Artisanal Mining Flashcards
Define artisanal mining and informal sectors
Artisanal mining: mining by individuals, families, or cooperatives, working with simple tools and equipment (labor intensive),
Informal sectors: activity not regulated by the state, low governance
Identify the physical conditions in which it occurs
Placer deposits (panning in water) → alluvial mining, typically surface mining
Sierra leone: happens along rivers
Use the Sierra Leone Diamond Case to illustrate the structure of artisanal mining, sketching out
1) the Digger/Supporter and
individual diggers (or miners) work independently
Digger: The digger is the primary individual who physically extracts the diamonds
Supporter provides Housing, food, supplies to digger, and access to land.
Supporter → has to pay off chief
Use the Sierra Leone Diamond Case to illustrate the structure of artisanal mining, sketching out
2) Digger Coop/Dealer models
Digger: diggers come together to form cooperatives (coops), which allows them to pool resources and share risks.
Support themselves, Share costs & profits, Sell diamonds to dealers
Dealer: Deals with chief and gives the digger their ‘cut’
ketch out the industry structure more broadly, identifying five strata (Diggers, Dealers, Exporters, Overseas Buyers and Customers), and the relative number of players in each strata.
Diggers: large numbers of workers
Supporters/Dealers: fewer supporters/dealers
Exporters: even less exporters
Overseas Buyers: uptick in overseas buys
Customers: large customer basis
Define Oligopsony. Identify who holds the most bargaining power between 1) diggers and dealers; and 2) dealers and exporters. Explain why.
Oligopsony: small number of buyers while there are many sellers.
Dealers and Diggers: Dealers Hold Power Over Diggers: diggers rely on dealers for resources to sustain their mining activities
Exporters and Dealers:Exporters Hold Power Over Dealers- Exporters are fewer in number more impact on market. They decide how many diamonds to purchase, set baseline prices by forcing dealers to negotiate based on their desired pricing
dealers take it because there aren’t as many buyers
Define Oligopoly. Identify who holds the most bargaining power between 1) exporters and overseas buyers; and 2) overseas buyers and customers. Explain why.
Oligopoly: small number of sellers while there is a large pool of buyers.
Exporters and Overseas Buyers: Exporters Hold More Power:
Limited Number of Exporters gives them leverage over overseas buyers. They get to set prices
Overseas Buyers and Customers: Overseas Buyers Hold Power Being in a large pool of potential customers, they givest the ability to negotiate prices and terms
Provide examples of how supporters/dealers cheat diggers, and clarify why diggers are unable to defend their interests
How supporters/ Dealers cheat diggers
*Don’t give full market price
*Say diamond is ‘damaged’ or low quality (yellow, chipped)
*Don’t fully “support” them and give them the full amount of food and living
*Say the exporters only gave them $20 when really it’s $50.
*Exporters cheat supporters, so supporters cheat diggers
Chief is supposed to alleviate issues between diggers and supporters but the chief takes bribes from supporters so diggers issues never get solved. The supporter and the chief works against the diggers who are too poor to be able to bribe.
Identify and explain where within the structure smuggling is attractive
Digger: By smuggling diamonds, diggers can sell directly to buyers willing to pay a higher price, bypassing the supporter’s cut. Smuggling allows diggers to pocket the full sale amount
supporters/dealers: bypass official regulations, licenses, and taxes associated with legitimate sales. By smuggling, supporters can seek buyers across borders or in less regulated markets where they can sell diamonds for much higher prices than what exporters would offer.
Identify 2-3 underlying vulnerabilities that contribute to the rise of conflict mineral
- Distortions in National Development and government /weak government : governments rely heavily on taxes and revenues from diamond exports, and ignore other economic sectors. This creates a distortion
- Marginalized groups want wealth and power: Marginalized groups, resort to violence to gain access to the wealth generated by natural resources. Ethnic Group 1 is excluded from accessing resources controlled by another group Ethnic Group 2, tensions can escalate into conflict.
- Regions of vulnerability: placer mines located in remote regions where government presence is weak or non-existent, makes it easier for rebel groups to capture and control mining operations. Profits from here to sustain violence and instability.
Define formalization, and identify the two main goals
Fromalization: assertion of regulatory authority and policies (no more wild west)
Goals:
Conflict free minerals (stop rebels, get conflict out)
Economic development: from curse to blessing
Identify Rappaport’s main goal and the main lead behind the initiative
Main goal: Economic development→
Supporting and improving the livelihoods of diggers and their communities, enhance their way of life
Main lead: Industry - led : (corporate social responsibility, [being better actors in the industry])
Summarize his approach, clarifying why diggers should be better off, and which linkage this approach sought to strengthen
Create a public auction: diggers can receive fair compensation for their resources, directly putting money in their pockets
Final demand linkage → Increased income leads to greater spending and investment in local services,
Explain why, according to Rappaport, additional players down the supply chain should also be better off
Can make more money→Consumers will buy the idea of morally acquired diamonds vs the blood diamonds
Customer Consciences do not want to spend money on illegal/smuggled diamonds, we will attract more customers by making it clear that we’re making Sierra Leonean Lives better
Investors are more likely to support companies that prioritize diggers well-being→ lead to increased investment in their businesses
Identify the two main winners under the status quo, and explain why they each resist Rappaport’s initiative
Winner: Government & exporters:
Why: Maintaining the status quo helps sustain their control over resources . A public auction system could lead to fairer prices for resources, which might cut into their margins and
reduce their competitive advantage.
corruption and the structure
