draft these illegal diamonds easily and register them. These are some of the many problems that the jewel industry faces. The diamond cartel's operations are in no better shape than some of the corrupted countries in Africa.

De Beers bought from various countries and established a dominant presence. Their dominance required them to take out the competition. This included dictating the future of newly founded companies. On one occasion, De Beers tried to buy Zaire's major mines, but the country refused. Zaire's mines are now reportedly under the control of the diamond cartel after only two years of being on their own (U.S. News and World Report, par. 4). When new mines were discovered, De Beers would go in and make an offer buy out a large portion of production. If the company refused, the diamond cartel would dump the same type of diamond in the market for a much lower price, thus making the company bankrupt or susceptible to a substantially lower second offer.

The financially savvy cartel has executed strategies based only on its financial future regardless of the global economy, competitors and involved countries. They are only interested in money, and they will gain it in by any means. They currently have a stockpile of over 8 billion dollars, and they do not plan on selling it all at once, rather they will sell carefully distribute diamonds at a time they consider best. They have grown considerably due to a conglomerate merger with the retail company LVMH Moet Hennessy Louis Vuitton. They have reportedly dropped the name De Beers, and left their famous slogan on their branded jewelry. This merger has made them even stronger and even more widely known.

To the untrained consumer, De Beers has constantly revealed plans of selling their stockpile in order to stimulate the market and welcome competitors. This has not been the case; they are constantly growing through various subsidiaries in Namibia, Botswana, South Africa, and the newly governed Angola. The diamond cartel has constantly stated that less than 3% of conflict diamonds make it to retailers but independent analysts believe the amount to be 15% (Time International, par. 4). In Namibia alone, the Debmar Atlantic, along with seven sister ships, recovered over 570, 000 carats of high quality diamonds in the year 2000 alone. The main strategy of the diamond cartel is exhibited through their actions. The diamond cartel is also improving the state of their local mines in South Africa to maximize profits. The Johannesburg mine is underway and is receiving a boost of 300 million to double production. De Beers faces little government opposition and is in place no other company is likely to be.

The diamond cartel has an iron fist in most countries and has no plans of stepping down. In Northern Botswana, the diamond cartel is widely known as the largest local company. The country of Botswana boasts a position in the top five in diamond production, yet the diamond cartel is reported to be the largest local company despite efforts for the government to become independent. The cartel is hated by the community especially when it comes to helping out the local people. Social responsibility is an area in which the company needs to improve

The social responsibility exhibited at the De Beers in Botswana is very low. "The cartel only contributed $14,000 to social issues which is only 2% of the annual budget" . The miners hate their jobs and constantly say that the company only cares about mining diamonds and increasing wealth. Due to technological mining techniques, most of their workers will never come within 100 yards of a diamond but they still insist on extensive daily x-ray and constant surprise x-rays. De Beers is hated by many locals because other companies do much for their community and their country, but the diamond cartel faithfully donates the minimum required by law to barely evade lawsuits.

Although De Beers has been out of Angola because of the conflict diamonds, they are slowly returning, despite the heavy corruption that controls the country. "Its representatives continue to negotiate with the government, and it has just recently finished construction on a 12-story sorting house in downtown Luanda, and it still spends about $8 million a year prospecting in the Angolan jungles" (Stein, par.48). The diamond cartel does not care much about the community and it shows especially in the surrounding areas around key mines in various countries

The diamond industry needs some world involvement and established guidelines. There are too many countries that are not benefiting from their natural resources, and the diamond giant is one of the multinational companies that is overtaking and robbing developing countries. We need a committee to supervise the complex diamond industry. Diamonds are very easy to smuggle, and thus they command strong laws and heavy enforcement to discourage black market dealers. With a committee in place, competition can be encouraged and developing countries can wholly benefit. The United States is taking protective steps against the diamond cartel in an effort to disintegrate the cartel's potency. Nicholas Stein says:

"The U.S. Department of Justice has been investigating De Beers for years and still has an outstanding indictment against the company from a 1994 price-fixing case. As a result, De Beers can't deal directly with its largest market, and its directors won't even enter the U.S. for fear of arrest. This industry needs more competitors, as well as consumers."

Although the United States is taking steps to reduce company dominance, over 50 % of diamonds are shipped to the U.S.A, and an estimated 70% of women in the United States own at least one diamond . The United States has a very powerful economic presence that can make major changes in the North American economy, possibly the world. De Beers's diamonds should be boycotted to break up its prejudicial business practices and its lack of social responsibility.

De Beers has been called racially prejudice by many. The company is mostly run by whites and only has a black hard labor workforce that has very little power. The diamond cartels sells its diamonds to first to sight holders, and in turn these sight holders polish and purify the raw diamonds to the glistening magnificent jewels that we see in stores today. The South African Government has been increasing the pressure so that the cartel can sell its raw diamonds to black sight holders and to stop the prejudice that it has hidden for hundreds of years (Africa News Service, par. 11). The cartel needs to reform its ways and give opportunity both for individuals and countries to have an opportunity to benefit in this high profit industry.

Respectfully, each country capable of producing diamonds should benefit fully. Africa is rich in culture in addition to many resources, yet there continues to be a lack of advancement in which the world can notice. Many people ignore the fact that Africa is a rich continent just because of what they see on the news or in movies. Africa may have problems, but it can help itself with the unification of its people and the proper distribution of money raised from resources as well as other avenues.

Africa desperately needs a bystander for it to reach its potential at all levels. Diamonds are just one of the areas that is important because of their worth and stable consumption by strong economies. The reality is that we do not need diamonds; rather we purchase them because of the sentimental value to a significant other. Most people in Africa cannot legally afford to purchase the finished products that come from valuable resources.

As a reader gains information, he or she should act on it in order to fully absorb its content and realize its meaning. Diamond consumers need to be trained to spot out conflict diamonds or diamonds associated in any way with De Beers in order to help alleviate this problem. We should stop the diamond cartel and fully investigate its operating methods. The diamond industry needs a watchdog to supervise all the wrong doing that is currently going on both on our continent and as well as the world. A Diamond may be forever, but monopolization and war affect all of us and the results are eternal.