When Peace Hurts Profits in Angola’s Diamond Industry: CID Faculty Research Insights

This study provides insight into the political economy of conflict, revealing that peace is not always rewarded in capital markets, at least not uniformly. In resource-rich, institutionally weak environments like Angola, civil war may unintentionally create profitable conditions for incumbent firms by reducing competition, lowering regulatory scrutiny, and enabling informal arrangements. The negative investor response to the end of the Angolan civil war suggests that markets anticipated post-conflict governance to be less favorable for these firms, highlighting how private sector incentives can diverge from the public interest in fragile states. 

The implications are significant for both conflict resolution and post-war reconstruction. In a global context where the private sector is increasingly expected to support peacebuilding, this research underscores that firms may, under some conditions, have vested interests in conflict persistence. Policymakers and donors must therefore go beyond assuming automatic business support for peace and instead design post-conflict institutions, such as transparent licensing regimes and competitive tendering, that realign private incentives with social goals. Otherwise, the transition from war to peace risks entrenching corruption or rent-seeking behavior under a new guise. 

More broadly, the findings challenge optimistic assumptions that political stability and peace are uniformly positive for all types of businesses. They invite a more nuanced understanding of how violence, governance, and investment interact in weak states, particularly in sectors like mining, where rents are high and regulatory institutions are vulnerable. It underscores the need to integrate political economy analysis into investment risk assessments and the design of post-conflict economic governance. By rigorously documenting investor behavior around a major turning point in Angola’s conflict, the paper contributes to a deeper understanding of how conflict shapes not only political outcomes but also market dynamics—and of how markets, in turn, can shape the incentives for peace.