Egmont Diamond Chain

The Misery & the Mark-up

Miners’ Wages and Diamond Value Chains in Africa and South America

Shawn Blore - Independent Researcher

The Royal Institute for International Relations

Why Compare?

Similar geology

Inputs comparablypriced -diesel/gasoline -food

International price for diamonds constant

Wage differencesdue to difference in value chain


Why This Study Growing interest in artisanal diamonds as engine of

development, particularly in Africa To evaluate potential size of development impact

1 million diamond diggers in DRC making US$1/day Even just doubling this wage will have an enormous impact Establish realistic benchmark, based on real world example

Indicate which actors in diamond chain are capturing what percentage of wealth embodied in a diamond

With percentages identified, can work on adjusting those percentages in favour of producers


Methodology Determine wages of African artisanal miners

Literature Review Determine wages of South American artisanal

miners through field research Brazil Guyana

Compare wages Investigate mark-ups in diamond chains in

Brazil, Guyana, DR Congo Who is capturing how much?


African Diggers’ Wages Rich Man, Poor Man; Development

Diamonds and Poverty Diamonds: The Potential for Change in the Artisanal Alluvial Diamond Fields of Africa (PAC/GW)

Angola, DR Congo, Sierra Leone Diggers paid in food, sometimes a daily wage

(0-50cents), plus a share of proceeds (30-50%/number of diggers = +/-0.5%-1%)

Macro mathematics to determine average wage

(Export Value Artisanal Production*Estimated Discount)/ Estimated population of diggers

Angola = $1/day DR Congo = $1/day Sierra Leone = $1.25- $1.5/day (profit

sharing) = $2/day for semi-

mechanized (straight wage – relatively rare)


Brazilian Garimpeiros-Artisanal

Paid a monthly minimum wage by financial backer (R$415/US$250)

Financer is not diamond buyer Garimpeiro and backer share proceeds

equally, after expenses Garimpeiro share of production +/-

30% 30% to garimpeiro 30% to financer 10% to landowner 25% to earthmover 5% for water

Yield (income) from percentage difficult to determine

Relatively rare in Brazil (Coromandel)


Garimpeiros:Semi-mechanized Larger Jigs (Coromandel) Garimpeiro (worker) paid a monthly

minimum wage (R$415/US$250) Four workers per jig each receive 1%

share each Can be lucrative


Date Sold Size Garimpeiro Share (cts) US$18-Jan-07 21.93 $ 7,238.48 18-Jan-07 134.36 $ 26,286.90 30-Jun-07 18.78 $ 470.59 20-Jul-07 263.13 $ 15,084.18 4-Sep-07 21.93 $ 7,238.78 4-Sep-07 139.36 $ 26,286.90 25-Sep-07 123.68 $ 865.29 5-Mar-08 27.1 $ 201.18

The Resumidor, Jig or Dredge


4 inch – 8 inch dredgesCrew: one man + 1 per inch

Guyana Data Set Weekly production of each dredge recorded in on-site

production sheets Sheets travel with diamonds to point of export GGMC enters data from sheets into excel In other tables, GGMC records dredge size, export price

of diamonds Linking tables gives access to vast repository of

production and price data


Dredge No of Data Production Dredge Income Individual Miner Income

Size Crew Points Cts/Wk Per Week Per Week Per Month All 1429 Average 39.56 $ 4,367.68 $ 223.69 $ 958.65 Median 15.41 $ 1,700.44 $ 89.37 $ 383.02 Max 1098.23 $ 111,498.44 $ 6,171.86 $ 26,450.84 Min 0.44 $ 48.59 $ 3.41 $ 14.61 StDev 90.29 $ 10,024.65 $ 513.35 $ 2,200.09

3" 4 8 Average 19.86 $ 2,286.72 $ 223.69 $ 958.65 Median 10.55 $ 1,201.41 $ 90.11 $ 386.17 Max 58.84 $ 6,973.80 $ 6,171.86 $ 26,450.84 Min 0.44 $ 48.59 $ 3.41 $ 14.61 StDev 21.02 $ 2,468.65 $ 513.35 $ 2,200.09

4" 5 630 Average 30.90 $ 3,454.14 $ 207.25 $ 888.21 Median 13.15 $ 1,435.21 $ 86.11 $ 369.05 Max 867.90 $ 102,864.38 $ 6,171.86 $ 26,450.84 Min 0.50 $ 56.80 $ 3.41 $ 14.61 StDev 75.06 $ 8,581.52 $ 514.89 $ 2,206.68

5" 6 465 Average 41.79 $ 4,695.47 $ 234.77 $ 1,006.17 Median 16.52 $ 1,829.71 $ 91.49 $ 392.08 Max 891.56 $ 101,488.06 $ 5,074.40 $ 21,747.44 Min 0.74 $ 81.16 $ 4.06 $ 17.39 StDev 92.20 $ 10,486.68 $ 524.33 $ 2,247.15

6" 7 307 Average 52.30 $ 5,615.05 $ 240.64 $ 1,031.33 Median 20.33 $ 2,165.12 $ 92.79 $ 397.68 Max 1098.23 $ 111,498.44 $ 4,778.50 $ 20,479.31 Min 1.15 $ 106.35 $ 4.56 $ 19.53

StDev 112.45 $ 11,925.09 $ 511.08 $ 2,190.32 8" 9 19 Average 74.41 $ 7,357.76 $ 245.26 $ 1,051.11

Median 26.27 $ 2,882.53 $ 96.08 $ 411.79 Max 296.98 $ 26,500.02 $ 883.33 $ 3,785.72 Min 3.89 $ 461.28 $ 15.38 $ 65.90

StDev 92.75 $ 8,632.11 $ 287.74 $ 1,233.16

Guyana Miners Wages


Checks on DataFIGURE 1: DREDGE AND INDIVIDUAL MINER INCOME AS A FUNCTION OF DREDGE SIZE

Dredge and Individual Miner Median Weekly Income

$1,829.71

$2,165.12

$2,882.53

$1,435.21

$1,201.41

$90.11 $92.79

$91.49$86.11

$96.08

$-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

3 4 5 6 8

Dredge Size (inches)

.

Dre

dg

e I

nc

om

e

.

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

$110.00

$120.00

$130.00

$140.00

$150.00

(All Values in US$)

.

Min

er

Inc

om

e

.

Median Gross Prod/W k Median Miner Income/W k


Summary – Wage ComparisonTable 3: Summary of types of artisanal mining and miner compensation in West Africa and South America

Location Type of Miner Compensation Formula Net Income

Per day (US$)

Net Income Per Month

(US$)

Sierra Leone

Fully Artisanal (hand miner)

US$0.50/day wage plus daily allowance of rice plus

30% of gross diamond production, divided among all diggers

(approx 0.5-1% each)

$1.25-$1.50 $45

Sierra Leone

Small Scale Mechanized

US$2.5/day No share of proceeds $2.5 $75

Brazil Fully Artisanal Minimum wage (US$250/mo),

plus 40% share of gross diamond production

$7.5

$250, plus

diamond production

Brazil Artisanal Miner – Mechanized Earth

Moving

Minimum Wage (US$250/mo), plus 30% of gross diamond

production $7.5

$250, plus

diamond production

Brazil

Unskilled labour on stationary small scale

diamond jig

Minimum wage (US$250/mo), plus 1% of gross diamond

production $7.5

$250, plus

diamond production

Brazil Guyana

Venezuela

Worker on small scale Resumidor-style jig

All meals plus 30% share of gross diamond production, divided

between 5-7 workers (4.3%-6% each)

$12.75 $383


Value Chain Analysis If Africans getting less, implies that

some other actor in value chain is capturing more of diamonds’ value

Analysis of mark-ups within chain to determine which actors gain what percentage


African Chain and Mark-ups

The Dynamics of Diamond Pricing and Marketing in Sierra Leone (Levin & Gberie) DDI

Mapped complex pathways of diamond chain

Four Step Pathway (simplified) Digger License Holder (Miner)

Licensed Buyer Exporter Overseas Buyer

Mark-ups: License Holder to Licensed Buyer

(200%) Licensed Buyer to Exporter (50%) Exporter to overseas buyer (10%)Caution as numbers based on interviews


Guyana/Brazil Chain and Mark-ups Guyana as open a system as exists

Exports 300,000 carats, but 50 registered exporters (i.e. competition)

Licensing/citizenship barriers to trading/exporting minimal Buyers do not finance miners (no forced sale)

Diamond Chain as follows Miner Field Buyer Exporter Overseas BuyerFinal Buyer

Mark-ups Investigated Field Buyer to Exporter - field investigation

(2-5%-Guyana; 50% Sierra Leone) Exporter to Overseas buyer – estimate (assessed)

3% Guyana; 10% Sierra Leone Overseas Buyer to Final Buyer – Diamond Exchange Records

18% Guyana; 900% Brazil (Cinta Larga); 700% Congo


Mark-up: Field Buyer to Exporter

Field investigation Watching sales Creating price

tables 2%-5%-Guyana 50% Sierra Leone


Guyana – 2-5%Sierra Leone – 50%

Mark-up: Exporters, Overseas Buyer

Exporter to Overseas buyer – estimate (assessed) 3% Guyana; 10% Sierra Leone

Overseas Buyer to Final Buyer – Dubai Diamond Exchange Records

Track parcels into DDE, Track back out again Done to avoid taxes Difference gives Markup 18% Guyana 900% Brazil (Cinta Larga) 75%-700% Congo


Summary of Mark-upsCountry Field

Buyer to

Exporter

Exporter to Overseas

Buyer

Overseas Buyer

To Polishing

Sierra Leone

50% 10% n/a

Guyana 2%-5% 3% 13.5%-18%

Brazil Cinta Larga

n/a n/a 28%-928%

Congo*(PAC report)

n/a n/a 58%-750%

Results of Study South American miners make from 7 to 10

times more for the same diamonds Mark-ups for middlemen and exporters in

situations where miners semi-legal and ignorant of prices (i.e. DR Congo, Cinta Larga) are high

75%-900% Mark-ups in middlemen and exporters in

situations where miners relatively knowledgeable, relatively unconstrained (i.e. Guyana) are more reasonable:

2% - 15% Study does not suggest how to change these

percentages, merely demonstrates that there is significant room for readjustments, without bankrupting middlemen and exporters


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Egmont Diamond Chain