Reports call for tightening of diamond sector controls

The Kimberley Process, a regulatory framework aimed at reducing the potential for diamonds to fuel conflict, must take cognisance of the need for proper internal controls in producer countries and ensure a fair wage for Africa's diamond diggers, say two new reports. The first report, 'The Key to Kimberley - Internal Diamond Controls', highlights the need for proper internal controls and tracking in diamond-producing countries. The second report, 'Rich Man, Poor Man - Development Diamonds and Poverty Diamonds', warns that controls alone will probably never work unless diamond digging pays more than a dollar a day. Both reports were produced jointly by the NGOs, Global Witness and Partnership Africa Canada. The 'Key to Kimberley - Internal Diamond Controls', delves into internal control practices in a number of countries and reveals serious weaknesses "which, if they are not corrected, will compromise the effectiveness of the overall Kimberley Process Diamond Certification System (KPCS)". The report noted that "huge efforts have been made by almost four dozen governments and their diamond industries to comply with the KPCS for rough diamonds. Authorities have been established, certificates printed and statistics gathered. Where the movement of diamonds is concerned, most of the emphasis has so far been placed on international transfers between countries". This has seen the introduction of control measures such as tamper-proof containers, forgery-resistant certificates and the compilation of data regarding shipments. "But the Kimberley Process certificate is more than a physical description of what is in a parcel when it leaves one country and arrives in another. It certifies that the diamonds in each parcel are conflict-free," the report noted. PROBLEM OF POOR INTERNAL CONTROLS If a government is to be in compliance, the KPCS requires the country to "establish a system of internal controls designed to eliminate the presence of conflict diamonds from shipments of rough diamonds imported into and exported from its territory". Thus, for the KPCS to work, certificates "must be guarantees that the goods contained in shipments are clean". "It is essential, therefore, that producing countries maintain systems that allow them to track diamonds back from the point of export to the place where they were mined," the authors said. The study examined internal controls in seven countries: four producers, including Angola, the Democratic Republic of Congo (DRC) and Canada, which is also an importer, and three trading countries: the United States, Belgium and Great Britain. "The most problematic area for internal controls ... is found in countries where alluvial diamonds are produced by artisanal miners. Angola and the DRC are major artisanal alluvial producers and Ghana is a minor producer, but the problems are the same," the report pointed out. "In each country there is a good system for recording and formalising the diamond trade prior to export, and systems for licensing dealers and recording transfers have been articulated back through the system - but the trail runs cold one or two transactions upstream," said the researchers. The lack of controls in countries with artisanal alluvial diamonds is an old problem. Unlike kimberlite mines, which can be fenced off and protected, alluvial diamonds are scattered over hundreds of square miles and present a very difficult regulatory problem. "The geographic and geological nature of alluvial diamonds, and their value in relation to the poverty of the countries where they are found, makes this one of the most serious problems facing the effective implementation of the KPCS," the study warned, and would continue to hold the potential for destabilising these countries. Angola was the first country to implement a full certificate of origin for diamond exports after the United Nations imposed sanctions on former rebel group UNITA's diamond trading in 1998, followed by investigations in 1999. In 2000 the government introduced a certificate of origin system and implemented a single-channel marketing system, replacing the previous 'wide-open system'. However, its artisanal alluvial diamond miners numbered in the hundreds of thousands, and implementing regulatory control over them was an immense task. RESISTANCE TO REGULATION "It is estimated that there have been between 270,000 and 400,000 illicit miners in Angola during the last 12 years, at least 80 percent of them Congolese by nationality," the report said. "Many of these were brought in to mine for UNITA in the first instance. Numbers increased following the end of the war in 2002 and, in December 2003, the FAA [Angolan Armed Forces], working with the national police and migration services, was ordered to expel illegal aliens on the basis of threats to national security and territorial integrity." The study noted that "at present there is no system for determining the origin of diamonds from the artisanal sector, beyond records of purchases kept by buying offices", and remained an "incomplete paper-based system". "The generic culture of this type of diamond buying has historically been that no questions are asked, with the objective of ensuring supplies of rough diamonds at the lowest prices," the report commented. However, despite the expulsion of illegal miners at the end of 2003 and again this year, "it is estimated that there are still approximately 200,000 active in Angola". The state-controlled SODIAM diamond marketing company has estimated that US $2 million worth of diamonds was currently being smuggled out of Angola every month. "Proposed control mechanisms for the remaining artisanal miners have yet to be put in place - one will require small miners to dig only on the fringes of industrial mines, which will control the miners. But diamond deposits exist in areas where no mining companies currently operate and it is not clear how such deposits will be protected," the report said. At present there was no assurance that Angola's internal controls prevented diamonds from leaving or entering the country illegally. Among the recommendations made in the report was that the government consider the appointment of international inspection and audit firms to help enforce local internal control regulations. Alex Yearsley of Global Witness told IRIN that the government needed to "end the widespread involvement of the military in the diamond trade" and the "removal of involvement of the political elite in diamonds". "One is very well aware of the role of generals at the moment [in the diamond sector], and it's causing problems in relation to smuggling of diamonds out of the country. There were systems developed a couple of years ago that worked, but they worked too well and encroached on vested powerful interests," Yearsley alleged. Angola had started licensing middlemen, but "weren't able to get down to licensing the diggers because of the sheer numbers of people involved". FAIR WAGES NEEDED A second report, 'Rich Man, Poor Man - Development Diamonds and Poverty Diamonds', warned that controls alone would probably never work, unless diamond digging paid more than a dollar a day. Although a return to war is unlikely in nations like Angola, "the future of these countries now turns on whether productive activities can be made available to the young men who fought in the wars, and the other young men coming after them: productive enterprises that outweigh the return on more dangerous activities," the report noted. Yearsley added that "we need to make sure they [diggers] get a fair living wage, that they receive the same amount of profit and benefit as that of some of the companies in 47th Street in the main diamond district in New York". "What we really want to see now is the diamond industry, governments in particular, and development agencies, start looking at the issue of diamonds as an issue of development, as often they [diamonds] are the largest single 'employer' or activity for the male population that is [traditionally] drawn into armed conflict," Yearsley noted. "Until Africa's diamond diggers earn a fair wage, diamonds will always be a destabilising factor in these countries," added Ian Smillie from Partnership Africa Canada. For the full reports go to: www.globalwitness.org and www.partnershipafricacanada.org