Gem of an Idea

By Alex Perry / Gaborone

If there is a formula for foreign companies operating in Africa's extractive industries, it has been this: Pay the government millions of dollars for concession rights; dig, pump, pick or chop what you seek; and export. Don't worry too much about the country or its people.

These days, you'll increasingly have to make some effort to control pollution and balance profits with corporate social responsibility. But many Western multinationals would still balk at demands to create enough jobs in the host country to offset the corruption, inequality and not infrequent social unrest their fees can fuel. Such things, they argue, are someone else's concern. The persistence of this mind-set is one reason for the endurance of the "resource curse," the term given by economists to the paradox that countries blessed with natural wealth often grow more slowly and become more violent and repressive than others.

Botswana, the world's biggest producer of diamonds, has proved an exception to this rule, raising its 1.9 million people out of poverty within the span of a generation. The country's forward-thinking leaders have persuaded a global mining giant to invest in its happy road to development. De Beers, the world's largest diamond-mining company and a name once synonymous with the imperial multinational, has operated its mines with the government for decades as a 50-50 partnership called Debswana. Now De Beers has deepened that cooperation by moving its worldwide diamond-sorting and -valuing operation from London to Botswana's capital, Gaborone--a move it predicts will create 3,000 jobs and establish a model for other miners in Africa.

It's little wonder that Botswana is the setting for Alexander McCall Smith's tales of contented Africa in The No. 1 Ladies' Detective Agency series. Thanks to the wealth in its soil coupled with a succession of honest and capable leaders, the country has gone through one of the most rapid economic transformations in recent history. It wasn't too long ago that Batswana children were schooled under trees and the country was so poor that its postindependence leaders famously told inquiring businessmen that there was "no point being corrupt." After years of consistent growth--Botswana since independence had one of the world's fastest-growing economies, and growth now hovers between 5% and 6%--primary, secondary and university education is almost free (and indoors). Most health services, including antiretroviral treatment for aids, which has devastated the country, are also state-funded. Whereas diamonds finance war in West and Central Africa, there have been no coups and little unrest in Botswana in 41 years of independence. And the country is one of just two in Africa to have graduated to middle-income status, according to the International Monetary Fund (the other is Mauritius).

De Beers has undergone a makeover almost as dramatic as Botswana's. For a century, De Beers (founded by the British imperialist Cecil Rhodes but named after the family on whose South African farm the Kimberley mine was discovered) was a secretive near monopoly that extracted or bought 70% of the world's diamond supply in order to keep prices artificially high. Under the leadership of Gareth Penny, who joined the board in 2002 and became managing director in 2006, the group sold off its entire diamond stock and now sells only diamonds it mines itself (40% of global output). Gone too is the secrecy: De Beers now has a small army of public relations experts keen to produce executives for journalists and is even opening its own retail outlets on some of the world's more well-to-do main streets.

De Beers unveiled the most significant symbol of that transformation in March, when it hosted a dinner in Gaborone, in the atrium of what is now De Beer's main diamond-sorting, -valuing and -aggregating unit. The glass-and-steel construction will employ 500 Batswana and generate a further 2,500 ancillary jobs, particularly in 16 cutting and polishing factories set up around the new plant, and on its sorting benches, which will process a total of 34 million carats a year--22% of world output--or $6 billion in diamonds by 2009. "Our diamonds are for development," Botswana's then President Festus Mogae told TIME at the opening of the facility. "This building is evidence of what diamonds do for this country."

The wisdom of placing a building that will hold, at any one time, half a billion dollars' worth of diamonds on the border of a country with one of the world's highest violent-crime rates--South Africa--might be questionable. But the benefit to Botswana, through stable jobs in Gaborone, is undeniable. What will surprise many old industry hands, particularly those familiar with the saga of Sierra Leone's conflict diamonds, is how the building is also evidence of what the country can do for diamonds. "The way people feel about diamonds has to be the way they think about our company," says Penny. "We have to be a role model. We want to make a profit. To do that, we have to behave in a way that makes a contribution to the country. It's benign self-interest."

The decision to move the value-added sorting and aggregation from its traditional center in London to Gaborone was a pure business call for De Beers, according to Penny and De Beers Group chairman Nicky Oppenheimer. It's a concrete way to live up to a phrase coined by Oppenheimer, posted on the wall of every De Beers office: LIVING UP TO DIAMONDS. Oppenheimer, one of the richest men in Africa and the third generation of Oppenheimers to run De Beers, notes, "Ultimately, people do not need to buy diamonds." That they do buy them, he says, is bound up in the emotions and events with which they are associated: love, marriage, purity. "If we behave in a way that is wrong, if we play with the image of diamonds in a way that downgrades them, we're destroying ourselves."

Oppenheimer's experience in Botswana has firmly cemented his position on the question, Is business better for Africa than aid? "I'm anti-aid," he says. "It's brought more problems than it's solved." Donors reward bad governments, he argues. "Where Africa is coming right and is on an upward trend, that attracts business. Where it's doing badly, that attracts aid." Oppenheimer consults regularly with Rwandan President Paul Kagame, who leads a growing body of opinion on the continent that has come to the same conclusion. "In the last 50 years, you've spent $400 billion in aid to Africa," Kagame told TIME last year. "But what is there to show for it?"

While their impact on the country may be immense, De Beers' diamonds do not actually spend much time in Botswana. Once unearthed, stones will spend a few weeks passing through De Beers' plants, and a few more in cutting and polishing, before they are flown to jewelry makers around the world--all told, about three months after coming out of the ground. The De Beers marketing slogan "A diamond is forever" is not quite true in Botswana. However, for the country's growth, for now, that's enough.