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Cablegate: Life in a "Wild West" Sapphire Mining Town

VZCZCXRO9214
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHAN #0224/01 0791406
ZNR UUUUU ZZH
R 191406Z MAR 08
FM AMEMBASSY ANTANANARIVO
TO RUEHC/SECSTATE WASHDC 1107
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 04 ANTANANARIVO 000224

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E.O. 12958: N/A
TAGS: PHUM KCRM SMIG ECON ELAB EAID SOCI MA
SUBJECT: LIFE IN A "WILD WEST" SAPPHIRE MINING TOWN

REF: 07 ANTANANARIVO 175 AND PREVIOUS

1. (U) SUMMARY: Ilakaka, a town in Madagascar's southwest, is known
both for the lucrative sapphire trade and its social consequences,
including crime and exploitative labor. Most stories depict a
dangerous town reminiscent of the "Wild West," where men stroll
around carrying guns on their hips. Ilakaka most recently made
international headlines in January 2007 for the murder of Osama bin
Laden's brother-in-law, Mohammad Jamal Khalifa (reftel), by a group
of bandits allegedly looking to avenge a gem deal gone bad. PolOff
traveled to Ilakaka and the surrounding area to understand the
rapidly changing economic dynamics, as well as the social impacts,
of this mining boom town. END SUMMARY.

SAKALAMA SETS THE SCENE
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2. (U) Upon PolOff's arrival in Ilakaka, the town was buzzing about
the latest mining site, Sakalama, where sapphires had been
discovered near a riverbed just three weeks before. We drove to
Sakalama on a barely passable dirt road alongside hopeful miners
making the journey on foot and small taxis crammed with people,
chickens, mattresses, and digging equipment. Two hours later, the
road ended in a camp along the river composed of makeshift tents,
essentially nylon sacks spread across tree branches, as far as the
eye could see. Within three weeks, ten to fifty thousand people had
descended upon the previously uninhabited site to try their luck at
finding sapphires. Enterprising families had also set up tents
selling chickens, hats, food, and even casino games. The sanitary
and living conditions were appalling. Miners showed PolOff their
dig sites pockmarked with holes 10 to 40 meters deep, in which they
spend up to 24 hours at a time looking for gemstones. With not one
latrine in all of Sakalama, people had defecated between the mining
holes. Children could be seen playing around the holes or sifting
through gravel for sapphires in the river with their parents.
Miners swarmed around, eager to sell their gemstones for as little
as two U.S. dollars in order to buy that day's meal. Seeking the
head of Sakalama's law enforcement, PolOff erroneously approached a
Malagasy man straight out of a western film - complete with cowboy
boots, handlebar mustache, and a black cowboy hat with a "sheriff"
badge. Explaining he was just a gem buyer, the man pointed to the
gendarmes patrolling the tents armed with Kalashnikovs. On the
drive back to Ilakaka, PolOff encountered at least ten empty-handed
miners seeking rides back to town to treat the persistent coughs and
dysentery they had picked up in Sakalama. The surreal scene
triggered the question -- with such low odds of actually making a
profit, why do so many people endure the squalor of sites like
Sakalama?

GOING BACK IN TIME: ILAKAKA IS BORN
- - - - - - - - - - - - - - - - - -

3. (U) With the discovery of sapphires in Ilakaka in 1998, it went
from a four-building hamlet along National Route 7 to a hastily
erected mining boom town. Ilakaka quickly dwarfed Madagascar's two
previous sapphire mining sites to produce somewhere between 30 to 50
percent of the world's sapphires. Workers, mostly men, initially
flocked to Ilakaka with plans to get rich quick, return home, and
resume their normal jobs as farmers and teachers. But as time went
on, entire families transplanted themselves and "makeshift"
infrastructure soon followed. Ilakaka and the surrounding mining
villages that have sprung up along National Route 7 (hereafter
referred to as the "Ilakaka zone") are a ramshackle mix of huts
selling clothing, food, and pharmaceuticals; churches and mosques;
and gem shops -- lots of them. Unfortunately, more permanent
infrastructure like schools and hospitals has barely materialized.
There is only one modest dispensary in Ilakaka town and eight
primary schools in the whole mining zone.

4. (SBU) By some estimates, the Ilakaka zone is now home to a
population of 65,000 to 90,000 people. UNICEF estimates the
approximately 50 permanent mining sites in the entire area have
attracted a migratory movement of as many as 200,000 people.
Approximately 85 percent of residents in the area work in the mining
sector; the rest work in the small business sector selling/buying
gems, running hotels and restaurants, and selling household goods.
Inhabitants are a mix of Malagasy tribesmen, as well as African and
Asian (mostly Sri Lankan and Thai) gem dealers.

5. (SBU) Ilakaka's economic potential is considerable. Malagasy gem
dealer Jean Noel, who has lived and worked there since 1998,

ANTANANARI 00000224 002 OF 004


estimates two tons of sapphires come out of Ilakaka every year. One
carat of top quality sapphire can fetch 100,000 to 200,000 Ariary
(USD 55 to 110) on the international market. He believes the region
will not dry up for some 40 years, while other gemologists have
placed the estimate closer to 50 years.

6. (SBU) Four local chiefs identified the following positive
aspects of Ilakaka's boom. As mining sites immediately in or near
Ilakaka town dry up, the town itself has become a commercial hub to
buy and sell gems and other goods. Infrastructure is on the rise,
and foreigners in particular are building luxury homes. Electricity
is now available on a limited basis, and small businesses have been
created for agriculture and husbandry. However, there are even
greater obstacles to development. Education, which does not extend
beyond primary school, is stymied by a shortage of trained teachers
and classrooms. With only one generator providing the town with
electricity from 6pm to midnight, there is a general lack of access
to electricity and information. Local leaders worry investment in
the zone may not last, as gem dealers continue to take their money
outside of the country. Finally, crime is a constant source of
concern; armed attacks by outside "mercenaries" or village youth on
both Malagasy and foreigners who have recently bought or sold
valuable stones are disturbingly common. While the local chiefs
believe the security situation has improved since the Government of
Madagascar (GOM) established 50 rotating gendarmes in Ilakaka in
2004, Jean Noel believes crime has gotten worse. He explained that
the poorly paid gendarmes and police are easily corrupted by bandits
to "loan" them their weapons for attacks. Victims have little
recourse, as the nearest tribunals are one to three hours away by
car.

WORKING IN THE MINES
- - - - - - - - - - -

7. (U) In the first few years of the sapphire rush, there was a
simple three-tier division of labor: Malagasy manual laborers
("miners") dug the sapphires out of the ground and river beds;
Malagasy middlemen ("businessmen") bought these stones cheaply at
the mine site and then sold them to mostly foreign gem dealers, who
then sold them abroad for easily ten times the original price.
Foreign gem dealers were not allowed to go directly to mining sites
to buy stones, a rule still in place today. However, as foreign gem
dealers realized there was little government regulation, they
brought in their countrymen to take over as middlemen. Now, Sri
Lankan and Thai "businessmen" are regularly seen frequenting the
routes to the mining sites.

8. (U) Miners typically work in groups for one employer, usually a
Sri Lankan or Malagasy. (Thais, by contrast, usually buy stones with
the help of a "guide.") There are usually three different types of
working arrangements: miners may receive payment in kind (food and
equipment) for their daily work and later divide the proceeds of
stone sales among the employer and miners in the group; miners may
earn a daily wage of two USD or less but forfeit any share of stone
sales; or miners may choose to band together in a group to work for
themselves and sell directly to buyers. As most miners arrive at
the sites with very little cash in their pockets, they willingly
work up to 24-hour days in poorly ventilated holes up to 40 meters
deep hoping to find stones for quick cash. Sanitary conditions are
poor, as some sites suffer from a lack of latrines or potable water.
As a result, with even rudimentary health care several hours away
on foot, workers suffer from respiratory issues, tuberculosis,
malaria, diarrhea or worse. Approximately 100 people are trapped
and die in landslides every year. And all this with no contract;
foreign and Malagasy employers alike discourage contracts by saying
it is a matter of "trust."

9. (U) Unfortunately, most Malagasy miners do not know enough about
their working rights or how to assess the quality of a gemstone to
get an appropriate price for their labor. Sapphire buyers have
exploited their lack of knowledge and the lack of market regulation
to buy stones for a fraction of the international price. The GOM's
four labor inspectors are stationed in the regional capital of
Fianarantsoa four hours away - too far and too few to have any real
impact on working conditions in the Ilakaka area.

WORST FORMS OF CHILD LABOR ABOUND
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10. (SBU) A study conducted by an International Program for the
Elimination of Child Labor (IPEC) consultant in 2006 showed that

ANTANANARI 00000224 003 OF 004


approximately 19,000 of Ilakaka's 21,000 children work.
Approximately 15,200 (or 80 percent) work in the mines, while the
rest work as domestics and prostitutes. From PolOff's consultations
with local authorities and site visits, it seems most, if not all,
cases constitute worst forms of child labor undertaken to assist the
family in making ends meet rather than human trafficking conducted
by a third party. IPEC divides Ilakaka's children into three main
groups: 1) those younger than 7 years of age who do not attend
school and stay in their village, 2) those age 7 to 14, some of whom
attend school, but most of whom work in the mines or as domestics,
and 3) those 14 to 17 years of age, most of whom are child workers
whose wages go to their parents. Many 17-year-olds are already
working for themselves.

11. (SBU) IPEC, UNICEF, and local officials in Ilakaka believe, and
PolOff concurs, that most children working in the mines work in the
family unit in the less lucrative informal sector. Girls and boys
as young as 5 years old sift through miners' discarded piles of
gravel in the riverbeds in the hope of finding sapphires. Older
children carry water in buckets back to the village to sell.
Starting at age 10, boys carry heavy loads of rubble on their heads
and backs. Adolescent males flock to the sites and willingly work
for extremely low wages in the hopes of finding the sapphire that
will make them rich; the more business-savvy among them work as
middlemen.

12. (SBU) In terms of child sexual exploitation, the local chiefs
explained that most female underage prostitutes find their own
clients (both foreigners and Malagasy) walking the main drag or in
Ilakaka's only nightclub, but there are some cases where parents or
friends are complicit (which UNICEF confirmed). IPEC also notes
young women are often given in child marriage starting at 14 years
old, and many are in situations of "concubinage" -- living with a
man without being legally married. Boys do not seem to be victims
of child sexual exploitation in Ilakaka. Local police recently
started monitoring hotels and nightclubs to ensure minors do not
enter. In terms of domestic labor, most workers are girls between
the ages of 13 and 17 who earn between 15,000 to 30,000 Ariary per
month (USD 7 to 14), although some boys work as domestics as well.
Local authorities and NGOs believe the vast majority of children
working as domestics and prostitutes come to Ilakaka and find their
clients directly of their own will.

13. (SBU) UNICEF estimates that in the permanent villages in the
Ilakaka zone, only approximately 44.44 percent of the children
attend school. However, in the mining sites where there are no
schools, the rate is effectively zero. Many parents working in the
mines either do not have enough money to send their children to
school or do not see the need, as they themselves did not attend
school.

WHERE IS THE GOVERNMENT?
- - - - - - - - - - - - -

14. (SBU) Some Malagasy gem dealers who PolOff consulted believe the
GOM has missed out on hundreds of millions of dollars in revenue
through its spectacular failure to regulate the gem trade, establish
an international market, maintain strict controls on foreign gem
dealers entering Madagascar, and impose customs procedures for gems
being exported. They note foreign gem dealers stay in the country
illegally for years, exploit miners' lack of knowledge in order to
buy gems at dirt-cheap prices, and smuggle the stones out of the
country. Meanwhile, the GOM has not so much as established a bank
in Ilakaka or trained Malagasy miners in order to help them get a
decent price for their stones. They questioned how President
Ravalomanana, a consummate businessman, has foregone this
opportunity and surmised a number of government officials must be
pocketing the money instead.

15. (SBU) Until recently, these gem dealers' assessment was
partially correct. When questioned, the Secretary General of the
ambitious Madagascar Action Plan (MAP) for development admitted the
administration is not equipped to control the activities of foreign
buyers and that some government officials may be lining their
pockets by looking the other way. Where the government has failed
to address working conditions on its own, international NGOs and
local unions have stepped in. In 2006, Malagasy trade union
leaders, supported by a German NGO, launched an initiative to
unionize workers in every sector of the mining industry. Sponsored
by the U.S. Department of Labor, IPEC recently kicked off a program
to rescue 1,000 victims of child labor by providing them with

ANTANANARI 00000224 004 OF 004


remedial educational, vocational training, and medical and
psychological services, and by training their parents on
income-generating activities. But a local village chief voiced a
common sentiment -- "We are fed up with surveys and statistics.
Train us to improve the price of sapphires."

16. (SBU) 2008 has already seen greater GOM efforts at governance
and institutionalization of the sapphire mining sector. Following
public consultations, the Ministry of Mines has committed to
building an Administrative Mining Office in the Ilakaka zone in
August, which will provide miners with training to help them get a
fair price for their stones and formalize and regulate the
activities of buyers. Perhaps more interesting, on February 28 the
government banned the export of several gemstones including
sapphires, citing the need for extensive sectoral reform. PolOff's
conversation with the Secretary General of the MAP suggests that
instead of trying to control the international supply chain, the GOM
may seek ways to help economic actors increase the value of stones
locally, for example by facilitating the creation of jewel factories
where gems can be sold in Madagascar at a higher price. On a
broader scale, the Secretary General surmised that since small scale
mining is included in the Extractive Industries Transparency
Initiative (EITI), it is possible sapphire mining could fall under
Madagascar's EITI plan.

17. (U) COMMENT: Ilakaka is quickly becoming a permanent economic
actor in Madagascar's southern region, and indeed in the world if
one considers the reach of its sapphires. The zone's rapid and
largely unregulated development has brought opportunities and
challenges, both economic and social, in its wake. Recent GOM
efforts to improve governance in the mining sector raise hopes that
social issues such as child labor will be eradicated in the long
term through the improvement of family's working conditions and
economic earning potential. Post will continue to monitor the
development of this economically dynamic mining zone. END COMMENT.

MARQUARDT

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