KP Reaches Agreement with Zimbabwe

140 95 Rapaport News

RAPAPORT… It was a huge relief for many in the diamond industry when participants in the Kimberley Process (KP) summit in St. Petersburg reached an agreement that would allow immediate diamond exports in small amounts from Zimbabwe and send a review mission back into the country before additional exports are allowed. The roller-coaster negotiations, which brought together representatives of KP member countries, nongovernmental organizations (NGOs) and industry, were held over two days in the Russian city and seemed on the brink of falling apart just before the deal was announced. “This is not a hundred percent perfect document, but it accommodates everyone,” said Obert Mpofu, Zimbabwe’s minister of mineral resources.

Details

According to the new agreement, KP Monitor Abbey Chikane will return to Zimbabwe the week of August 9 to certify rough produced since May 28, 2010, by the Mbada and Canadile mines in the Marange diamond fields. He’ll return a second time in September to certify a new round of production. At the same time, a KP review team will arrive in the country to assess the implementation of the KP Certification Scheme (KPCS) and Joint Work Plan (JWP) that was prepared in November 2009 to lead Zimbabwe toward full compliance with the minimum standards of the KPCS. Headed by Liberia, the review team will include representatives of the U.S., the European Union (EU) and African countries. The team will present its findings by September 30, after which the KP monitor will decide whether to certify further diamond exports. The forensic audit report on the diamonds mined in the area from 2007 to May 28, 2010, also will be ready by that time.

“In exchange for certain limited exports now, they also are going to have to prove to a review mission — which is going to include some very skeptical countries — that they comply with the KP standards,” said Cecilia Gardner from Jewelers Vigilance Committee (JVC). Gardner said that the volume of exports was one of the biggest concerns in the negotiations because Zimabawe has huge diamond stockpiles. Mpofu said earlier that his country had 6 million carats ready to be shipped.

Eli Izhakoff, the president of the World Diamond Council (WDC), said that Zimbabwe’s rough exports would not have an immediate effect on the global diamond market given that the quantity is rather small in the overall scheme of things. On the one hand, industry players were expressing concern during the negotiations about the potential flow of large amounts of Zimbabwe rough to the market. But, on the other hand, the current shortage of rough in the global market makes the country’s deposits very desirable to many manufacturers. Still, no one wanted the country’s diamonds to hit the market without KP certificates. After an earlier round of negotiations on Zimbabwe diamonds collapsed in Tel Aviv, Israel, in late June, the Zimbabwe government threatened to export its diamonds without KP certificates.

“These two organized mines in the area — Mbada and Canadile — are producing 1.8 million to 2 million carats a month, which is potentially 24 million to 25 million carats a year,” said trade consultant Chaim Even-Zohar, who conducted an on-site inspection of the Marange diamond area along with Moti Ganz, president of the Indian Diamond Manufacturers Association (IDMA), prior to the meeting. Even-Zohar estimated the annual potential of the area at 30 million to 50 million carats a year once it reaches full capacity.
 
Making it Work Although the agreement was hailed as a “breakthrough,” reservations remain over how successfully it will be implemented. “Although we can regard this as progress, there remains much to do,” said Izhakoff. “The discussions were often intense, but a great deal of goodwill was shown.” The agreement calls upon Zimbabwe to establish uniform diamond mining procedures within the Marange area and to tighten “border controls and cross-border cooperation with Mozambique, with a view to curbing smuggling and illicit trade of Marange diamonds.”

Alleged human rights abuses in the country remain a major issue. “The ball is now in Zimbabwe’s court to make good on its promises and act to end one of the most egregious cases of diamond-related violence in many years,” Annie Dunnebacke of Global Witness told news agencies. “We fervently hope that the governments in the Kimberley Process will, for their part, hold Zimbabwe to its commitments in order to begin to restore the battered integrity” of the KP. Gardner said she believed, based on negotiations, that Zimbabwe would comply with the JWP. “One of the most effective ways to address the alleged human rights violations is through compliance with the Kimberley Process,” she said.

In advance of the meeting in St. Petersburg, the Zimbabwe government released from police custody NGO activist Farai Maguwu. He was arrested before the June KP intercessional meeting in Tel Aviv, at which he had been expected to present testimony. It was rumored that his arrest was an attempt to keep him from testifying.

Redefining Blood Diamonds

Another issue hanging in the air through the meeting was either redefining “blood diamonds” or expanding its current definition but that subject was not addressed in St. Petersburg and remains open for debate. KP was initially launched specifically to end trade in “blood diamonds,” which were then defined as diamonds used to fund insurrections and civil wars by rebel forces. The KPCS was considered successful in reducing the trafficking in blood diamonds to 3 percent to 5 percent by some estimates.

In Zimbabwe, there are no issues of blood diamonds used to fund rebel conflict. But there are widespread allegations of human rights violations committed by the government and the military against miners and other local residents.
 
Industry participants say that the issue of human rights abuses in connection with diamonds damages the trade because customers turn to stones with cleaner, less controversial reputations. “Jewelers report a high level of consumer awareness about diamonds and the diamond industry,” said Matthew Runci, president and chief executive officer (CEO) of Jewelers of America (JA). “Some customers shift their buying practices on the basis of diminished consumer confidence.”

According to the Edelman Trust Barometer 2010, an annual trust and credibility survey conducted by the New York City-based Edelman public relations firm, transparent and honest practices are the most important factor in a corporate reputation, according to 83 percent of polled consumers. “If there are human rights abuses, the industry shouldn’t trade in these diamonds,” said Ari Epstein, deputy CEO of the Antwerp World Diamond Center (AWDC). However, he added, “it’s a different situation when you can say ‘There is a problem, but the situation has been improving.’ Let’s try to help this country. If we keep them out of the KP, it’s going to become worse.”

Mark Van Bockstael, AWDC’s director of international relations, said the issue of redefining blood diamonds, as well as other changes to the KP, are complicated by the very way KP is organized, with NGOs and industry having observer status only and unanimous approval by member companies required to authorize any actions. “The KPCS is completely incapable of approving the definition of conflict diamonds that some people would like to have,” said Bockstael. “It’s not possible because the legislation does not allow us to do that, so if we want to change that, I think we have to go back to the drawing board.”

Is KP Still Viable?

The meeting in St. Petersburg was regarded by many as a final test for KP to prove it can stay viable. “If we didn’t make this decision, we could have serious consequences for the KP because a long and considerable rift in opinions doesn’t strengthen our dialogue,” said Sergey Oulin, the president of the Russian Diamond Chamber. In order for a KP decision to go through, its participants must come to a unanimous consensus, an unachievable task if only one or two members are opposed. The previous meeting on Zimbabwe in Tel Aviv failed for this very reason.

“The past several months have been difficult, but they have clearly demonstrated that not only does the Kimberley Process have teeth, it also is able to achieve results,” said KP Chair Boaz Hirsch.

Many participants in the St. Petersburg meeting, held immediately after the 34th World Diamond Congress in Moscow, addressed the organizational and structural issues that, in their opinion, hamper its work. “KP was created to ban conflict diamonds, but now it is being used to solve problems between countries and this is a dangerous evolution,” said Epstein. He said that KP involvement in a political conflict between two countries could damage the industry. “I think that the flaws that we see here are the flaws of the KP Certification SchemeI think the KP should think about updating itself,” said Bockstael.

However, participants in the negotiations paid tribute to the way KP is addressing the burning issues, including human rights violations. Gardner emphasized that it was KP that shone a light on what’s going on in Zimbabwe, not the UN or the EU. “We have a country where there are allegations of human rights abuses and the KP steps in and regulates the activity in this area,” she said. Regarding the imprisonment of Maguwu, Bockstael said that governments should be “ashamed” that they want the KP to deal with such concerns that are better handled by governments themselves, who have the UN to help them — and its ability to place sanctions.

As for the current agreement with Zimbabwe, many agree that bringing the pact to fruition will require much effort from all sides. “I want to assure everyone that
Zimbabwe means business,” said Mpofu, in welcoming foreign investors to his country. Zimbabwe has yet to prove it is committed to engaging more investors, providing more security at the mining sites or spending proceeds from its diamond sales to improve the life of its people. The agreement says that the country recognizes such need.

“KP needs to work so that Zimbabwe is allowed to mine diamonds based on the interests of their country, not other interests,” said Lev Leviev, the head of the Leviev Group. He expressed an opinion that the involvement of big mining companies in developing diamond fields can increase transparency in the industry, create jobs and thus stop illegal trading of diamonds.

The September reports of the review mission should show how and whether Zimbabwe is living up to its promises. Yet, KP Chair Hirsch said the St. Petersburg agreement could become “the building block” that opens dialogue on issues that are the core of the KP. “Being able to unite the U.S., Zimbabwe and NGOs and the industry — this is the formula we will apply in the next crisis,” he said.

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