Masters of Illusion

| 1st September 2003
Janine Roberts describes how De Beers cons the world into paying so much for its cheap, plentiful diamonds and turns a blind eye to the eradication of the oldest culture on the planet.

Forever, as the diminutive pop star Prince once sang, is a mighty long time. But for the world’s largest diamond company De Beers forever is not about time. It’s about money. It was in 1948 that an advertising agency working for De Beers first came up with the line ‘a diamond is forever’. The slogan was not a comment upon the legendary indestructibility of diamonds. Rather, the underlying message was: ‘Once you’ve bought a diamond, never sell it.’ But the purpose of the campaign was not so much to encourage people to keep diamonds as heirlooms as to discourage the market in second-hand gems; the second-hand market might limit the profitable (for De Beers) trade in ‘new’ diamonds. For diamonds, in fact, are not for ever. They are brittle and can burn.

The eternity ring – a ring inset with several small diamonds – is not, therefore, so much a symbolic expression of love given to one’s long-term partner. It is a marketing device thought up by De Beers and its ad agency in the 1970s to sell a surfeit of undersized diamonds that had been recently found in Siberia.

Eternity and indestructibility are just two of many illusions in the diamond world. And while it certainly is no illusion that diamonds are expensive to buy, do you know why they are so expensive? Is it because they are expensive to mine or cut? If not, then surely it is because they are so rare? How else could De Beers justify charging hundreds, if not thousands, of dollars for an engagement ring? More importantly, what else could justify the removal of an entire people – the Bushmen of Botswana, a people whose culture is the oldest in the world – from their ancestral lands?

Myth 1: Diamonds are expensive to mine
In the course of 15 years of investigating the diamond industry, I have met mining company executives and diamond mine workers from all the major diamond producing countries in the world – in southern Africa, Australia, northern Canada and Russia. I’ve learnt that to extract a carat-weight (a fifth of a gram) of diamonds in the Orapa mine in Botswana it costs $9, in the Finsch mine in South Africa it costs $12, and in the Argyle mine in Australia it costs just $2.90. If that doesn’t sound much consider further that $12 is roughly equivalent to the weekly take-home pay of many sub-contracted black mine workers.

At the Kleinzee diamond mine on South Africa’s Atlantic coast, it costs De Beers, on average, $6.40 to mine a high-quality diamond weighing 0.8 carats in size.

When cut, such a diamond would be worth $1,000 dollars on the market. Kleinzee’s black mine workers laughed when I asked them if they ever bought their girlfriends diamond engagement rings. They said that De Beers brings them divorce, not love. For these black mine workers are not allowed to live with their wives in the diamond mining town. The same rules do not apply to Kleinzee’s white mine workers.

More extraordinary still is the fact that diamonds don’t have to be mined at all. De Beers has secretive plants in the Isle of Man and southern Africa that produce high-class pure diamonds from methane gas. US military scientists are now using the same technology, and gas from a sewage plant in Washington DC, to produce hard diamond-coated missile cones. It is a cheap process; the heat needed can be supplied by a blowtorch.

Myth 2: Diamonds are expensive to cut

Up until 2000, men, women and children recruited from impoverished farming villages in Gujarat, India, received just 40 cents for every diamond they cut and polished. That year their wages were slashed even further. Today some 85 per cent of the world’s gem diamonds are cut for 20 to 25 cents each. The take-home pay for Indian diamond workers is a miserly $6 a week. The total cutting, mining and transporting costs for a gem diamond of an average engagement ring size is less than $10. Thus, De Beers’ profits are huge. Perhaps this explains why the Oppenheimer family firm that controls De Beers is registered in Liberia, where there is no need for offshore companies to produce annual audited reports.

Myth 3: Diamonds are rare
When in 1870 diamonds were discovered in vast numbers in South Africa, a number of very rich European merchants panicked. Sitting in their secure rooms were some genuinely rare and expensive Indian diamonds. They feared that their stock would become worthless. So, they financed the British empire builder Cecil Rhodes to buy up all the diamond finds in South Africa – on condition that all the diamonds produced there were sold back to Europeans. Thus, the latters’ stock would not be undercut. Rhodes thus set up De Beers not so much to produce diamonds as to control their production – to propagate the myth of scarcity and keep prices high. The future chairman of De Beers Ernest Oppenheimer summed up the company’s philosophy in 1910 when he said: ‘Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production.’ It has been doing this ever since.

Rocks to the core

But what, you might wonder, has all this got to do with Botswana? The point is that Botswana is the jewel in the De Beers crown. It is the country, above all others, whose diamond production De Beers must control if it is to maintain its stranglehold over the diamond market.

Of the diamond mines De Beers currently operates in Botswana, Jwaneng is the richest in the world. Last year it produced a huge 13 million carats worth of diamonds. These reserves, along with those at Orapa, Letlhakane and Damtshaa, make Botswana the most valuable producer of diamonds in the world. Botswana’s total diamond sales (all of which are marketed by the De Beers-owned Diamond Trading Company) amounted to $1.8 billion in 2002. Incredibly, Botswana produces 25 per cent of all the world’s rough diamonds.

Compare these figures with those for South Africa – the birthplace of De Beers. The country now produces only 11 per cent, by value, of the world’s diamonds. The biggest De Beers mine in South Africa, Venetia, produced around 5 million carats in 2002. Quite simply, Botswana matters to De Beers.

An ‘uneconomic’ mine

One mine in Botswana, however, is not producing any diamonds at all. That mine is Gope, which is located on the edge of the Central Kalahari Game Reserve (CKGR) – right where the Bushmen are being evicted from. When the Canadian mining firm Falconbridge found a rich diamond deposit there in 1980, De Beers purchased it immediately. But, not wanting to draw attention to the discovery (the profits of which the Bushmen may rightfully, perhaps, have considered as their entitlement), De Beers and the Botswana government announced that the mine was ‘uneconomic’, and that they had no plans to exploit it for the foreseeable future.

Yet the projected water consumption figures for the Gope mine (4.2 million cubic metres of water a year) show that it is anything but ‘uneconomic’. De Beers estimates that the average water consumption of its mines is 0.65 cubic metres per carat of production. On the basis of these figures, Gope would produce about 6.5 million carats worth of diamonds a year. In terms of carat-weight of diamonds produced, that would make Gope the fifth largest diamond mine in the world. The average value given by De Beers for Botswana diamonds is a minimum of $80 a carat (that is, at least, what De Beers tells the Botswana government). If the Gope mine were to produce more than 6 million carats of diamonds, therefore, their official value would be in excess of $500m a year.

Even without the extra money that Gope would bring in, diamonds already account for 70 per cent of Botswana’s foreign exchange earnings, 50 per cent of government revenue and 30 per cent of its gross domestic product. They are inextricably linked to the country’s economy. So too is De Beers, which controls the country’s diamond industry through a 50-50 joint venture with the government called Debswana. So closely are De Beers and the Botswana government joined that the country’s president Festus Mogae has described them as being like ‘siamese twins’. Yet despite such obvious and enormous influence, De Beers has remained silent while the Bushmen have been evicted from the CKGR.

Survival of the fattest

On 26 March 2002 Survival International, the organisation that campaigns for the rights of indigenous peoples, wrote to current De Beers chairman Nicky Oppenheimer, saying: ‘It is obviously more expedient for the [Botswana] government to remove the Bushmen now and so avoid bad publicity at the time of mining and any risk that Bushman claims over the area might inhibit or complicate extraction. We believe that there really is no other plausible explanation for [the government’s] actions… In the 33 years since we have been studying these matters we have never come across a case anywhere in the world where tribes have been moved against their will merely to “develop” them [the reason given by the Botswana government for the Bushmen’s removal]. In every single case, it has been because others have wanted their land or its resources.’

Survival appealed for De Beers to support the Bushmen

On 7 June 2002 Survival wrote to Oppenheimer again, asking if De Beers had yet interceded with the Botswana government on the Bushmen’s behalf. This time De Beers replied, saying that Survival’s campaign would bring the organisation into ‘disrepute’. But De Beers failed to explain, as it had previously been asked to do, why it was paying fees to hold onto mining interests at Gope – its supposedly ‘uneconomic’ mine.

In a further letter to Survival dated 15 October 2002 De Beers stated: ‘In your letter you ask if De Beers has a policy to cover indigenous rights. We have given much thought to this matter.’ The firm then explained that it supported the abolition of apartheid in South Africa but not the rights of indigenous minorities. ‘[South Africa’s] new constitution made it quite clear that never again would [its] people be classified by ethnicity. A policy to cover indigenous rights would head straight down that path once again, which is something that no one in southern Africa could, or should, contemplate.'

De Beers went on to say: ‘Leading anthropologists, such as Tim Ingold, Adam Kuper, Carl Wilmsen and James Suzman oppose in principle the granting of any group special privileges or status on the basis of ethnic identity. ‘They argue that indigenous rights ideology is indeed based on the same discredited social theorising that justified apartheid and separate development. It is, moreover, virtually impossible to assess who is indigenous. Genetic measures are meaningless given levels of hybridity in southern Africa.’ (It’s worth noting that Ingold has denied expressing the views attributed to him here, while Suzman has undertaken work on behalf of De Beers on more than one occasion.)

It is shocking that De Beers should advance such arguments. In Australia courts have ruled in favour of indigenous ancestral land rights precisely on the grounds that not to do so would be racial discrimination. In a letter to Survival about De Beers’ statement, Geoff Clark, the chairman of the Aboriginal and Torres Strait Islander Commission, wrote: ‘Giving effect to indigenous rights is not “apartheid” remodelled. To suggest this is nonsensical and offensive. Apartheid is a policy that seeks to justify colonialism and enforce a subordinate status on colonised people. By contrast, the recognition of the rights of indigenous peoples removes the legacies of colonialism and promotes the self-determination of indigenous peoples. The apartheid bogey is one that is occasionally used by sections of Australian society for simplistic political purposes. It is a suggestion that Aboriginal and Torres Strait Islander peoples hold in the deepest contempt.’

Diamond dogs

Last November De Beers was on the verge of opening a high-profile jewellery store in the West End of London; it had recruited the super-model (and wife of David Bowie) Iman to promote its diamonds. De Beers placed a large advertisement featuring Iman on a hoarding outside the site of its new store. But Survival activists replaced it with a poster of a female Bushman with the slogan ‘the Bushmen aren’t forever’. Iman decided not to attend the store’s opening (though she is still happy to take De Beers’ money for appearing in the advertising campaign).

Soon afterwards, De Beers counter-attacked. Lawyers acting for the company wrote to the Charity Commission querying Survival’s charitable status. Fortunately, this did not put Survival off. Responding to De Beers’ lawyers, Survival’s solicitor wrote: ‘[Your] letter was designed to intimidate. Our clients have not been intimidated… The available evidence indicates that your client has been complicit in an assault on the rights of [Botswana’s] Gana and Gwi Bushmen, one so oppressive and extreme that their very existence as a people is now in jeopardy.’

The last thing de Beers wants is negative publicity for its diamonds. This would threaten its exorbitant prices. In recent years concerted public pressure has resulted in stones from war-torn countries such as Angola and the Democratic Republic of Congo being labelled ‘conflict’ or ‘blood’ diamonds. A similar effort is now needed to save Botswana’s Bushmen. De Beers and the Botswana government must be made to understand that if the Bushmen are not allowed to return to their ancestral lands then they will have the unenviable task of persuading the world to buy diamonds tainted not just by conflict, but with genocide.

How de beers gained control over the world’s diamonds

1870    Diamonds found on a South African farm owned by the De Beers family.

1884    With Cecil Rhodes’ support, De Beers adopts a slave system. All black mine workers are to be confined to barracks while on contract. The apartheid system is founded.

1888     Founded by Rhodes, De Beers Consolidated Mines is funded by a London-based price-fixing syndicate of diamond merchants to buy control of all new cheap diamond mines in South Africa. All the diamonds produced must be sold to the syndicate.

1895    Ernest Oppenheimer and several of his brothers travel from Germany to London to work for the diamond syndicate. In 1902 Oppenheimer is sent by the syndicate to South Africa.

1910    Oppenheimer writes: ‘Common sense tells us that the only way to increase the value of diamonds is to make them scarce – that is to reduce the production.’

1917    Oppenheimer founds Anglo-American. Its name hides German interests that would otherwise be forfeited as enemy property because of WWI. In 1919 Oppenheimer gains control of German diamond reserves in what is now Namibia. Black workers are employed to crawl over the desert at night and pick up diamonds sparkling in the moonlight. Their mouths are gagged to stop them swallowing diamonds.

1927    More diamonds found in South Africa. Oppenheimer writes: ‘We bought the farms with the mineral rights so that we can either work them or keep them locked up. It is a most valuable purchase… It will, of course, leak out in due course that we have bought this ground but [we] felt that it was better not to publish the fact, and for that reason we are forming a company called HLG Limited… The director of the company will be one of our auditors, and the registered address will be in his office.’

1928    Oppenheimer is appointed chairman of De Beers, and promptly also takes over the London Diamond Syndicate. De Beers effectively becomes the property of the Oppenheimer family.

1938    De Beers employs advertising agency NW Ayer to help boost the image of diamonds after a worldwide fall in their price. The campaign aims to alter the ‘social attitudes of the public at large and thereby channel US spending toward larger and more expensive diamonds instead of competitive luxuries’. Specifically, NW Ayer stresses the need to strengthen the association in people's minds between diamonds and romance.

1940    De Beers gets 20,000 diamond stories placed in US magazines and newspapers as it begins to build the diamond myth.

1942    Allied Intelligence discovers that major Belgian companies in the diamond syndicate are supplying Nazi factories with diamonds to be used for cutting steel. The Allies conclude that De Beers-contracted mines in the Congo are supplying both themselves and the Nazis, and that cutting off this trade would dramatically shorten the war. US intelligence discovers that UK government employees with close links to De Beers are protecting the Nazi trade.

1943    The US indicts De Beers and other members of the diamond syndicate for running an illegal price-fixing cartel. De Beers immediately threatens to cut off all diamond supplies to US war industries.

1948    An NW Ayer copywriter comes up with the caption ‘a diamond is forever’, which is shown on the bottom of a picture of two young honeymooners.

1974    The US Justice Department again recommends indicting De Beers and its associated companies on criminal charges for running an illegal price-fixing cartel. De Beers does not contest the action. In return, only its subsidiaries are indicted. The subsidiaries are found guilty, fined and bound over not to engage in price fixing again.

2000    The UN accuses De Beers of violating ethical guidelines in the Congo.

2003    The South African Justice and Reparation Commission recommends that corporations, particularly mining firms, be made to pay reparations to the victims of apartheid. Using legislation previously used to gain compensation for Jewish victims of the Nazis, a multi-billion dollar action begins against De Beers in the US.

The real cost of diamonds

Secret production cost figures leaked by a very senior diamond industry executive reveal the real cost of diamond extraction. Per-carat costs are:

Mine/firm    Country    Cost of extraction
Jwaneng       Botswana           $12
Finsch         South Africa        $12
Orapa          Botswana            $9
Miba             Congo               $7
Argyle          Australia            $2.90

At the Kleinzee diamond mine on South Africa’s Atlantic coast it costs De Beers an average of $6.40 to mine a diamond weighing 0.8 carats.

Despite the vast profits made by the people who control the diamond industry, the wages paid to mine workers are low everywhere apart from in Canada and Australia. In 2002 mine workers’ wages in one South African De Beers mine were officially about $30 a week, but sub-contracting meant that many of the black workforce received one third of this figure.

How clean are 'clean' diamonds?

In accordance with an international agreement called the Kimberley Process, diamond-producing states issue certificates supposedly guaranteeing that vended diamonds have not been used for criminal or unethical purposes. These certificates are mandated by legislation like the US’s Clean Diamond Act. Referring to this act, US senator Dick Dubin said: ‘The diamond – a symbol of love in the US – should not be paid for by the blood of Africans… The brutal wars in African nations may be thousands of miles away, but the source of the funds that buy the weapons may be as close as your ring finger. Our legislation says: "If you can’t prove to US Customs agents that your diamonds are legitimate, take your business and your diamonds elsewhere."

But contrary to claims in the media, diamonds continue to be used to finance wars and oppression. In February 2002 the US General Accounting Office (GAO) pointed out: ‘[Diamonds] are virtually untraceable back to the original source… Diamonds are a high-value commodity that is easily concealed and transported. These conditions allow diamonds to be used in lieu of currency in arms deals, money laundering and crime. Lack of transparency in industry operations also facilitates illegal activity.’ The GAO also noted: ‘The nature of diamonds makes them attractive to criminal elements… Smuggling routes are well established… Once mixed [diamonds are] virtually untraceable… Any “conflict” diamond could be claimed as a stockpiled diamond.’ The GAO concluded that ‘under the current import system, the US cannot determine the true origin of diamond imports to ensure that conflict diamonds do not enter the country’ and that much still had to be done to make the proposed system work.

As the GAO has pointed out, there is no independent verification or vetting of Kimberley Process certificates. The process is easy to bypass. The UN has detailed how this can happen. Diamonds used to fund wars can be sold to merchants that have a ‘legitimate’ business and then included in their production figures.

Earlier this year Amnesty International strenuously objected to diamonds from a major mine in the Congo being labelled as ‘conflict-free’; the mine police shoot civilians and imprison children. But according to the logic of the Kimberley Process the diamonds are conflict-free. This is because the mine they come from is government-owned, and the only kind of violence banned under the Kimberley Process is that committed by rebels. If a government is guilty, that’s OK. That government’s diamonds are classified as ‘clean’.

There are now calls for a Kimberley Process ‘Mark Two’ – one that would be independently checked and which would genuinely ban all human rights violations. Unsurprisingly, De Beers strenuously opposes the need for a ‘Kimberley Two’. De Beers chairman Nicky Oppenheimer has said: ‘[The Kimberley Process already provides] the industry with precisely the insulation it requires to ensure that any diamond that tarnishes the image of our beautiful product and threatens the integrity of our business is excluded utterly and completely.’

This is, of course, nonsense. If the Kimberley Process is not revised human rights abuses will assuredly continue to tarnish diamonds. Currently, there is no guarantee that a certified Kimberley stone will not have been cut illegally by a child working in dangerous conditions in India, or by a miner breathing asbestos dust in South Africa, or from land from which indigenous people have unjustly been evicted.

De beers’ secret diamond network

De Beers has long tried to keep its operations secret – moving diamonds along international trails similar to those used by arms’ merchants and covert intelligence operatives. The UN recently complained that this has made the tracking of conflict diamonds impossible.

In 2001 the UN reported: ‘To date, not a single parcel of illicit Angolan diamonds has been intercepted anywhere… No dealer has… witnessed Angolan gems being sold by trader or by bourse. The gems seem to vanish into thin air after leaving Angola. How is this possible?’

The UN also reported on De Beers’ use of a system that conceals the facts about the diamond production of individual nations. Originally, this served the purpose of making it impossible for diamond miners to discover the profits De Beers made when it sold on their diamonds. It also prevented sanctions being effectively imposed on diamonds from apartheid South Africa, and it protected Russian diamonds from an import tax imposed by the US.

Furthermore, the UN found that De Beers maintained a warehouse in the free-trade zone at Zurich airport. Diamonds arriving there were not officially counted as arriving in Switzerland. De Beers used the site to mix and sort its diamonds before sending them on elsewhere. But there was another twist. If De Beers did the paperwork to export a parcel of, say, Congolese diamonds from this free-trade zone to, say, Russia, it could then legally import them into Switzerland as Russian gems – even though they had not left the free-trade zone since their arrival. This made it particularly difficult for the UN to track ‘blood’ diamonds; gems arriving at the Zurich free-trade zone were ‘losing their identity’. They could arrive from Africa and by the next day be transformed into Australian or Russian gems. Blood free!

This article first appeared in the Ecologist September 2003