Global Policy Forum

By Martin Rapaport

See also Rough Controls and Guilt Trip, also by Martin Rapaport.

Background

The fundamental problem of diamonds in Sierra Leone is that the government and people of Sierra Leone do not derive economic beneficiation from the countries diamond resources. There is a clear and immediate need for Sierra Leone to establish an efficient and competitive diamond marketing system that channels funds to legitimate stakeholders while denying funds to warring factions.

A Practical Model

The following model addresses the complex problem of Sierra Leone's diamond industry by promoting a system of selective beneficiation. Instead of buying diamonds randomly based on price and availability, buying actives are targeted at specific areas to insure an optimal concentration of economic beneficiation and that diamond are only bought from reliable sources that will not use the proceeds for the purchase of weapons. In effect socio-economic political consideration are given higher priority than profit optimization, The challenges presented by a highly developed illicit diamond market and resultant corruption are addressed by incorporating a totally transparent business model that seeks to optimize diamond price levels. The model requires total transparency and the monitoring of every aspect of the operation by local NGO's. The model is highly reliant on the integrity and credibility of selected local NGO's as they are empowered to direct and control the economic power provided by the diamond buyer. In effect we are promoting a new type of strategic partnership between NGO's and commercial interests whereby each help the other create a legitimate marketplace that balances the interest of the local population and the diamond buyer.

While the role of government in this model is replaced somewhat by the NGO's, we are reliant on government to provide a satisfactory level of security and a compatible regulatory environment. In return taxes are paid in a consistent and transparent manner. The model does not seek a monopoly of Sierra Leone's diamond trade and is designed to work together with other types of competitive economic activity. Please note, while numerous details have been edited out of this brief outline, the model has been thought through and is commercially viable and could be operational in the very short term.

Transparency

Pricing Transparency

Diamonds will be purchase by a trading company that works on a fixed commission. The commission will be structured to provide a 5% net profit. The diamonds will be transported to Antwerp or Ramat Gan where they will be sold to the trade by open public tender. The resultant tender prices will be fully disclosed to all parties. NGO's and government will know the price paid and received for every diamond, monitor all expenses and income of the trading company and monitor the public tender. Funds realized by the tender in excess of the original purchase price plus commission and costs will be rebated to the sellers.

Sourcing Transparency

Local NGO's will monitor and select where and from whom diamodsn are purchased. It will be the responsibility of the NGO's to limit dimond buying operation so that no conflict diamonds are purchased. All purchase will be under direct NGO supervision with full documentation of the identity of seller and the price paid for the diamonds.

Beneficiation Transparency

It is expected that the NGO's will target specific buying areas. Purchases will be made from digger cooperatives and groups identifiable to specific local chieftains or village areas. A portion of the funds generated from the diamond sales will be earmarked for specific community beneficiation projects. The NGO's will monitor how community money is spent and insure that real economic benefit accrues to the local community.

Beneficiation

Government Beneficiation

All taxes will be paid by the trading company based on the actually prices realized by the tenders in Antwerp or Ramat Gan. There will be no guessing as to the value of the diamonds as sales prices for all diamonds will be transparent. Diamonds will only be purchased from governmental licensed sellers.

Local Beneficiation

To the greatest degree possible diamond will be purchased at the village level direct from digger cooperatives. It is our intention to optimize revenue sharing by insuring that the economic beneficiation for the indigenous local black population (i.e. diggers). While bypassing traditional dealers may be controversial it will democratize the economic beneficiation of the countries resources. Another benefit of buying direct from cutters is that it will insure that the source of the diamonds is known and reliably non-conflict.

Optimal Market Access and Pricing

By tendering the diamonds for sale in the cutting centers we will be arbitraging price levels between Sierra Leone and the international markets and thereby increasing diamond price levels in the Sierra Leone market. The closer Sierra Leone prices are to international prices the less room for illicit markets. The best way to stop illicit diamond markets is by offering higher prices in the legitimate market.

Social Beneficiation

It is highly advisable to incorporate a targeted program of diamond benefits within the context of a larger benefits model that addresses the overall health and social needs at the capable of absorbing and multiplying the economic benefits.