Jewelled development

Luxury goods such as jewellery have come under considerable consumer scrutiny in recent years as the extraction of gems and metals are often perceived to fuel conflict and other development disparities. While the media’s focus was on gold and diamonds as exemplified by documentaries such as The Curse of Inca Gold or Hollywood thrillers such as Blood Diamond, coloured gemstones have received scant attention even from scholarship.

In many ways, however, gemstones are even more challenging to regulate in a development context. They are neither a weighted commodity with a central-bank nexus such as gold, nor are they traded in a centralised market system as are diamonds. The diamond trade has been regulated with relative ease through certification schemes such as the Kimberley process, which even critical civil-society organisations are beginning to applaud.

Gemstones are traded by itinerant traders and merchants who have access to markets and know where to have the stones refined to bring out the best colour and sparkle. Unlike diamonds, most coloured gems are “treated” in some way or another – either through heat processes or resin filling. The techniques for adding value that way have been perfected by specific ethnic communities, particularly in Thailand and Sri Lanka. Often, expatriate traders dominate gem markets. In contrast, the countries of origin are often excluded from the highest profit margins, and their revenue streams tend to be instable.

In the past ten years, a phenomenal sapphire rush engulfed Madagascar, attracting the attention of various donors. The Projet de Gouvernance des Ressources Minérales (PGRM - Project of Governance of Mineral Resources) is particularly interesting. Established in 2003, it provides a new model for development assistance in a traditionally non-renewable resource sector. Moreover, this project is being implemented in an ecologically sensitive country with some of the world’s most unique biodiversity. The project is supported, among others, by France, the USA and South Africa.
Coherent strategy

The stated goals of the PGRM include assisting the government in implementing a strategy to accelerate a sustainable development of the mining sector and thereby to contribute to reducing poverty in Madagascar. One focus is on supporting the small-scale mining sector and handicrafts industries.

The PGRM effort sets out from a scientific base, enhancing the technical/geological skills to find the best mining areas. For instance, a computerised system is in use to interpret and exploit certain geo-scientific data. On the other hand, the programme boosts business opportunities, for instance, through skill training. Among other things, an Institute of Gemology has been established. At subsidised rates, it teaches Malagasy people in the use of state-of-the-art equipment. Scholarships are available, and students from other African countries are increasingly enrolling in courses.

Today, some miners have moved up the supply chain in search of a more sustainable livelihood. If Madagascar succeeds in developing a jewellery manufacturing sector, processing and handicraft skills gained at the institute should be of lasting value, even once Madagascar’s minerals will be depleted. In this regard, it is useful to consider the cases of Chantaburi in Thailand and Surat in India.

Today, Chantaburi is still an important trading post, even though Thailand’s ruby mines have largely been depleted. In 2005, the Economist estimated that 50 kilogrammes of gems were smuggled from Madagascar to Thailand every week for processing – to the economic detriment of Madagascar. Surat in the Indian State of Gujarat has acquired a dominant market share in jewellery manufacturing, even though neither the gold nor the gems are any longer from India itself. These examples show that it makes sense to invest in a manufacturing sector that ties in well with local skills and market interests.

In Madagascar, some environmental activists express the worry that mineral extraction will negatively impact on the island’s fragile environment. They speak of erosion, deforestation and subsequent sedimentation of riverways. Another concern is the loss of biodiversity due to illegal hunting. After all, miners operate in remote areas with scant food availability and rely on bush meat for survival. Environmental damage, in turn, could immediately hurt Madagascar’s dominant service sector, which is tourism. If mismanaged, eco-tourism and mining could conceivably become incompatibly competing sectors.

Fortunately, it is widely recognised that the island’s great biodiversity is unique and precious. Accordingly, the government committed in 2003 to have 10 % of its total area under environmental protection by 2008. The government has successfully attracted donor support for environmental purposes like this. However, activists worry that such commitment may not be met or adequately enforced if mineral development gains momentum. Conservationists admit, however, that gemstone mining is far less damaging than the larger scale gold mining projects that are underway in the country. Unlike metal mining, which requires high intensity chemical inputs such as mercury or cyanide, gemstone mining is relatively benign.

The key to environmental management of small-scale gemstone miners in remote areas is to provide them with both the know-how for prospecting and incentives for conservation of natural resources. Ideas for community cooperatives for mining have also been explored. Organising a business that way can help monitoring and law enforcement, particularly if skills and expensive equipment are shared. At least, that is what Brazil’s experience with emerald mining suggests. In such cases, environmentally sound extraction processes become easier to enforce.

While challenges remain to move Madagascar further up the Human Development Index (from its current rank of 150), the confluence of environmental, social and economic imperatives appears to be heading in the right direction. The $ 40 million investment in the PGRM programme from donors has already had some tangible outcomes in terms of improved livelihood and income stability.