Few companies have controlled an industry as De Beers has controlled the diamond industry. De Beers, established in 1888, is the world’s leading diamond company with unrivalled expertise in the exploration, mining and marketing of diamonds. Effectively, the company’s history is that of the diamond industry. Among the founders of the company was Cecil Rhodes, the man most responsible for British dominion over most of southern Africa. Historically, the company has controlled 85 to 90 percent of the world’s diamond trade. The company only sells its wares at limited sightings called “single channel marketing”  where diamond merchants can only buy or reject diamonds sold in lots determined by De Beers. The price is fixed and the company is able to maintain its pricing structure by limiting the amount of diamonds that are made available. The size of the diamond industry is approximately $30 billion USD.

The company created the slogan “A Diamond is Forever” in 1939 to suggest an emotional value to diamonds that did not really exist prior. The goal behind that marketing campaign was to ensure that women keep their diamonds literally forever and to prevent a secondary market from being created. The campaign is perhaps the most successful ever creating a mass market for diamonds. The main use for diamonds is industrial. One factor that has helped De Beers maintain its control of the diamond market is that until the end of the Cold War, Russia kept its diamonds off the global market – engagement rings were just not a Marxist-Leninist value. In the past twenty years that changed with the Russians forming the Alrosa Diamond company, 90 percent owned by the Russian government. De Beers’ share of the diamond trade has fallen to 40 percent. In 2009 Russia quietly passed a milestone this year: surpassing De Beers as the world’s largest diamond producer.

Recently, De Beers’ fortunes have sunk even further. Short of cash, the company had to raise $800 million from stockholders in just the past year. The onset of the global recession also coincided with a settlement with European Union antitrust authorities that ended a longtime De Beers policy of stockpiling diamonds, in cooperation with Alrosa, to keep prices up.

It is hard to shed tears for De Beers even as if the transformation of De Beers over the past decade or so is a remarkable and little-known story. But the collapse of the diamond trade is having repercussions in Botswana, perhaps the best managed economy in Africa. The collapse of global diamond trade bodes ill, not only for Botswana’s mineworkers and diamond cutters, but also the country’s economy as a whole.  At independence in 1967, Botswana was one of the poorest countries in the world, with a per capita income of about $80 a year. Today, it is among the most prosperous countries in Africa, with a real middle class, and a per capita income approaching $6,000 a year.  Its economy is the diamond industry and the income from that industry has allowed Botswana to build Africa’s longest-lived democracy after that of Senegal.

The discovery of diamonds in Botswana came in 1968, a year after independence. Thus De Beers was forced into a joint venture agreement with the government when otherwise it might have chosen another path. A new company called Debswana was created with De Beers and Botswana each owning half of the company. At their peak in 1990s, the diamond, manganese and copper mines controlled by joint venture provided half of the country’s GDP. Today, it still accounts for a third of Botswana’s GDP.

Debswana is one these private-public partnerships that I often talk about and of which I am fond. From the New York Times:

There is also no question, though, that Botswana was greatly aided by something else: De Beers’s own sense of — to use the current term of art — corporate social responsibility. Unlike most big companies that have exploited Africa’s resources over the course of its tragic history — indeed, unlike most Chinese companies operating in Africa today — De Beers did not simply plunder Botswana. Practically from the start, it entered into a 50-50 joint venture with the government; about a decade ago, it also sold the government a 15 percent stake in the company. (De Beers has only two other shareholders: the South African-based Oppenheimer family, which has controlled the company for over 100 years, and the publicly traded Anglo-American Corporation.)

It has also built roads, hospitals and schools in Botswana; worked to help the country deal with H.I.V. and AIDS; and been involved in and paid for a hundred other things that have helped make Botswana an African success story. Most of the executives in the government-company joint venture are black Africans who have been trained by De Beers. In March, the company closed its diamond sorting facility in London, and opened the largest, most technologically advanced diamond sorting complex in the world in Gaborone. It employs 600 people and is also part of the company’s 50-50 joint venture with the government.

“We think our approach is a competitive advantage,” said Gareth Penny, the cherubic 45-year-old South African who has been the company’s chief executive since 2006. It’s hard to disagree. Botswana’s citizens need roads — but so does De Beers, to transport its diamonds. De Beers needs a healthy work force, so its emphasis on H.I.V. awareness and treatment is clearly in its self interest. Indeed, a more prosperous Botswana helps De Beers in every way imaginable, not least by providing a stable environment in which it can do business.

But the global recession and the fall off in the global diamond market brought on by heightened competition is having an impact. Today comes word from the Minister of Minerals, Energy and Water Resources of Botswana, Pontashego Kedikilwe, who divulged that Botswana feels compelled to rescue De Beers from its debt because the failure of the world’s biggest diamond producer will have devastating consequences on the economy of this small but successful African country. The story from All Africa:

“De Beers is a significant player in terms of protection of diamond equity and as a country dependent on diamonds, we are bound to honour the agreement that has been made in principle,” he said at a press conference on Friday.

Botswana, however, is itself cash-strapped after diamond exports plummeted to the point where the country had to seek a bailout from the African Development Bank (AfDB), will finance $150 million for its part of the De Beers ’stimulus’ package.

The minister said government is mindful of its budget constraints, however for De Beers shareholders to maintain confidence in the diamond industry, they have to see to it that De Beers stays afloat.

“We are in discussion with all our partners on how we can keep the company afloat because the failure of De Beers can have serious consequences on projects (Jwaneng expansion) we are embarking on and the future of the diamond industry.”

Indeed, Botswana is between a rock and a hard place literally.

Charles Lemos is a blogger based in San Francisco.

Military control over diamond mining in Zimbabwe’s eastern Marange district has resulted in a brutal mix of massacres, forced labour, beatings and rape.

This is according to a comprehensive report released last week by Human Rights Watch (HRW), the New York-based rights NGO, which interviewed over 100 people in the region in February 2009.

Mining in Marange began in 2006. Initially the government allowed anybody to prospect in the area. Then it started clamping down. Recognizing the mines as an important revenue opportunity, the Zanu PF-controlled army invaded the mines in October 2008, massacring over 200 miners in the process.

Helicopters swooped down over illegal miners, shooting live ammunition and teargas. 800 soldiers were sent in to secure the area. Illegal miners were forced to dig mass graves for their murdered comrades. The report says:

A local headman told Human Rights Watch that in the three weeks of the military operation, Chiadzwa resembled “a war zone in which soldiers killed people like flies.” Another headman was forced to bury five bodies of miners; all five bodies had what appeared to be bullet wounds. None of the bodies were identifiable.

With the army in control of the area, the violence has continued and illegal mining – which the police and military were ostensibly supposed to shut down – has continued to flourish, this time in the hands of soldiers.

The army is forcing at least 300 children to work without pay in the mines. A woman forced to work on the mines told an HRW researcher: ‘We worked together with about 30 children of ages between 10 and 17 years. The children worked the same 11 hours each day as adults did. The soldiers had a duty roster for all villagers in Chiadzwa to take turns to work in the fields, irrespective of age.’ The woman explained how men did the digging, while children and women carried the ore, then sieved it before sorting the diamonds. The women and children were forced to work without breaks, with soldiers not even providing food and water, and beating those working too slowly.

Soldiers have also been plundering impoverished villages, stealing items like cellphones, maize and blankets. In addition to this, the report reveals that:

Several witnesses and victims told Human Rights Watch that soldiers continue to assault, harass, and subject the local community to torture…

Two such incidences occurred in February 2009 when:

[F]ive soldiers beat three Muchena villagers for over five hours using a rubber hose without stating any reasons for the assault. The same night, eight soldiers assaulted a family in Muedzengwa village using open palms, clenched fists, rifle butts, and booted feet. The soldiers then allegedly stole several items of personal property. During the beatings, the soldiers demanded information on local miners, which the villagers did not have.

Zanu PF party apparatchiks have also threatened to forcibly remove those who live in the area, estimated by HRW to be about 7000 families. The reign of terror and military oppression continues, with the illicit profits from smuggling (diamonds are sent illegally to Mozambique and Johannesburg, South Africa) benefiting soldiers and senior Zanu PF officials.

HRW has called on Zimbabwe’s power-sharing government to intervene and place police control over the area, ensuring ‘that the police abide by internationally recognized standards of law enforcement and use of lethal force.’ It also calls for the government to launch an investigation into the rampant human rights abuses in the area.

Unfortunately, the unity government is unlikely to do anything. While Prime Minister Morgan Tsvangirai is eager to claim that Zimbabwe has made great strides in governance reform, and that his nemesis President Robert Mugabe is accepting this process, nothing could be further from the truth.

As I have discussed in the past, Zanu PF is doing its utmost to stall reforms proposed in the unity agreement. Furthermore, human rights activists, lawyers and opposition MDC politicos continue to be unlawfully harassed and detained. Hundreds of prisoners die of starvation in jail. And land grabs and persecution of farmers occur with impunity.

Zanu PF’s undemocratic participation in government is only further aiding Zimbabwe’s disintegration and prolonging the suffering of our ordinary Zimbabweans. The world cannot look away from the horrifying abuses and continuing tyranny in the Marange diamond fields and elsewhere. It is no use pretending that Zanu PF is prepared to surrender its illegitimate and strangulating hold on power. Zimbabwe will continue its agonizing implosion if the West decides to prop up this sham unity government.

Regional powerhouse South Africa as well as Europe, Britain and the US need to act in the best interests of all Zimbabweans and force Zanu PF to accept the rule of law and ensure that the obligations in the unity agreement are adhered to. The suffering citizens of Marange, and of Zimbabwe as a whole, deserve nothing less.

Alex Matthews is editor of The Soapbox. He writes this in his personal capacity.