The flawed diamond sale: Sanctions lifted on gemstones from Zimbabwe

via The flawed diamond sale: Sanctions lifted on gemstones from Zimbabwe The Independent by Charlotte McDonald-Gibson 15 December 2013

Belgium has successfully lobbied for sanctions to be lifted on gemstones mined in Zimbabwe, promising a windfall for the ailing nation. But critics say the ethics of the move are questionable

When 300,000 carats of rough diamonds went on sale in Belgium this month, they were remarkable not only for their wealth and sparkle. The auction marked the European debut of gemstones from Zimbabwe’s Marange diamonds fields, which once promised great riches for the nation but have instead been tainted by international sanctions and allegations of human rights abuses.

For the Belgian government and diamond industry officials who successfully lobbied the European Union to lift sanctions on Zimbabwe’s state-owned mining company this year, the sale marked the first step towards generating billions of dollars in revenue for Zimbabwe’s government, which they say will help lift its people out of poverty and encourage transparency. But critics argue that the sale of stones mined in one of the world’s most corrupt countries, which has a dismal human rights record, is another example of how the Kimberley Process – launched a decade ago to keep unethical diamonds from the market – is hobbled by its  narrow remit.

“The violence in the diamond sector has changed since the creation of the Kimberley Process,” says Alan Martin, research director at the resources watchdog, Partnership Africa Canada (PAC). Today, he says, it is not only the rebel groups sanctioned by the Kimberley Process that stand accused of abuses, but state bodies and private security firms. There is also growing concern that diamond revenue is not ending up in the pockets of the people who need it most. “In the same way that the definition of violence and conflict diamonds has changed, the entire corporate social responsibility landscape has changed,” Mr Martin adds.

The Kimberley Process came into effect in 2003 after groups such as PAC and UK-based Global Witness highlighted atrocities as rebel groups plundered African diamond mines to fund civil wars. The process in which diamond-producing nations are now monitored and certified has largely stemmed the involvement of rebel groups, with what are traditionally termed “blood diamonds” making up only about 1 per cent of all stones currently on the market. Rights groups and some governments are now lobbying for the narrow definition of conflict diamonds to be expanded, while groups such as PAC argue that transparency and accountability should also be more closely monitored.

Kimberley Process officials did stretch their original definition in 2009 when they placed an embargo on Zimbabwean stones, citing military involvement in the Marange fields. The ban came after human rights groups accused the government of killing up to 200 people in an operation to remove thousands of small-scale miners from Marange, which in 2006 was found to hold some of Africa’s largest diamond deposits. The government in Harare denied the accusations and, after noting improvement in the mines, Kimberley Process officials lifted the ban in 2011. But the US and EU maintained economic sanctions which had been in place since the early 2000s to encourage democratic reform, meaning the diamonds had to be sold in Dubai.

Then in September this year – following elections won by President Robert Mugabe – the EU lifted all of its sanctions, including those on the Zimbabwe Mining Development Corporation (ZMDC). The US State Department, however, retained its sanctions on the grounds that the polls were “deeply flawed”.

Emily Armistead, a campaigner for Global Witness, thinks the EU was premature in lifting the sanctions. The fields are run by joint ventures between private firms and the state-owned ZMDC, and opaque management structures have led to concerns that military and government-linked figures are still profiting from the gems. “We continue to be anxious that the military and other parts of the regime are bolstering their power through diamond revenues and potentially undermining democracy,” she said.

The week-long sale of Zimbabwean diamonds in Antwerp, which ends tomorrow, is the first of many and is expected to raise between $7.5m (£4.6m) and $15m. Belgian officials estimate that the lifting of sanctions could mean an extra $400m a year in revenue for Zimbabwe.

Mr Martin is not convinced the wealth will trickle down in a country ranked 157th of the 177 nations surveyed by the anti-corruption body Transparency International.

Zimbabwe has had a small-scale diamond industry since the 1980s but it was the discovery of the eastern Marange fields seven years ago which led to hopes that the gem industry could help to turn around an economy battered by years of mismanagement and instability.

Those promises of wealth have been slow to materialise. A PAC report last year alleged that up to $2bn in diamond revenue had gone missing in four years, the result of smuggling, undervaluation of stones leaving the country and a “high level of collusion” by government officials.

Zimbabwean mining executives denied the claims but complaints have also come from within the government. The former Finance Minister Tendai Biti, of the opposition MDC party, complained that the promised $600m from diamond sales earmarked for development projects had not materialised, with only $41m making its way into government hands last year.

Cecilia Gardner, the general counsel of the World Diamond Council, says the Kimberley Process does require all member countries to report detailed statistics on the quantity, weight and value of all diamonds mined and exported, with regular reviewing and monitoring.

The recent ban on diamonds from the Central African Republic shows the Kimberley Process remains a much-needed tool for both holding regimes to account and keeping the consumer informed. “No system is perfect, but it has done a great job of enhancing awareness of conflict diamonds,” says Anish Aggarwal, of the Gemdax consultancy.