I speak as an individual. What I say does not represent the views of my past, present or hopefully future clients. It is my own opinion. T have been in the business 40 years and I am completely independent. Perhaps because of that I can say things others cannot.

Let's turn to table1.

I have not included South Africa, where you have about 1,500 active diggers. The table can only be a broad estimate. Statistics from the producing countries are unreliable. The Antwerp statistics tend to give a better picture. Having merged what is available I am confident that these figures are realistic, although there is no precision in this area. Production fluctuates with discoveries and rushes. It varies with the weather. There is a lot of smuggling. For instance normally about half the production by value of Sierra Leone and of Guinea is smuggled rather than exported through the legal channels, which I will outline later.

The table shows what a big part of the world diamond supply this is - over 20%. It also shows the number of people employed - at least 1/4m people. Compare this to the 5, 000 or so employed on a large mine.

Next let's look at how these people operate.

They may be living in a town like Bo or Tshikapa or Macenta in Africa or Cuiba or Diamontino in South America or whatever. Town big enough to feature in a world atlas. Towns with schools, hospitals, sanitation, etc. Or they may be living in the villages surrounding those towns - living at subsistence Ievel. Some will be part time miners and part time farmers. In Guinea under Sekou Toureh mining could only take place when there was nothing to do on the farm.

At the lowest level their mining activity is carried out with a bucket and spade and a sieve plus a small pump. Others will simply be diving for gravel from the riverbed. More sophisticated schemes might involve a drag Iine or a minor river diversion or a bulldozer to remove the overburden from terrace deposits.

They are financed - that is to say their equipment and food is provided - either by wealthier family members (prior to the rebel war in Sierra Leone many people in Freetown - civil servants, soldiers, professionals had an interest in the diggings), or by Iocal chiefs (modem politicians or old fashioned tribal chiefs), or by local shop keepers.

Historically their operations have been governed by legislation and regulations enforced by a Mines Department. These regulations will include a license stating the area they can mine and the number of people they can employ. They will cover safety and working practice. A fee is paid for the digging license. Unfortunately in Sierra Leone and in the DRC these practices have been eroded by the anarchy that exists. In Angola only now has the Government had sufficient control on the ground in the mining areas to begin implementing such a practices. And indeed, as Eng.Baltazar has told us, the enforcement of the new measures will be a slow and gradual process. We should be clear that we are dealing with a situation where in some case governance has not only become corrupt but has descended into anarchy.

In South America, where the business is not so economically important relatively, controls are less strong and relate to safety and the environment. Nevertheless much of the exports from Brazil are smuggled to avoid normal taxes. In this respect it is worth nothing that in the past most of these smuggled goods were declared as being from Liberia when they entered Antwerp, which accounts for past high exports from Liberia - they were nothing to do with conflict diamonds.

There is one thing I would like to clear up: there has been talk of indentured slavery, which may be true of people working for Unita or the RUF, but is not normally the case. The diggers may be an underclass, but they are not slaves. Diamond digging is regarded as an honourable occupation. It is attractive, because it includes an element of a gamble. The lucky ones can make their fortune.

To get a feel for what it is all about let's look at a couple of examples of this activity. First let's look at some `garimpieros' in South America. A couple of them will paddle a canoe up a small river into the rain forest, sampling river gravels as they go. They will make a discovery. The word will get around. An airstrip will be carved out of the jungle. Then the fun begins. Buyers will arrive. A bar, a shop, a restaurant will be established followed by a billiard table then some girls. There is excitement and adventure. It lasts a few weeks or months until the deposit is exhausted and then everyone moves on.

Sustainable development it is not, but nor is it slavery.

For my second example I'd like to go back in time to before the rebel war in Sierra Leone to the small town of Boajibu or Jaima Nimikoro in the rain forest and join a group of fifty or so diggers leaving town soon after dawn and heading for the river bank. They would be a happy well-fed group. They reach their destination. Three or four hand dug pits, 10 metres by l0 metres and 5 metres deep. The spoil from the pits is piled beside them. Their license is attached to a pole in the comer. Today is an important day: they will reach gravel and start washing it. They start their small diesel driven pump to get out the water that's flooded in overnight. Then singing in unison they remove the last of the overburden and start to load their buckets with gravel, which is washed in hand sieves in the river by their colleagues. Representatives of the Iocal chief and the local Lebanese shopkeeper watch the proceedings. After washing the sieves are upturned onto a basic wooden table. At first there is nothing but a small circle of heavy minerals, then their luck improves and small shiny stones are picked out. Then there is a two carater bright in the heavy minerals. Everyone is happy. They will all share in a good fortune.

Again this is not slavery: it is the way these people earn their living. Properly controlled such digging can be an engine for development

Lets look at the costs and benefits of such mining.

The benefits -

I. Cash into the grass roots of the economy to enable people to pay for their food, clothes, medicine, education.

Look at SL, officially the poorest country in the world, yet prior to the rebel war most people seemed surprisingly prosperous. Why? Because of this stream of cash from diamonds going direct into their pockets. Money that the Government couldn't waste, income not affected by corruption.

2. This is the only way of mining low grade deposits where industrial mining is not profitable. This is the only way this resource can be liberated

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3. It is also arguably the best way of mining marginal deposits. Consider a small mine. A foreign company comes in to develop it. It borrows money to do so. It buys expensive foreign equipment. It employs expatriates to run it. The funds gained from the sale of its production go to pay off its debts, to pay interest on them and to pay expatriate salaries. If the Government was clever, it negotiated a royalty on sales and it may get some profits tax. But the benefit of liberating this resource may go more to outsiders than to nationals.

Contrast that with leaving it to the local small miner.

Of course there are costs too.

I. It is an inefficient way of mining - recovery rates are lower than in industrial mining.

2. It is difficult to tax, because it is informal and smuggling is easy.

3. There is damage to the environment.

4. And there is the associated criminality that all too often arises in and around the diamond diggings.

Our working group paid considerable attention to diamonds development. Section VI

1 covers the small miners.

Point 1 talks competition. Recent developments in Angola and in the Congo have moved away from this concept. Monopoly marketing arrangements have been granted. It remains to be seen how effective they will be. The conflict diamond situation creates an opportunity for trying them. Certainly the scheme in Angola is working well - exports and Government revenue are up.

In the equation governing the marketing of alluvial artisanal production there has to be a balance between competition, control and the level of taxation.

The benefits mentioned above can be maximized and the costs minimized by the implementation of schemes for small mining. The national Governments can do much by creating the right licensing, exchange control (or rather lack of it) and security structures.

Donors would do well to look at possible technical assistance and micro credit facilities; at providing geologists to help identify deposits better, engineers to improve working practices and a revolving fund to finance small equipment are some ideas worth considering; but also to bear in mind the overall need to encourage and support better governance. If the civil service and the law courts aren't working what hope is there for success?

Let's look in move detail at how the production is marketed.

This shows the typical pyramid system in place in countries like the Central African Republic, the Congo, Guinea and Sierra Leone.

The diggers at the bottom of the pile normally have a fairly good idea of the value of a diamond. Although sometimes it must be said that they probably do not appreciate how valuable a large stone can be, but then they often get more than the market price for the small stones.

The dealers or collectors are licensed to move around in the field buying the stones from the diggers, who generally speaking do not want to leave their diggings untended. They may be the shopkeepers, who are supporting the diggers.

The exporters are normally international firms from the diamond cutting centres specialising in buying such productions, who are licensed to buy and export diamonds.

There are several firms, which have specialised in this sort of business. I will mention some names. Major international firms operating in Antwerp like Glasol, IDC, Langer, RDR, Steinmetz, Templesman; or Antwerp Lebanese like Afrostar, Ezzidine, Nasser & Shallop; Israelis like Leviev and Gertler. The Israeli Government once had a buying firm, but it ran into trouble. Many of these firms are one man or family businesses operating without constraint. There is only one major African dealer, Karim, the biggest exporter from the CAR operating with a Palestinian partner, although many Mandingo merchants from Guinea and Senegal play a prominent part in the business in Africa. Diamonds know no frontiers. In the old days such merchants used to be known as Alhaji Monrovia or Alhaji Kinshasa after their sphere of operations. There is a lot of competition, which properly handled can lead to high prices being paid in the producing countries. Such firms make a good profit operating on small margins (3% to 5%) by turning over their capital quickly.

I name names for a purpose - firstly to emphasise that there are relatively few people involved in this business and secondly to indicate that everybody knows everybody else in the rough diamond trade. They know who they are and what they are up to. Everyone in the trade knows Mr D from South Africa and Mr L from Antwerp who were major buyers from Unita. Everyone knows Mr M who traded arms for diamonds with the NPRC Govemment in Sierra Leone. Most people know Mr F, the biggest diamond dealer in Lisbon

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The trade is normally carried out in US dollars (this is also often the case in the diamond cutting centres too. The DTC sells for dollars.) In the past a lot of problems have been caused by exchange controls leading to situations where there is a parallel market for foreign currency. Diamonds then become almost a currency themselves. Traders smuggle them out, sell them for hard currency and by other goods to import.

To turn to the diagram, at the top of the pyramid we have the Government entity controlling and valuing exports. The GGDO in Sierra Leone, the CNE in the Congo, Endiama in Angola, BECDOR in the CAR, the BNE in Guinea and the DAO in Liberia. These check the value of the exports and collect the tax payable. The taxes range between 3% and 8%. Experience shows that taxes higher than this encourage smuggling

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The performance of these offices in Africa has been patchy. In a corrupt society their existence creates an opportunity to make money. An exporter is all too often willing to share the benefit of an undervaluation with the valuer.

Due to their almost infinite range colour, shape, quality and size and due to the volatility of the market, in which they are sold, diamonds are hard to value precisely. However systems do exist and can be enforced. Much as I would like to give you a talk on valuation, now is not the time. Perhaps we might cover this on another occasion.

Finally before considering the impact of an international certification scheme on small miners, I would just like to take a look at the overall international market for diamonds.

I see it as shaped like an hour glass

At the top there are at least 20 producing countries producing from more than 60 sources.

At the neck of the hour glass De Beers controls a Iarge part of world production and the rest goes through a relatively few diamond merchants in the diamond cutting centres.

At the bottom there are the diamond cutting centres in their entirety with I 5,0000 firms in Antwerp and thousands more in Israel and India. Beneath them the whole manufacturing jewellery industry and the retail trade. The point I wish to make and make strongly is that we can deal with the conflict diamond problem best by focusing on the neck of the egg timer. In particular we do not need to go downstream.

Now to get to my subject - the impact of an international certification scheme on small scale diamond miners.

Firstly let me say that perhaps we should be looking at this the other way around - looking at the impact of the small miners on the international certification scheme rather than vice versa.

Frankly there is not going to be much impact on the ground, but an international certification scheme will help to provide a better environment for the small miner:

There could also be ill affects: