Focus on

ETHICS & SUSTAINABILITY

DIAMONDS FOR DEVELOPMENT: PROVIDING SOCIAL SIGNIFICANCE TO A LUXURY PURCHASE

For a purchase as substantial as that of fine diamond jewelry, it should come as no surprise that many consumers look for more in the product than simply satisfying their need for prestige and wellbeing, or even their desire to express their affection for a loved one. The recent survey of the American diamond market conducted on behalf of the Diamond Producers Association showed that 78 percent of American consumers were more likely to consider purchasing a natural diamond once they learn of the positive social, economic and wildlife conservation impacts of the diamond industry.

This readiness to demand that a product have both social and material value is a particularly true when it comes to younger consumers, and especially for Millennials and members of Generation Z, who today make up the bulk of diamond jewelry demand. Forbes magazine has reported that 76 percent of young people say they have purchased or would consider purchasing a brand or product to show support for the issues the brand supported, and 67 percent said that they would stop purchasing or consider doing so if the company or brand associated with the product behaved in a way that didn’t align with their values.

Gaborone, the capital of Botswana.

BOTSWANA’S DIAMOND DEVELOPMENT MODEL

In 1966, the British Protectorate of Bechanaland obtained full independence, becoming the Republic of Botswana. At the time, the Southern African nation, which has land mass larger than that of Spain, had only 12 kilometers of paved roads.

In terms of educational potential, the situation was not much better. The first state secondary school had only been built in 1965, the year before independence, and in the entire country, there were an estimated 40 university graduates and about 100 secondary school graduates. Health wise, there was only one doctor for every 47,652 people.

But, serendipitously, the same year that Botswana became independent, a De Beers prospecting team discovered the first kimberlite pipe in the Mochudi area. One year later, massive diamond deposits were discovered at Orapa, which would be developed into a major mine, and that would be followed by Letlhakane and then Jwaneng, the world’s richest diamond mine by value to this day.

The influx of capital for the diamond mining sector that resulted was a catalyst for the development of other sectors of the Botswana economy. From 1966 to 2014, GDP per capita increased at an average of 5.9 percent per annum, one of the highest rates in the world over that period.

The revenues generated from the diamond trade also help build the country’s infrastructure. By 2011 there were more than more than 6,000 kilometers of paved roads. Access to schooling improved steadily, with the country producing 10,668 tertiary and 8,268 secondary school graduates in 2013. The ratio of doctor out of the general population was cut to one for every 3,300 people.

 

A PRIMARY RESOURCE IN MULTIPLE COUNTRIES

Botswana is today considered a middle-income country – a rarity in sub-Saharan Africa. Its diamond industry generates about 30 percent of GDP and more than 75 percent of its foreign exchange earnings.

Neighboring Namibia is also heavily reliant on the extraction and processing of minerals for export. There mining accounts for 11.5 percent of the country’s GDP and more than 50 percent of foreign exchange earnings.

Source: www.diamondfacts.org

Diamond mining also plays a critical role in the economies of Angola, Sierra Leone, the Democratic Republic of Congo, the Russian autonomous zone of Yakutia, and to a lesser degree in Zimbabwe and South Africa.

It does not make much a dent in the GDP of a developed nation like Canada, which today is the world’s third largest producing country after Russia and Botswana. But it certainly does in the country’s Northwest Territories, the icy and largely undeveloped region where most of the mines are located, and where diamonds account for about 20 percent of the area’s economy.

 

TRANSITIONING FROM A DIAMOND ECONOMY

The countries or regions that in one way or another are reliant on their diamond sectors together house populations approaching 1.5 billion people, which ias about 20 percent of the world’s total.

Dependent as some of them are on the contribution made by the diamond business, the threat of that sector being damaged in any way is also acute. Modeling by the Botswana Institute for Development Policy Analysis estimated that gross domestic product per capita in the country could drop as much as 48 percent once the mines are exhausted.

In Botswana, as is the case in a number of countries, the pressure is on to use their diamond resources as a means of creating alternative and more sustainable sources of economic opportunity.

This is a slow process, and, as even a developed nation like Australia demonstrates, countries that are economically dependent upon natural resources, find it exceedingly difficult to shift to other means of income revenue.

But that in no way detracts from the very significant role being played by diamonds and the diamond sectors in the long-term economic health of developing nations. The benefits in terms of infrastructure development and investments in public health and education have been and will continue to be invaluable.