How to Steal a Diamond (Part Two)

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M A R C H 1 9 9 9

(The online version of this article appears in two parts. Click here to go to part one.)

THE beaches of Alexkor, the South African state mine, begin only a few miles north of Port Nolloth. By the company's own admission, the mine leaks as much as 30 percent of its goods, amounting to some $15 million worth of diamonds every year -- most of it making its way to Port Nolloth. Newspaper reports assert that the losses may in fact be as high as 45 percent. Still, Alexkor is something of a sideshow; for thieves on the Diamond Coast, Namdeb is the main event.

pigeon smuggler

Every year giant bucket-wheel excavators scoop some 33 million tons of overburden from the beach, adding it to the neat range of hills that Namdeb has created along the coast. Every year some 26 million tons of ore, buried eons ago, is dredged up and returned to the light of day. Namdeb feeds the ore to its mill, which crushes, sifts, and washes it, leaving a gravel concentrate. The concentrate is fed onto conveyor belts and bombarded with x-rays; when the fluorescence that indicates the presence of a diamond is detected, jets of air knock the diamond free.

Namdeb's biggest security problem comes from a historical anomaly -- the construction of miners' hostels inside the part of the mine site that includes the high-grade beach. A large population of single men with lots of spare time to think up ways to steal diamonds thus permanently occupies the most sensitive area of a famously rich mine. Miners with luggage pass in and out at will. Criminal syndicates, active at mines throughout the region, conduct a brisk bourse inside Namdeb's hostels. Miners receive anywhere from 60 to 80 percent of a diamond's value, adding the sum to their $350-a-month wage. Nor is money the only incentive. Coercion is ubiquitous. "The diamond industry has tended to attract all kinds of unsavory characters, not just to steal but to intimidate people, to introduce a general criminal atmosphere," says Sir Alan Grose, the chief of security for De Beers. "Once that gets in place, it's very hard to eliminate."

Reluctant to offend the Namibian government, Namdeb will not raid the hostels. Political delicacy has also precluded simply closing them: the former guerrillas believed to operate the Namdeb syndicates are veterans of the same organization that now constitutes Namibia's ruling party.

A few years ago Namdeb's beleaguered security force tried a different tack. "They decided to raid the buses," a former De Beers mine executive told me, referring to the vehicles in which miners travel to and from the beach. "The thinking was, if we can't do anything about the hostels, let's stop the buses on the way back. So without warning, security stopped the buses. They didn't find a thing. But a hundred yards back all these tiny parcels littered the road. The miners had chucked them out. Even though the roadblock had been a last-minute operation, word had gotten to the buses in time. That's how completely the syndicates have penetrated security."

De Beers is always trying to improve security, and has developed a low-dose x-ray, called Scannex, a version of which is now being tested at Cape Town's Groote Schuur hospital. If the tests indicate that the dose is safe for daily use, Scannex could close the loophole of random scanning. But the problem of corrupt security is likely to remain. The only real solution would appear to be the removal of the hostels. Unless that happens, Namdeb will stay porous.

"I wouldn't want to put a percentage on our production that goes missing," Sir Alan told me a year ago, "but the larger of the figures you just mentioned is in the ballpark." That figure was 15 percent, the high end of a conservative estimate I'd heard. I had in mind a higher figure. "They'll tell you fifteen percent, but it's more like thirty," a former De Beers executive had warned me. When I tried this higher figure out on Sir Alan, he fixed me with a serene gaze. "I don't think it's ever been much more than thirty percent, honestly."

the archery method

In 1997, for example, Namdeb collected 786,000 carats from the beach. Offshore its fleet scoured the seabed for another 485,000. Inshore a few tupperwares on commission brought in 135,000 carats more. At, say, $270 a carat (an insider's estimate of Namdeb's price for rough), the reported production adds up to some $380 million. If workers are stealing 30 percent -- in other words, if the $380 million represents only 70 percent of Namdeb's real output -- then thieves are skimming off some $160 million a year.

The boundaries of Diamond Area 1 exactly match those of the old Sperrgebiet, the "forbidden territory" proclaimed by Namibia's German colonial masters in 1908, after a railway laborer shoveling sand from the tracks stumbled across a diamond. South Africa seized Namibia in 1915. Seventy-five years later the Namibians ousted the South Africans. Four years after that, in 1994, Namdeb was formed. Through it all the borders of the Sperrgebiet have remained unchanged. The enduring sovereignty is the sovereignty of diamonds.

IN the diamond trade there are effectively no states. Borders are unable to control the flow of goods. Take Botswana, considered a model of civic decorum, with a reputation for husbanding its diamond revenues to improve the conditions of its people. The Jwaneng mine, a joint venture of De Beers and the Botswana government, produces 12 million carats a year. A game park teeming with zebras surrounds the mine, and the nearby village where the miners and their families live is a little Eden, profoundly unlike the calamitous, violent world of neighboring South Africa. Yet miners steal diamonds here, too; a De Beers executive in the capital, Gaborone, told me that South African syndicates have moved in.

South Africa, of course, has added its own special acid to the corrosion of frontiers. During the country's long civil war the army and the African National Congress thrust back and forth across the region's borders, helping to spread economic mayhem throughout the southern part of the continent. The white government in Pretoria is reported to have authorized military intelligence to engage in the illicit diamond trade, further entrenching the activity.

Related articles from the online edition of The Mail & Guardian, a weekly South African newspaper:

"Too late to turn tough on diamond smugglers," by Dan Atkinson, Alex Duval Smith, and Owen Bowcott (August 14, 1998)
"European Union plans to get tough on Africa's diamond smuggling may do no more than push the diamond industry into an underground racket matching the drug trade for viciousness."

"Spectre of diamonds crash looms," by Dan Atkinson (August 5, 1998)
"European economists fear a diamond price crash following reports that Angola's Unita rebels have engaged in more widespread massive diamond smuggling than previously realised."

"Inside a Zambian enclave," by Alex Duval Smith (May 21, 1998)
A report "from the surreal wild west of Zambia, where peasants on donkeys smuggle uncut diamonds, gold dust or ivory. It is the lifeline corridor of Angola's Unita rebels, despite all efforts to close them down."

"Unita's diamond bargain," by Chris Gordon (May 23, 1997)
"Although Unita has little choice but to part with some of its diamond concessions, it will not do so without haggling."

Diamonds have also fed Angola's long civil war -- a war that ended with a peace accord in 1994, but only on paper. The war was reignited late last year by a bloody series of rebel attacks, including one on a remote diamond mine owned by a Vancouver-based company, some of whose directors had clear ties to mercenaries who have acted against the rebels. There are two principal warring factions: the Popular Movement for the Liberation of Angola (MPLA), headed by José Eduardo dos Santos, the country's President, and the Union for the Total Independence of Angola (UNITA), under Jonas Savimbi. The MPLA, which has enjoyed international recognition since 1976, holds the capital, Luanda, and in recent years extended its military reach into regions once controlled by UNITA. In spite of commitments made in 1994, UNITA has refused to relinquish the diamond-rich Cuango Valley and the provinces of Lunda Norte and Lunda Sul, each with valuable diamond fields. The rebels are funded, after all, by the only available asset that meets the dual requirements of portability and easy conversion into cash -- diamonds.

"The government has oil, Savimbi has diamonds," says Edgar J. Dosman, a Senior Research Fellow at the Centre for International and Security Studies at York University, in Toronto. In 1996 alone Savimbi ran $700 million in rough out of Angola. Clearly, UNITA cannot afford to abandon the diamond regions.

The government reaps its share of diamonds too. Ministers openly take positions in diamond-mining joint ventures. Elsewhere a joint-venture partner would furnish money or expertise; in Angola he simply arranges permission to mine.

Next door, in the Democratic Republic of the Congo (formerly Zaire), the new President, Laurent Kabila, now battling insurgents, is believed to have funded his own insurgency partly by selling diamond and other mineral rights. The ruler ousted by Kabila, Mobutu Sese Seko, maintained an alliance with Savimbi; Kabila's is with the MPLA. The long-term effects of these shifts in power and allegiance remain to be seen.

Helicoptering up Angola's Chicapa River, I could see the vivid scars of illegal digs -- illegal in the eyes of the government, perhaps, but "licensed" by whoever had happened to control the area at the time. The specter rises of a medieval land, a dominion of barons perversely devoted to the sacking of their own domains. In this model the lonely monarch is De Beers, fighting an endless battle for order, at tremendous cost. In a practice known as "mopping up," the company has often tried to buy as many illicit diamonds as it could; the gems, if allowed to flood the open market, could send prices plummeting virtually overnight. Not long ago, De Beers was spending $15 million a week mopping up Angolan diamonds alone.

ONE winter morning, in the hard sunlight of Namaqualand, I stood staring down into a pit whose dimensions were roughly those of a twenty-story building covering three football fields. It was part of the Trans Hex Baken mine, which produces diamonds worth, on average, $500 a carat. It is hard to find better goods than these. At the bottom of this hole, dug from gravel laid down over 15 million years, is a former riverbed. Sometimes Trans Hex locates the plunge basin of a prehistoric waterfall, where handfuls of diamonds may have accumulated. Recovering them involves a lot of digging: Trans Hex estimates that two truckloads of dirt are removed for every carat that makes its way out of the pit and onto someone's finger.

Across the Orange River morning dumped its bin of light onto Diamond Area 1. I could almost hear the pigeons stirring. Probably the first few stones of the day were already slipping past the fence. And down on the Diamond Coast, in Port Nolloth, someone would be turning the ignition key in his BMW, tossing his loupe onto the dash, and heading off to work.

The online version of this article appears in two parts. Click here to go to part one.

Matthew Hart, an editor of the trade magazine Rapaport Diamond Report, is the author of the novels The Male of the Species (1993) and Into the Purple Duchy (1995), and has just completed Rough, a thriller about the diamond trade.