Ralfe Praises Kimberley Rules

150 150 Rapaport News

(Rapaport…October 28, 2002) An address given by Gary Ralfe, managing director of De Beers, to the opening session of the World Diamond Congress, October 28, 2002:

Mr. Hager, president of the London Diamond Bourse and Club, Mr. Fischler and Mr. Cohen, presidents respectively of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA), I thank you for this opportunity to address the joint session of the 30th World Diamond Congress (WDC) and congratulate you on this significant anniversary. I recognize many leaders of the diamond industry from around the world. You have important matters to discuss and determine over the next two days. I wish you fruitful deliberations and welcome you all here in London.

This Congress was scheduled to be held in Israel; indeed I look forward to being in the vibrant diamond community of Ramat Gan next week. We all deplore ele3ments in Israel as we deplore it in Bali, in Moscow and in New York City. May the leaders of the civilized world have the resolve and support of right-minded men everywhere to control the scourge of terrorism.

And so I should like to acknowledge the presence here of United States Ambassador J.D. Bindenagel, who, in the relatively shore time he has been involved in our industry’s affairs, has coordinated the American government’s policy in a positive and forthright manner, brining clarity of thought and firmness of action. In the perilous international arena the interests of the United States lie in parallel with ours. You have our full support, Mr. Ambassador, and we thank you and the U.S. administration for working constructively with our industry at a time when you have so many other grave issues to consider.

Two years ago in July 2000 the last WDC took place in Antwerp. Humanity’s only certainty is change and what changes there have been since then, both globally and in our own industry! Two years ago my own company, De Beers, had already started its own dynamic of transformation, basically of changing our business model and in the process some of the fundamental tenets of our business. The old model was based on viewing the diamond market from the perspective of supplies of rough diamonds. The new model, fully compatible with the philosophy of competition, is directed at growing demand for diamond jewelry and at competing with other luxury goods. The Diamond Trading Company (DTC) is moving from seller of last resort to Supplier of Choice.

Since the last WDC we have witnessed a strong move towards what I might call ethical accountability among global companies and industries, and those businesses touch the lives of millions. The diamond industry and De Beers need to respond proudly and firmly to the demand from civil society, from the consumer, from NGOs and from governments for ethical accountability. And particularly in our business; I reminded my audience at the WDC “the value of our product lies in its desirability to the consumer and the consumer’s desire to own a diamond lies in its value as a symbol – a very beautiful symbol – but a symbol nonetheless of enduring love and purity.” And if the theme of my address to this Congress is ethical responsibility, where in our business is its immediate focus? It is of course in the continuing of conflict diamonds.

The diamond industry has been engaged for the last two years in a dialogue with the United Nations, national governments and representatives of civil society (the NGOs), to devise solutions to the problem of conflict diamonds. This was not a problem of our making, but the very idea that our beautiful and unique product should be associated in any way with the horrors of war, with the appalling images of death and mutilation screened around the world from the civil wars in Sierra Leone, Angola and elsewhere in Africa, meant that this was an issue that we had to take very seriously indeed.

There is, firstly, the absolute moral imperative that requires us all to do everything we can to prevent human suffering caused by the abuse of diamonds to fund conflict. Secondly, there is the clear and immediate threat that consumers worldwide, and particularly in the key American market, could refuse to buy diamond jewelry because of this connection with death and disaster. Make no mistake about it, this possibility of consumer boycotts of diamonds was, and remains, a reality. We are grateful to Global Witness for drawing this to our attention.

It was in this knowledge that the WFDB and IDMA, together with other stakeholders, set up the World Diamond Council to combat the threat by drawing together all the various parts of the industry — producers, dealers, manufacturers, wholesalers, jewelers and retailers — in a united front to demonstrate to the world that we would not tolerate the infiltration of our business by unscrupulous individuals trading in diamonds tainted by the blood of innocent people.

It was not sufficient to say that conflict diamonds at the peak amounted to only 4 percent of world production, that we were not involved or that governments should look to the causes of conflict rather than blame the soft target of the diamond industry. It is easy to say that this is an African problem, that the arms trade or other industries more clearly implicated — oil, for example — should be brought to account. Yes, of course, but like it or not, we are in the frame and we had absolutely no choice but to engage with this issue and manage it in a way least disruptive to our business and to protect consumers’ interests.

This is what our representatives on the WDC have been doing over the last two years and I want to commend most strongly to you the tireless work done on our behalf by Eli Izhakoff and his team to secure an effective solution that would not place undue burden on our business. This team of dedicated people has been negotiating with 40 national governments, each with sizeable delegations of diplomats, and the representatives of over 100 NGOs, to preserve the vital interests of the diamond industry.

These multi-party negotiations are known as the Kimberley Process, which has a clear mandate from the United Nations General Assembly. The Kimberley Process comes to fruition on the 5th of November, eight days from today, when there will be a ministerial meeting of the participating nations in Switzerland. At this meeting the ministers of each and every one of our governments — whether we are from diamond producing, processing or consumer countries — will ratify the Kimberley Process in a binding international agreement.

Governments have established an international certificate scheme for rough diamonds that will require all exports, imports and re-exports of rough to be accompanied by official certification that the goods have been formally identified as conflict free. To avoid harsh regulations being imposed on us by the authorities without due regard to the needs of the business, the WDC has negotiated industry self-regulation measures to supplement the certification scheme that are now agreed, accepted and enshrined in the agreement. Without the Kimberley certificates and the industry measures it will be illegal to import, sell, buy or export rough diamonds.

This means we are committed and there is no going back. However, what may not yet be clear to us all is precisely what we are committed to do. The detail of this is spelt out in the guidelines produced by the WDC, forming the basis of WFDB and IDMA resolutions to be placed before you here in London. I am confident that you will demonstrate once again the courage and determination that has served this industry so well throughout and adopt these binding resolutions unanimously.

Simply put, the self-regulation is a System of Warranties that will require that each and every rough diamond transaction be accompanied by a written guarantee or warranty on the invoice that:

“The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations Resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.”

The DTC has been doing this since March 2000.

By including this warranty on our invoices, we will be assuming legal liability for the accuracy of the statement and will thus be obliged to confirm that the warranties we have received from our suppliers are accurate and reliable. Furthermore, we will need to maintain records of all such warranties received from suppliers and issued by us to our customers. Every year we will be required to instruct our independent auditors to certify that these records are being maintained accurately. When requested by an appropriate national government agency, our auditors will submit their certification for review.

Thereby we protect both he reputation of the industry and the integrity of our product. We shall be securing our business from yet more intrusive oversight and the threat of consumer boycott.

That, then, is the background. In the immediate meantime, however, we have to ensure that these industry self-regulation measures are firmly in place and ready to be implemented.

Despite the fact that the Kimberley Process has been in negotiation for more than two years, it is now apparent that some of the countries involved in the rough diamond business may not be in a position to implement the Kimberley Agreement on the due date of 1st January 2003. It is possible that at the meeting in Switzerland next week the assembled nations will vote themselves an extension of some months. This may well be presented as an “Implementation Assessment Phase,” but any such delay will cause outrage amongst the NGOs and, no doubt, fierce public media criticism of all parties involved, including the industry.

It is, therefore, of the utmost importance that we, the international diamond industry, are able to demonstrate that we are ready and eager to introduce our self-regulation measures — the System of Warranties and the auditing provisions — without delay, regardless of the pace of government compliance. If there is any hesitation in Switzerland, the WDC needs to be able to make a strong, unequivocal statement to that effect.

For this reason I urge you most strongly to give your unanimous support to the WFDB/IDMA resolutions here in London and to use all your influence to ensure that this message reaches the farthest corners of our industry. It is up to us, as leaders of our industry, to rise to the challenge we have been set by the international community. If we fail, our business, our livelihoods, our communities and our children’s inheritance will be at risk.

We should see the whole conflict diamonds episode as a benefit to our business. Through your vision and the work of the WDC on behalf of us all, the standing of the diamond industry in the eyes of the United Nations, the U.S. State Department, our national governments, the responsible elements of civil society and the media, and in the eyes of the world, has been enhanced. This is why we are, why we have to be, committed to the Kimberley Process and I commend with vigor the measures of industry self-regulation set before you.

Moving away from conflict diamonds back to my broader theme of ethical accountability, this involves fiscal and legal compliance. De Beers has been engaged for some months in a constructive dialogue with the Competition Directorate of the European Commission in Brussels in order to ensure compliance with the jurisdiction in which DTC operates. We are still hopeful before the end of this year we shall have completed due process on DTC’s distribution policies, indeed on all that we understand by Supplier of Choice. We shall remain engaged with the Commission well into next year on our agreement with ALROSA, which is subject to the Commission’s approval.

There are two issues on your agenda on which I would like to comment: HPHT [and] small- and medium-sized manufacturers and traders under Supplier of Choice.

In conclusion, I would like to state again unequivocally my vision of ethical accountability of our industry. Our vision is of an industry that is honest, fiscally and legally compliant, ethically committed and accountable. An industry that subscribes to best practice principles. At DTC we are convinced that transparency, objective criteria in the selection of our sightholders and in the allocation of our supplies are the best ways of achieving our commercial goals. So in our industry at large is ethical accountability the most certain foundation of the revival of our business, and of diamond jewelry’s competition with other luxury goods.

Diamonds represent the noblest of human sentiments; they stand for love, commitment and purity. They also embellish beautiful women. They need our concerted efforts to maintain their integrity as mankind’s most potent symbol.

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