UN Report May Inflict Great Damage To The Development And Rehabilitation Of Post-Conflict Diamond Resources – And Drive Good Companies And Investment Money Away From Africa.
November 06, 03When a so-called United Nations Panel of Experts publishes a tainted report, flawed by weird inconsistencies, blatant errors and illogical and incredible distortions, the only sensible thing to do is to ignore it – and simply regret that this is another lost opportunity for the United Nations to make a meaningful contribution to the responsible development of the diamond resources in Africa. However, because it may seriously impact the marketing of rough diamond resources throughout the African continent, it becomes a matter of utmost concern to each and every member of the diamond community – and of the African producer countries.
The latest and final report of the UN Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo will have only one “net effect” for the African diamond countries: responsible, accountable, respectable diamond companies will start to shun the continent – leaving the scene to mostly rogue players. No serious diamond player can “afford” the risk of dealing with African countries, as the Panel’s weird reasoning and even more suspect actions, will potentially damage the reputation of even the best and the finest diamond companies.
What is the problem? The UN Panel has created a criterion called “elite networks”. Though never clearly defined, this refers to companies or individuals that attain personal financial benefit from the conflict in the Democratic Republic of the Congo. Though it hardly gives any examples of what is meant, it is implied that the Panel is opposed to some of the legitimate DRC government’s partners in certain mining ventures. So how does this effect the diamond industry?
A European diamond company that makes legitimate, totally legal diamond purchases from a DRC source – a company that pays the relevant export taxes, has the goods properly evaluated and documented, that obtains the proper Kimberley Certificate documents - now takes the risks that one day the UN will declare the company as contributing to wars, conflicts and plundering. It will do so, even without informing such company or make any attempt to contact such company. The owners will simply wake up one morning and discover that they have been accused and found guilty - with no recourse, with no chance to air its views or even hear the evidence.
Over 75 countries in the world labored for many years to get the Kimberley System in place. This author has many reservations on some aspects of the Kimberley Certification System, but there is no doubt that it is the world’s only credible instrument enabling differentiation between “conflict” and “non-conflict” diamonds. If strict adherence to the Kimberley rules doesn’t protect a company from UN charges of involvement in conflict diamonds, the entire fabric of the Kimberley framework will break down.
Kimberley was meant to create for countries such as the DRC, Sierra Leone, Angola, Guinea, CAR and others, a way to sell rough diamonds which are “untainted” by conflicts – diamonds which, thank God, still represent virtually the entire African production, as war and conflicts are dwindling down and have mostly come to an end. But if the world’s major international diamond companies – which have their good reputation as their foremost asset – cannot make purchases covered by Kimberley Certificates, because some UN Panel may still taint or destroy these companies’ reputation, then good diamond companies will stay away from Africa.
In many African countries alluvial or kimberlite operations may find that investment money will become a scarce commodity, that Western banks will not want to extend loans to mine development, and mining equipment providers may not want to take the risks of selling mining machinery to mines, even though these mines produce non-conflict diamond output that is fully covered by the Kimberley Process.
The UN Panel report – at least the part referring to the diamond sector – must be contested and rejected by those African countries that make strenuous efforts to rehabilitate and revive their diamond sectors in post-conflict Africa. The industry can neither afford nor tolerate a situation in which there is multiple criteria defining conflict diamonds. If a Kimberley Certificate is “no good”, if it doesn’t provide the diamond buyers with protection against plundering, ravaging and conflict charges, responsible companies will move away from Africa, leaving the diamond business in the hands of rogue players or those companies which are less concerned about their international standing and reputation. The UN DRC Panel of Experts report represents a problem for Africa – not for good diamond companies, which will know what to do.
We have many more problems with the Panel Report that raises questions about the “decision making” in what names to include or exclude from the report. One source close to the Panel mentioned political motivations, commercial considerations and even corruption as factors which may have played a role. This is something the UN member states or the Secretary General of the United Nations must investigate, that isn’t our role. We can only observe that there are inexplicable actions which certainly defy any logic and would point to irregularities. After implying what mining companies are considered “part of the political, military and business wings of cooperation within the “elite networks” in government territory in the Democratic Republic of the Congo and Zimbabwe”, the Panel subsequently removes most companies involved in the ownership of these mines from its various “black” lists. The panel doesn’t bother to list most of the past and present buyers from these mines – something, which even may be a welcome relief to the companies involved – but if the criteria of the Panel stands, these companies may still be exposed in the future. One of the companies that did not purchase a single stone from any of the newly defined “bad sources” considered “elite networks” by the Panel, is De Beers. As a matter of fact, De Beers didn’t purchase a single stone in the DRC in the period covered by the Panel and even long before.