Seven Questions: The New Africa

Long dismissed as a hopeless charity case, Africa is finally starting to see real economic gains. Gareth Penny, managing director of De Beers, explains why Africa is a diamond in the rough, how to keep the boom going, and how to break the resource curse.


Foreign Policy: What message are you trying to get across about Africa?

Gareth Penny: Africa is a continent that is on the move. Its easy if you look at a lot of journals or newspapers to get a one-sided view of what is happening, but in fact there is a lot on the ground that is extremely positive. Its a continent that is growing a lot faster than North America or Europe, and there are very significant opportunities, particularly in natural resources, but beyond that in telecommunications and a whole range of other industries.

Why is it important that De Beers tells that story? Weve been doing business in Africa for 120 years. Weve got 19 mining operations and 17 of them are in Africa. Weve got a business model that were happy to share with others in that hope that it acts as a stimulus. At the end of the day, if the continent is successful, that helps our business as well.

FP: Some development experts argue that celebrity advocates such as Bono and Bob Geldof are actually hurting Africa by portraying the continent as a basket case in desperate need of help. Do you think its harmful when aid groups lobby for outside assistance to Africa?

GP: They see a need and theyre trying to address it, and I think thats admirable. But its not the way we would look at it. Were a business. Our chairman has been vocal in promoting trade not aid, because we believe that the most effective long-term, sustainable way to help Africa is by building sound businesses and by working with governments to create a sound environment. I dont think its an either/or. Theres an opportunity to provide support for education or HIV/AIDS. But I dont think its a substitute for engaging on a business level.

FP: If I were a Western businessman thinking of investing in Africa, what advice would you give me?

GP: Youve got a take a longer-term view, and for us its particularly acute. If we started exploring in Angola, we could be there for 10 years before we found something. It could take us another 10 years, or seven or eight years, to get the permitting process, to get all the infrastructureroads, railways, watereverything else that we needed to establish a successful mine. And then it could take you the best part of 10 years before youd recovered your capital. So, you could be looking at a 20-year-plus program. Youre going to be there for decades. And most of the mines that were involved with, the life might reach out to 50 years. So, its all about sustainability.

FP: What do you mean by sustainability?

GP: It means all the things you might imagine: protecting the environment and so on. But its got to go beyond that. It means working with communities. It means making sure that you have local management. It means youve got to address issues like HIV/AIDS. The kind of trucks that people are driving on our mines, they could cost a million dollars each. So, youve got to have people who are really qualified to have that kind of equipment. So, its benign self-interest. There are excellent returns to be made [in Africa], but its got to be participatory; it cannot be neocolonial.

FP: De Beers has extensive operations in Botswana, the worlds largest diamond producer. Many people cite the country as a model for Africa; its been one of the fastest growing economies in the world for 25 years now. What do other countries with natural resourcesthe Democratic Republic of the Congo (DRC), Angolaneed to learn from Botswana?

GP: In 1966, Botswana was one of the five poorest countries in the world, and today, its a middle-income country. Some people say, Ah, yes, but they have diamonds. Well, yes, but how many other countries havent used natural resources in a beneficial way?

So what are the lessons? They are a democratic country. They have open and transparent government. They have rule of law, freedom of speech and association, active trade unions, and so on. They have very few foreign exchange limitations. Its peaceful. Theres very low crime. Your property rights are safeguarded, which is very important because if youre going to spend a lot of money doing exploration, youve got to be pretty confident that its not going to be taken away from you. So, its a country thats open for business. And theyve taken the revenue from the diamond business and channeled it extraordinarily effectively. It hasnt been wasted on lavish, non-productive activity.

FP: Doesnt geology make it harder to create sustainable diamond-mining operations in a country like Sierra Leone, where the diamonds are mostly on the surface, as opposed to Botswana?

GP: If diamonds are on the surface and theyre distributed across a wide area, it means that a much larger group of people can access them in a much more informal waywhereas all the diamonds in Botswana have been discovered at depth, and it requires sophisticated mining activity. But one can misconstrue that. However diamonds are found, theres a requirement from the state to regulate as necessary. Youve got to have things like the Kimberley Process, which has shown that even in places where you have lots of informal digging, you can still have a regulated environment. So, I think its more challenging but nevertheless doable.

FP: What did you think of the film Blood Diamond?

GP: Those events happened in the 90s, and as a response the industry had taken very significant measures from 2000 onwards, implementing the Kimberley Process and getting governments and civil society involved over a five-year period. Today, the diamond is the most regulated mineral in the world. Had that not happened, when the movie came out it would have been a very significant issue to face. So, when Oprah shined a spotlight on the diamond industry and went to Botswana and Namibia and filmed, the story was a pretty positive one, and it had no impact on our sales.

Gareth Penny is managing director of De Beers Group.