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 
 
SIPDIS 
 
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DEPT FOR DRL - KGILBRIDE AND SJOSEPH 
DEPT FOR INL - EFLOOD 
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PLEASE PASS TO DEPARTMENT OF LABOR - DGARMS AND SSCHASBERGER 
PLEASE PASS TO DEPARTMENT OF JUSTICE - MGROSS 
PARIS FOR AFRICA WATCHER 
 
SENSITIVE 
SIPDIS 
 
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 
- - - - - - - - - - - - 
 
¶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 
- - - - - - - - - - - - - - - - - 
 
¶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