|The Moor Next Door posts a piece on ‘Post-coup politics’ in Africa:
‘Economic and social stability and smooth, generally legitimate and legal transfers of power are seen as deeply linked. The legality and the legitimacy of a regime are considered more important in powerful capitals than in the past. Coups, being illegal and disruptive, do not promote political stability or investor or donor confidence. The rule of law suffers from illegal transfers of power, which has implications for economic life because coups can cause elite paranoia and reallocations of state and private resources.’
Thinking about ‘post-coup’ politics, how about ‘post-dance-for-foreigners’ politics?
Mental Acrobatics comments on what is becoming increasingly tiresome habit of ‘a bunch of scantily clad dancers doing a [Zulu] dance’. Mental is writing about the recent World Cup in South Africa but this tradition (I suspect it began in colonial times) is replicated across the continent. Fortunately a backlash is happening in Kenya which I hope will spread like wildfire across the continent:
‘In Kenya there is a growing cultural revolt against having “jumping Maasai in red shukas” as the only advertised symbol of Kenya culture. There has to be more to show than this, we cry. In a similar way how can these dancers been selected as the most prominent ambassadors of South Africa culture? You never get a second chance to make a first impression the saying goes. Are these dancers the first impression South Africa wants to give about its culture?’
Is it possible to develop technology applications in Africa which respond to the needs of Civil Society? Yes.
Mashale writes about ‘Apps 4 Africa’, a contest that challenges software developers to respond to specific needs described by people in Kenya, Tanzania, Uganda and Rwanda:
‘Sponsored by Appfrica Labs of Kampala, the Innovation Hub (iHub) of Nairobi, the Social Development Network (SODNET) of Nairobi, and the U.S. State Department, the contest was launched July 1 at iHub, an innovation hub and community workspace for local technologists. The contest runs through August 31.’
Black Looks publishes a radio interview she did with African Perspectives out of Canada in which she discusses the dangers of a ‘single story’ of ‘African’ (how do we get away from conflating the whole continent?) sexualities, and gay imperialism and LGBTI rights in Africa.
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* Sokari Ekine blogs at Black Looks.
* Please send comments to email@example.com or comment online at Pambazuka News.
Diamonds: Burden or boon?
2010-07-22, Issue 491
‘Given the context of blood diamonds, the real conflict rests not with militias mining diamonds’, but with ‘the battle to control markets and pricing’, argues Khadija Sharife, in an assessment of the structure of the international diamond industry. For developing country governments ‘at the helm of diamond-producing economies, corporate control over diamond markets means limited choices and fewer opportunities to collect equitable revenue from diamond resources’, says Sharife.The issue of ‘blood diamonds’ has once again made the news: Farai Maguwu, director of Zimbabwe’s Mutare-based Centre for Research and Development (CRD), languishes under the long arm of Zimbabwe’s law, on alleged charges related to his research on Zimbabwe’s Marange mines. According to a confidential 44-page report produced by investigators mandated by the Kimberley Process, an international scheme designed to prevent the sale of ‘blood diamonds,’ diamonds at Marange are being mined under the direct surveillance of the military, and alleged violations include forced labour, torture, beatings, and harassment.
Are Zimbabwe’s diamonds, 300,000 carats of which were approved for sale by the Zimbabwe High Court in April 2010, even worth the effort, given that massive volumes of gem quality diamonds are stockpiled with controlled release to prevent value from plummeting? In context, ‘blood diamonds’ officially contribute less than one per cent of the global trade – a largely unnecessary one per cent given the massive volume of stockpiled diamonds.
For De Beers, founded in 1888 by colonialist explorer Cecil Rhodes and born from the carbon-rich soils of South Africa, however, ‘price-fixing’ the value chain has always been crucial to the survival and growth of the diamond market. By 1941, more than 90 per cent of the world’s diamonds were produced in Africa and controlled by De Beers. While diamonds represent a perceived development vehicle for several southern African countries such as Botswana, Namibia, Angola and South Africa, stockpiles held by major players dominating the industry, including Russia’s Alrosa as well as other developed diamond producing nations such as Canada and Australia, determine the state of the market and the value.
According to the WDC, pre-recession about US$13 billion in rough diamonds were produced each year, with 65 per cent of diamonds being of African origin and valued at US$8.5 billion. An average 70 per cent of diamonds are utilised for cutting, drilling, grinding and polishing, while diamonds of gem quality – a specialty of Botswana, the world’s highest producer by value – are directed toward the jewellery industry, worth in excess of US$72 billion prior to the recession. The world’s primary diamond producing countries are Angola, Botswana, South Africa, Namibia, Democratic Republic of Congo (DRC), Russia, Australia and Canada, while Belgium and Israel count amongst the world’s leading cutting and polishing centres.
The process through which De Beers apportions rough diamonds is accomplished through ‘sightholders’ – persons or corporations approved by De Beers as ‘Suppliers of Choice,’ listed thereafter on the Diamond Trading Company’s (DTC) roster, and eligible to participate in ‘sights.’
Diamonds are classified in 12,000 different categories based on a variety of criteria, ranging from diamonds suitable for industrial purposes, to those with slight (S) and very slight (VS) inclusions or rents and clouds, and thereafter priced accordingly.
The DTC group hosts ten sights each year in the UK, South Africa, Botswana and Namibia, usually once every five weeks, disposing of De Beer’s rough diamonds sourced from African nations as well as Canada. DTC sightholders – the company’s sole customers – handle more than 75 per cent of the world’s diamonds and are renowned as leading diamantaires (master diamond cutters and manufacturers), assessed against the DTC’s Sightholder Criteria, and based on expertise and excellence for fixed contract periods. The present three-year period ends in 2011.
South Africa’s DTC, for instance, hosts 15 sightholders; Botswana, 16; and Namibia, 11.Not all countries are equally present in the diamond pipeline or value chain, extending from exploration and mining, to sorting, cutting and polishing, manufacturing and retailing. A diamond of gem value mined in Botswana may be locally sorted at Gaborone’s US$83 million sorting centre – the largest in the world (originally housed in the UK by De Beers for close to a century) – before travelling to India, where it will once again be sorted according to the four cardinal C’s of the industry: Colour, cut, clarity and carat.
Despite Belgium, Israel and the UK traditionally acting as diamond capitals or diamantaires of the world, these days the most crucial stage of the value chain has returned home to India, one of the British empire’s original sources of diamonds, which is armed with tax incentives, and a tremendously talented skill set. It is no wonder then that 11 out of 12 diamonds are cut and polished in the country. The process of beneficiation adds 66 per cent in value to diamonds: Sorting 15 per cent; polishing, 12 per cent; polished dealing 6 per cent. A further 33 per cent is added during the jewellery manufacturing period of asset transformation, another field that India has begun to specialise in. But the real mark-up is evidenced in the leap from manufacturing to retail, appreciating by almost 50 per cent in value, from 166 per cent to 320 per cent.
Africa produces some 65 per cent of the industry’s rough diamonds. Most, if not all, can be classified as free from the UN definition of ‘conflict diamonds’ as ‘diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognised governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council.’
Launched in January 2003, the voluntary ‘soft law’ of the Kimberley Process and the accompanying Kimberley Process Certification Scheme (KPSC) are designed to distinguish conflict diamonds from those legitimately mined. The Kimberley system was endorsed by the UN General Assembly, the UN Security Council as well as major diamond entities and producing countries. Under the umbrella of this system, diamond-producing countries are allowed to become members on application.
There has, however, been criticism levelled at the self-regulated mechanisms of the Kimberley Process, including the lack of auditable tracking systems that ‘fingerprint’ diamonds from source to end-destination, and the vacuum related to codes of conduct. For many observers, the Kimberly System is fundamentally flawed because it identifies perceived corruption as behavioural on the part of states. But the causes are systemic, rooted in the opaque and secretive nature of the global financial architecture, devoid of corporate country reporting and mandatory information exchange.
Though De Beers dominated the diamond industry for many generations, a new power player has since emerged following a confluence of events. The centre – previously De Beers – no longer holds, due in part to the terms of the European Union’s anti-trust lawsuit, effectively preventing De Beers from stockpiling. This was a swift departure from previous policies, forcing the company to exercise restraint over production.
These days Russia’s 90 per cent state-owned Alrosa threatens to unravel the last vestiges of De Beer’s legacy as a cartel through stockpiling – some three million carats each month (2009) locked in a vault – until the global economy, and demand, begins to peak again.
In reality, the Soviet Union has long been a producer of one-carat diamonds, though the ideological institutions of the Cold War prevented Russia from directly marketing diamonds to elites and newlyweds in US consumer markets. Instead, a secretive development agreement was negotiated between De Beers and the Soviet Union, to engage in a ‘single channel’ directed and operated by De Beers from London, to prevent the collapse of diamond marketing efforts.
At that time De Beers had a near monopoly of the distribution and sales of gems and diamonds on the world market. ‘A single channel,’ stated Oppenheimer, ‘is in the interest of all diamond producers whatever the political difference between them may be.’
Russia’s response to anti-trust legislation has drastically differed from De Beers. While the former continued to produce en masse, declining just 1.9 per cent, the latter decreased production by 91 per cent. Debswana, for instance, the joint venture between De Beers and the Botswana government and the world’s largest producer by value, closed three mines, putting 4,500 people out of work. In 2009, production was halved to approximately 17.1 million carats, with 2010’s production planned at 60 per cent of normal output, or 20 million carats.
Stockpiling at Gokhran – Russia’s stockpiling agency – began in December 2009, as a response to the continued decline in consumption. According to the head of Gokhran, Vladimir Rybkin, their current budget, tagged at US$1 billion (RUB 30 billion), will be used to continue stockpiling during 2010 – though to a far lesser degree than 2008 and 2009. Alrosa’s US$1 billion three-year yield of stashed rough is now being presented to potential investors despite Rybkin admitting that the real value was ‘a state secret.’ Rybkin originally claimed that for those ‘diamonds bought in 2008-2009, we shall not sell them during this or the following year. They will probably reach the market in 2012 or 2013.’
Both Alrosa and Gokhran are directly controlled by Russia’s Ministry of Finance. By 2009, the company had surpassed De Beers as the world’s largest producer, stealthily placing itself in the driver’s seat by possessing the means to flood markets and undercut ‘price stability.’ But Alrosa is not about to bust the market wide open. ‘If you don’t support the price,’ stated Alrosa spokesperson Andrei Polyakov, ‘a diamond becomes a mere piece of carbon.’
To this end, Alrosa has begun marketing diamonds to financiers as an investment, marketing gems under long-term contracts to the world’s cutting and polishing centres such as Belgium, Israel and India, as well as engaging partner country Angola to purchase 30 per cent of the country’s production in order to keep diamonds from flooding the market. Though the market for wholesale polished diamonds had decreased from US$21.5 billion (2008) to US$12 billion (2009), consumption – aided in large part by India and China – is once again picking up.
More than 60 per cent of the world’s diamonds are still consumed in the US, though China, and India have begun to develop consumer markets, targeting the middle and upper income groups. China’s burgeoning middle class, for instance, is similar in demography to that of the US’s entire population – some 300 million people – with 40 per cent of brides in major Chinese cities such as Beijing and Shanghai receiving a diamond engagement ring. The Diamond Administration of China (DAC) claims that the country has overtaken Japan as the world’s second largest diamond market, behind the US. China’s trade in polished diamonds rose by 16 per cent in 2009, to a high of US$1.52 billion while the Shanghai Diamond Exchange (SDA), one of 28 bourses worldwide, still in the maturing phase, rose by 30.7 per cent. Unlike India, China levies a four per cent value-added tax on imported diamonds, down 13 per cent from 2003.
This suggestion follows the advice of the World Federation of Diamond Bourses (WFDB). ‘Very few countries where diamond trading is thriving levy a value-added tax or import tax on diamonds traded in exchanges,’ stated then-President Shmuel Schnitzer. The SDA, China’s only bourse, intends to become the world’s fifth largest exchange by 2013. South Africa’s bourse, meanwhile, in a country with a history that developed almost parallel to the diamond industry, is less healthy due to the alleged lack of rough supplied to the bourse by De Beers, which controls over 90 per cent of diamond production. In 2008, the exchange accessed just three per cent of rough, seven per cent short of the minimum requirements, forcing the nascent beneficiation industry to halve from 3,000 to 1,500 people. While South Africa remains one of the world’s leading producers by volume, the bulk of small rough are sent to India, with only larger stones remaining in the country. According to South Africa’s department of minerals and energy, De Beers had agreed to assist the new bourse, created in 2007, with technical skills and assets.
Africa’s newcomers such as the Shrenuj India Group, De Beers diamond sightholders since 1982 and recently approved as a sightholder for Debswana, have already made in-roads toward developing local industries.
India’s cutting and polishing talents are perceived as legendary, and with a low cost of labour, India currently ‘handles the equivalent of 55 per cent in terms of value and 92 per cent by volume,’ says Shrenuj’s group general manager, Pranava Bhargava. ‘The great part about Botswana,’ he continued, ‘is the strong and stable democracy.’
As the world’s largest producer by value, with a labour force that speaks English and is educated, Botswana holds great appeal. Bhargave claims that developing the capacity of downstream industries is a priority through ‘training and transferring skills to people so that they can develop ancillary businesses of their own or gain employment in the industry.’
Just as some diamond producing countries, like Botswana, are moving toward the higher end of the value chain, other mobile economies (this time multinational) such as Graff Diamonds, Harry Winston and Tiffany’s – the iconic creators of the ‘blue box’ engagement rings – are moving backwards, toward the sorting, cutting and polishing states. Tiffany’s in-house unit, Laurelton Diamonds, for example, oversees cutting and polishing investments in South Africa, Belgium, China and Mauritius, which together produced 50 per cent of Tiffany’s diamonds in 2009.
Meanwhile, for those developing country governments at the helm of diamond-producing economies, corporate control over diamond markets means limited choices and fewer opportunities to collect equitable revenue from diamond resources. Most African countries have a net negative rate of national savings relative to GNI.
For each percentage point increase in dependence on extraction of natural resources for export the country’s GNI decreases by nine per cent against the real recorded gross domestic product,’ claims human rights attorney Richard Spoor. ‘South Africa’s growth has been negative by this calculation. We are selling off our national resources at prices that are lower than their real value.’ In sum, says Spoor, ‘revenue is small due principally because the state has to date not received value for our mineral assets. Gold, coal and diamonds were acquired by large monopolies.’
According to Spoor, the Mineral and Petroleum Resources Royalty Act, coming into effect on 1 April 2010 after a six-year delay, may improve revenue from mining, which contributed just 0.4 per cent to the economy in 2005. The legislation requires mining corporations to pay royalties proportional to the profitability of gross sales minus allowable costs and deductions, ranging from between 0.5–7 per cent. The Act was suspended during 2009 by the then finance minister Trevor Manuel to grant mining corporations relief from the recession.
Meanwhile, diamonds retain their cachet as fashion statements and tokens of love, testament to the enduring impact of a good marketing campaign As far back at the early 1940s, over 80 per cent of diamonds were purchased by young males in a bid to romance females. This has not changed, with diamonds big and small remaining the ‘surprise’ of choice for engagement rings, birthdays and other special memories. NW Ayers, the advertising firm credited with coining the pay-off line, ‘Diamonds are forever’ for their client De Beers in 1947, stated at the time: ‘We are dealing with a problem in mass psychology. We seek to... strengthen the tradition of the diamond engagement ring – to make it a psychological necessity.’ Given the context of blood diamonds, the real conflict rests not with militias mining diamonds, but rather, the battle to control markets and pricing, and the war for greater expansion throughout the diamond pipeline, from dust to diamantaire.
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* This article first appeared in The Thinker, July 2010.
* Khadija Sharife is a journalist, visiting scholar at the University of KwaZulu-Natal Centre for Civil Society (CCS) and contributor to the Tax Justice Network.
* Please send comments to firstname.lastname@example.org or comment online at Pambazuka News.
Food sovereignty in Africa: The people's alternative
2010-07-13, Issue 490
The different explanations given for Africa’s current food crisis seem to miss the real causes of the problem. Mamadou Goita does not believe that the crisis is of an economic nature. Rather, it is the endpoint of the dismantling of Africa’s agricultural sector and its linking to the international market and brutal liberalism. Based on an analysis of the political choices that have contributed to the current situation, notably the structural adjustment programmes of the 1980s, Goita proposes solutions and decisions that need to be taken to achieve food sovereignty in Africa.In Africa as a whole, but particularly the western and central regions, agriculture is the primary occupation for the majority of the populations. Mostly it is practised at a rural subsistence level, by families who combine their knowledge, labour, skills and resources in order to create wealth and produce surplus. Production is, first and foremost, to meet the food needs of the family. However, if there is a surplus produced, this is then used to meet other needs. This differs from private agribusiness, where members are linked through capital (monetary contributions of the sole proprietor, or the partners).
The first chapter of this essay will reflect on agriculture at a global scale, but from the perspective of a specific context. In the second chapter, we will look at the promotion and protection of indigenous produce, in order to achieve food sovereignty in Mali, West and Central Africa. The final chapter will present a framework of solutions to the problems identified.
AGRICULTURE AND ITS CHALLENGES FOR SOCIO-ECONOMIC DEVELOPMENT
Keeping in mind the description we have given above it is clear that agriculture as it is practiced in most of the continent is much more than just food production and economic activity. It has multiple orientations and contributes in many different ways to society’s fundamental aspirations. From the social perspective, subsistence agriculture, as practised in countries like Mali, provides employment, which in turn maintains the social fabric, if it is practised at a family scale.
Culturally, agriculture reflects our diverse tastes in food (our foods according to our tastes and our culture). It also promotes local consumption and agricultural biodiversity. This is one of the primary reasons for valorising local production. These local foods constitute a viable counterfoil to the changing urban dietary trends that are dependent on foreign foods.
At an environmental level, agriculture can contribute to maintaining soil fertility, conserving genetic resources and water quality.
At independence, most African countries strongly advocated for food self-sufficiency through the promotion of indigenous agricultural production. With the introduction of the SAPs (structural adjustment programmes) this policy was abandoned in favour of food security based on the international liberalisation of commodity markets. Under this system, the question of who produces the food becomes of secondary importance.
In Africa, liberalisation implies the political disengagement of the state and the decentralisation of agricultural services. At an economic level, it has to do with development of GMOs (genetically modified organisms), bio-piracy and the privatisation of genetic resources. Lately, we have also seen the development of biofuels. At the social level, we still see high levels of illiteracy among rural farmers, which limits their access to information.
The widespread liberalisation of trade in agricultural goods has had serious consequences for Africa: the worsening of the food situation, as well as the loss of rural jobs; the impoverishment of the peasant populations; and a subsequent spike in the rural urban exodus, which poses a serious threat to political and social stability. A large part of the African population now has limited access to food.
Under these circumstances, it is vital to deepen the analysis and understand all the factors that impact agriculture and rural development policy.
The recent high-level FAO (Food and Agriculture Organisation) meeting of experts in Rome, under the theme 'Ending hunger by 2050', provided yet another opportunity to demand commitment from the so-called rich nations controlling global capital and destroying African economies to 'save' the continent from starvation. As is always the case with Africa, once again the world is obsessed with addressing the consequences while blatantly ignoring the root causes of the problem.