The South African government has put the Organization for Economic Co-operation and Development (OECD) on notice of their strong objections to the so-called ‘Precious Stones Multi-Stakeholder Initiative Working Group (PSMI-WG),’ advising the global development organization this week that “it cannot accept unilateral initiatives and policies supported by the OECD which bypass sovereign governments, discredit international agreements like the Kimberley Process and last but not least impact on minerals from Africa without proper representation from Africa.”

The strongly worded protest by South Africa is against the OECD’s attempts to bypass the Kimberley Process Certification Scheme (KPCS) by replacing it (or making it irrelevant) through the adoption of a more comprehensive human rights-driven rough diamond regulatory process. The South African protest was conveyed by Mineral Resources Minister Susan Shabangu in a letter to Angel Gurria, Secretary-General, OECD – a copy of which was obtained by Diamond Intelligence Briefs. 

The Drivers of the Initiative
Precisely one year ago, we published an exposé called “The Hijack of Industry’s Conflict Diamond Leadership: New Self-Appointed Group Starts Conflict Diamonds Dialogue with OECD.” We explained then how this new group started out as a joint initiative among utterly frustrated KPCS stakeholders who wished to bypass the KPCS’s legally agreed upon governance mechanism (i.e. the consensus decision-making approach) and get the OECD or the European Union to adopt a more encompassing diamond regulatory environment (or a Dodd-Frank type of European legislation).

The key movers behind this drive were the U.S. State Department’s Assistant Secretary, Jose Fernandez, some leading U.S. jewelry chains (including Signet), U.S. trade organization Jewelers of America, as well as Global Witness, De Beers, and the Diamond Manufacturers and Importers of America, all of whom were conducting serial phone conversations to get the ball rolling. (This caused us to Christen this then-yet-unnamed entity as “Brad’s Teleconferencing Group” (BTG)).

We wrote that while we strongly favor KPCS reforms, we objected to the group leaving out the industry’s key players and warned them that the OECD is not perceived positively in Africa and the Third World. [DIB devoted a number of editorials to this development and to informing diamond industry players, who were largely left in the dark, about it. Some major diamond manufacturers were “cajoled” (or “pressured”) to join the group’s initial April 30, 2013, “workshop” at the OECD in Paris.

The Precious Stones Multi-Stakeholder Working Group
Thereafter, the initiative transformed itself into a Precious Stones Multi-Stakeholder Working Group, which actually did some interesting (and quite important) work in analyzing shortcomings in the KPCS. One of the KPCS’s key shortcomings that was raised by the group is that the scheme’s “approach may help prevent armed conflict and resulting human rights violations, but the scheme does not incorporate human rights principles or directly prohibit certification of diamonds that may be connected to human rights abuses in this context.

“Consequently, rough diamonds whose production was the direct product of human rights abuses may receive KPCS certification. Furthermore, the exclusive focus on rough diamonds means that even if the mandate was expanded to include human rights concerns, such issues may not be fully addressed because regulation of diamonds at the cutting and polishing stage has been excluded,” asserted the group.

Another major principal shortcoming identified was “KPCS’s narrow focus on conflict diamonds occludes the larger context in which diamonds can be (and have been) used to further human rights abuses.” In other words, the KPCS should – ideally – be transformed into a much larger human rights-related regulatory or compulsory scheme covering both rough and polished diamonds. Nobody opposes such praiseworthy and, maybe, quite necessary objectives – that’s not what the argument is about.

DIB strongly opposed the whole idea that a small part of the pipeline – many of whom are actually totally removed from mining, rough trading, diamond manufacturing, and polished trading activities – would unilaterally set the rules to be followed by the upstream and midstream players, irrespective of costs, feasibility and implementability. We are instinctively “wary” of self-appointed “guardians” that claim to have a mandate to represent all. This is essentially also the essence of the South African objections to the Multi Stakeholders Initiative. The Honorable Minister Shabangu has no issue with the group’s laudable aims and objectives – but rather with the manner in which the group has “ignored” Africa.

After having written so much about this in the past year, we would like to give the floor to the Hon. Minister Susan Shabangu by publishing her government’s sentiments in full:

Dear Mr. Secretary-General,

Allow me to ask your attention for an issue of great concern related to an initiative which is taking shape under the umbrella of your organization and related to due diligence guidance for responsible supply chains of precious stones from conflict-affected and high-risk areas.

The government of South Africa was informed that since April of last year, a working group which goes under the name of PS-MSWG has been having regular meetings with a view of exploring how to advance responsible sourcing and associated due diligence in supply chains of precious stones. The report is meant to lead to a new set of OECD Due Diligence Guidelines for Responsible Sourcing but now with a focus on Precious Stones.

It was reported that by March 2014, the PS-MSWG, an initiative from the US State Department, the government of the United Kingdom and the NGO Global Witness, will finish a report which - if implemented under the OECD set of Due Diligence Guidelines for Responsible Sourcing - will clearly bypass and discredit the Kimberley Process and the Kimberley Process Certification Scheme, initiatives taken some twelve years ago in full support of all African nations.

The Kimberley Process has 54 participants (i.e. Angola, Armenia, Australia, Bangladesh, Belarus, Botswana, Brazil, Cambodia, Cameroon, Canada, Central African Republic, China, Cote d’Ivoire, Democratic Republic Congo, European Union, Ghana, Guinea, Guyana, India, Indonesia, Israel, Japan, Kazakhstan, Laos, Lebanon, Lesotho, Liberia, Malaysia, Mali, Mauritius, Mexico, Namibia, New Zealand, Norway, Panama, Republic Of Congo, Russian Federation, Sierra Leone, Singapore, South Africa, South Korea, Sri Lanka, Swaziland, Switzerland, Tanzania, Thailand, Togo, Turkey, Ukraine, United Arab Emirates, United States of America, Venezuela, Vietnam, Zimbabwe), representing 81 countries, with the European Union and its 28 Member States counting as a single participant, represented by the European Commission.

Because of the KPCS, rough diamond is the best-controlled commodity in the world today. In the recent months, the KPCS has been able to eliminate the existence of conflict diamonds up to 99.8%. In its actions towards the CAR, the KPCS has again proven its ability to act swiftly when problems arise. Unlike other commodities, rough diamonds cannot be exported anymore from the CAR, hence cannot contribute to fueling the civil war further. It is of essence that the KPCS remains intact and the sole governing body so it can keep working towards a 100% clean trade in rough diamonds.

At no stage the government of South Africa or the government of any other southern African country has been involved in the PS-MSWG talks and deliberations. Further, there does not seem to be any African representative in the Authorship Committee. No initiatives have been taken to engage Africa in an exercise which clearly is targeted at adding supply chain controls on our diamonds and precious stones.

The government of South Africa has difficulties to understand how a coalition of Western entities deems it appropriate to establish guidelines on diamonds which for 60% are extracted from African countries and this without input from the African stakeholders.

The Republic of South Africa has a lot of respect for the good work of your organisation but cannot accept unilateral initiatives and policies supported by the OECD which bypass sovereign governments, discredit international agreements like the Kimberley Process and last but not least impact on minerals from Africa without proper representation from Africa.

Hereby we ask you to acknowledge our strong reservations about the methodology applied by the PS-MSWG and any outcome of these proceedings under the umbrella of your organization.

Yours Sincerely,

Ms. S. Shabangu, MP

Minister of Minerals

Let’s hope that the successors of Brad’s Teleconferencing Group will take this African outcry to heart and not abandon their objectives but rather restructure the process. In the end, this will be for the benefit of the entire value chain, and for all stakeholders.

SMI Recommendations For KP To Adopt Human Rights Standards For Diamond Certification
The Harvard University-affiliated Institute for Multi-Stakeholder Initiative Integrity (MSI Integrity), a non-profit organization that partners with academic institutions and local, national and international organizations to explore the effectiveness of multi-stakeholder and other voluntary initiatives as human rights tools, recently published a confidential 42-page draft report analyzing the performance of the Kimberley Process Certification Scheme (KPCS). The working draft is being made available only to members of the KPCS and is not being made public.

Some of the recommendations of the report are of considerable interest and quite consistent with the concepts championed by the Precious Stones Multi Stakeholders Initiative. According to MSI, to increase the effectiveness of KPCS as an initiative to stem the flow of conflict diamonds, KPCS should:

•          Expand its scope to include cut and polished diamonds.

•          Adopt specific and comprehensive minimum requirements regarding the quality of internal controls for government members. KPCS and its individual members have already developed valuable recommendations and good practices to guide this process.

•          To be relevant as a conflict prevention and human rights initiative in the context of trade in conflict diamonds, KPCS should expand its scope to include human rights standards relating to violence and conflict. These should address circumstances where trade or production is contributing to human rights abuses directly (e.g., displacement or violence) or fuelling violations indirectly (e.g., through funding). These considerations should apply as minimum standards for certification, regardless of whether the diamonds are produced or used by non-state actors, such as rebel groups or corporations, or by states themselves.

•          To be relevant as a human rights initiative more generally, and particularly in light of the common misperception that KPCS has a broad mandate to monitor the diamond industry more generally, KPCS should expand its mandate to include human rights considerations associated with the industry beyond conflict (for example, expanding its mandate to include monitoring whether child labor or forced labor is used in mines or factories).

•          Where KPCS certification does not include consideration of human rights issues, KPCS and industry should expressly acknowledge that the diamonds being traded are only certified as “rebel free” to correct the misconception that KPCS addresses all conflict and human rights concerns associated with diamond trade and production. For example, KPCS could consider requiring diamond sellers in its members’ jurisdiction to inform consumers of the extent of the issues addressed by KPCS certification.

This article is provided by Diamond Intelligence Briefs