Africa (Business)

Diamonds now Sierra Leonian economy's best friend

Monica Mark

Lying in Sierra Leone's mineral-rich eastern belt, the Koidu Holdings diamond mine was once at the heart of the country's decade-long civil war.

A woman walks past the crushing circuits at the diamond mining company Koidu Holdings plant, in Koidu, the capital of the diamond-rich Kono district, in eastern Sierra Leone. (AFP)

Six hours from the capital, Freetown, burned-out houses are testament to the brutal conflict that spawned the term “blood diamonds” as warring factions fought to control diamond fields.

Now, the pit that served as a war chest for the rebels – infamous for recruiting child soldiers who hacked limbs off their victims – supplies the jeweller Tiffany’s. It is also at the heart of a remarkable turnaround that has lifted this tiny nation of five million people to world-leading growth of 35% this year.

“When the mine began operating in 2002, there were still 16 000 peacekeepers in the country. From an investment perspective, it was, basically, how much money are you prepared to lose,” said Koidu Holdings chief executive Jan Joubert, who persuaded investors to put down a relatively paltry $16-million back then.

Joubert, who came to Sierra Leone in 1995 with the now defunct South African mercenary outfit Executive Outcomes, said the company planned to raise $1-billion on top of a $300-million expansion programme, and boost production to about 500kg of gemstones annually. A public listing could also feed demand in China’s luxury market.

The government hopes the burgeoning success of wildcat explorers will pave the way for big multinationals with deep pockets, allowing the country to haul itself into the bracket for middle-income countries such as South Africa or Mexico.

One-off increase
“There is no doubt mining can transform Sierra Leone’s fortunes,” said Sierra Leone’s finance minister, Samura Kamara. “Mining is bringing in a one-off increase [in gross domestic product] this year, but we have also made tremendous progress in improving the atmosphere for investment generally.”

Other companies are pouring money into the sector once associated with drug-crazed warlords. AIM-listed African Minerals claims that the world’s biggest magnetite mining operation will earn the government $92-billion in royalties over a decade or so. Meanwhile, London Mining, in which commodity giant Glencore has an “offtake” or supply agreement, plans to more than treble its iron-ore yields within a decade.

Signs of the money flooding in on the back of the mining boom are evident. Where peacekeepers once stood guard on the outskirts of Freetown, tractors are clawing huge chunks of red earth to connect satellite towns to the capital. There, Chinese companies are widening the cramped colonial-era roads designed for horse-drawn carts. The country’s white-sand and rainforest-fringed beaches remain largely empty amid a lack of tourism infrastructure, but the Hilton group plans to open an outlet soon. And Sierra Leone has jumped 15 places to 141 on the World Bank’s 2012 doing business rankings, ahead of its neighbours.

But the government has to negotiate a fraught path. An immense skills gap remains as the war stripped an entire generation of basic education, and high expectations have often strained relationships between mining companies and host communities.

Other controversies have dogged the bonanza. Civil society groups have pressured the government into several successful contract renegotiations, including one that involved London Mining raising its tax royalties to 25% from 6%.

Critics worry that underhand deals by lesser-known companies could deprive the country of millions. – © Guardian News & Media 2012

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