Rough Ethics in New York
November 15, 07The widely reported public letter sent by the Diamond Manufacturers & Importers of America (DMIA) to the Diamond Trading Company’s (DTC) managing director Varda Shine, evokes a variety of mixed emotions. The exercise through which a cutting center wants to leverage its particular circumstances and exert pressure to secure greater DTC rough supplies for its manufacturers is legitimate. It is a time-honored tradition in most centers, and is part of a system nourished by De Beers itself. However, the strategy to secure the objective must be carefully considered – and the possible unintended consequences need to be assessed well in advance.
Since the introduction of Supplier of Choice (SoC), it has become far more difficult to create leverage over the DTC. (In Israel, for example, the traditional twice yearly government/DTC talks were abolished some years ago.) The U.S. industry has many valid reasons to build a good case proving they are worthy of greater supplies from African countries. After all, America represents 50 percent of the world’s consumer market, and the industry has certainly done a lot to promote domestic and international diamond consumption.
The fostering of close relations between the U.S. industry and African diamond producers seems to be in the best mutual interest of the parties. Indeed, quite a few of the cutting companies manufacturing in African countries (i.e., beneficiation) are U.S. entities. Given the size of the industry, the U.S. players are well represented in the producer countries.
The U.S. diamond industry is an honorable, transparent, respectable industry that deserves to be saluted. Sadly, the same cannot be said about the implied strategy that was pursued through the DMIA letter addressed to Shine and some 20 U.S. senators, congressmen, governors, and the highest federal government officials at the level of Secretary.
The letter links U.S. humanitarian assistance to Africa to DTC rough supplies to New York. Allow me to quote two non-consecutive paragraphs from the letter before further commenting:
“The DMIA acknowledges the merits and necessity of beneficiation, and we support the DTC’s role in this initiative, as well as your support of black empowerment, and all the social and environmental issues that you have undertaken recently in your drive for corporate responsibility. However, there must be a balance so that the positive results of beneficiation do not come at the expense of rough diamond allocations to American Sightholders, as well as secondary market distribution to domestic non-Sightholder manufacturers.” [Emphasis added.]
“Figures from the U.S. Government indicate significant American aid and support for the countries of Botswana, Namibia and South Africa (see attached). The cost of this support is born by the American taxpayer, including those who work in the diamond industry. It would be an unacceptable contradiction for those who support beneficiation in the African continent to suffer the consequence of having rough diamonds taken away from American manufacturers, the ensuing loss of jobs, and the loss of tax revenue. This support should not and cannot be unconditional in the adoption of policies by these countries that have the effect of damaging employment and the welfare of industry within the Unites States of America.”
After the letter was published, an irate U.S. diamantaire called me in the middle of the night lamenting furiously, “Who the hell do they think they are? Do they really believe that our government and congressmen would, for the sake of a handful of diamond companies making an extra buck, cut back on assistance to millions of hungry Africans who have no decent life expectancy, no health care and no education? Don’t they realize that this is going to backfire on the reputation of the entire American industry?” I found myself in a position in which I had to calm my caller.
A Cultural Divide?
On reflection, those drafting the very legitimate letter not only failed to understand what the reactions of some of their own countrymen would be. They also failed to have empathy or understanding for how the letter would be viewed overseas.
The letter finds it “an unacceptable contradiction for those [Americans] who support beneficiation in the African continent to suffer the consequence of having rough diamonds taken away from American manufacturers, the ensuing loss of jobs, and loss of tax revenue.” Incidentally, the same can be said for every cutting center. African beneficiation will also take jobs away from Belgium, Israel and even India. But these countries are not complaining, because there is an understanding that it is “payback time.”
The DMIA’s letter talks about the “hundred years of development and growth of the American diamond industry.” It ignores that colonial policies have systematically extracted the natural resources of Africa, without ever giving Africans a decent chance and opportunity to get the domestic added value that is provided by beneficiation from their own mineral wealth. Again, it is payback time. De Beers isn’t supporting beneficiation because the company believes in it; De Beers supports it because the company recognizes a political reality that has grown beyond its control.
What I personally find very disturbing is the audacity of charging that the African policy “will damage the welfare of industry within the United States.” The sending of copies of the letter to lawmakers and administration officials (and attaching schedules of present and future U.S. aid allocations to African producer countries) implies that such unfriendly African policies should be penalized by reducing U.S. humanitarian assistance. To me, this doesn’t make sense.
Fighting HIV/AIDS, Poverty and Illiteracy
In Namibia, the U.S. government helps mitigate one of the worst HIV/AIDS epidemics and the highest tuberculosis (TB) case rate in the world, by focusing on providing care and services to orphans and vulnerable children, on reducing the spread of HIV through prevention activities and on supporting Namibia’s national TB program. Tens of thousands of mothers were treated to prevent mother-to-child transmission of HIV.
Namibia has the highest income inequality in the world, with 70 percent of the population residing in rural areas, mostly living in poverty. USAID helps these people to develop businesses to generate income.
Or take South Africa for example, where unemployment is running between 30 and 45 percent. The country has some six million HIV-infected citizens – more than in any other country in the world. USAID is making a revolution in transforming the country’s primary health care and in providing education. There are still 10 million historically disadvantaged South Africans that live in slums that lack basic shelter, drinking water, sanitation, solid waste disposal, electricity, and safe and affordable transportation. U.S. President Bush has taken the initiative to address these specific intolerable conditions. They do enormous good for people – and provide enormous goodwill to America.
How can any decent diamantaire in the world have the nerve to think that helping these African people requires a quid pro quo in the form of reducing the [uncertain] possibilities for these countries to get more welfare out of their diamond products? The European Union is spending four or five times more on Africa than the United States – we haven’t heard Belgian manufacturers asking for more rough in return.
Violating Best Practice Principles
I don’t want to take this to the extreme, but if I were in Varda Shine’s shoes, I would kick out any DTC Sightholder that signed this letter based on the violation of the ethical commitments contained in Best Practice Principles (BPP). (That of course would get me into trouble with the higher-ups at De Beers who consistently condone, tolerate, and accept BPP infringements and don’t allow sanctions. But that’s a De Beers and wider industry problem. I’m now talking about the U.S. diamond industry, which has traditionally followed a high threshold for humanitarianism and decency.)
The letter to Shine contains an attachment giving U.S. assistance figures to all African diamond-producing countries, not just those countries where the DTC operates. It is hard to predict how the U.S. officials receiving the letter will react.
Some may consider that foreign aid requires a quid pro quo, which I think is sad. But maybe that is what life is all about.
However, in any event, it’s highly unlikely that any U.S. lawmaker would take the political risk of antagonizing tens of millions of Americans just to serve the economic interest of a few small, private New York companies. To have a dramatic impact, the letter’s attachment should have been an economic analysis, rather than a U.S. humanitarian aid chart.
I’m looking at the letter from a diamond-industry perspective. This is really not the time to ask impoverished people to give up even the smallest chance to improve their own plight by considering the welfare of a few New York diamantaires.
Have a nice weekend.