African Smuggled Goods are Legitimized on Route to Europe
June 24, 04The European Union, as a single market, is currently the sole authority able to publish European rough diamond trade statistics. Last year, Africa exported some $5.7 billion worth of rough diamonds to Europe, a figure that requires some analysis to become meaningful.
According to the EU, rough diamonds represent 10% of all European imports from Africa and, after oil, it is the single largest commodity imported into Europe from that continent. Although Antwerp may have an impressive database, its diamond statistics cannot be conclusive anymore as there is no legal requirement to officially report any import or export transaction from one community member to another.
The EU’s diamond statistics are not available in a single file and it is a tedious task to collect them. The statistics are compiled in euros and we have taken the 2003 end-of-year exchange rate (€1 = $0.79637) to convert the figures into dollars. Of course, these countries’ diamond exports to Europe don’t necessarily represent all African diamond exports but, especially in the case of De Beers mines, in some instances the figures approximate total diamond production.
The “distortion” in (or questions about) the figures is mostly South Africa. Its exports at $2.3 billion represent more than twice its annual production. This underscores again that South Africa has become a transit center for much of Africa’s smuggled production that gets “legitimized” and is exported officially. It probably also points to considerable re-exports of DTC sight shipments to South Africa. The $2.3 billion figure does not include some $462 million worth of rough imports from South Africa into the United States, a weird figure which has already been contested by the South African Diamond Board, nor South Africa’s rough exports to Israel, India or Dubai.
Angolan exports seem far too low for comfort and one would need to look at Israeli, Swiss or Dubai figures to get a plausible explanation. Mauritius at $28 million again raises questions about the integrity of its Kimberley Certification system; there are too many stories in the market about the ease with which it is possible to secure blank certificates. Things are probably not that bad. In all fairness, we are well aware that at least one DTC Sightholder gets his boxes in Mauritius and, indeed, some $18 million is imported from Europe into Mauritius. Then the goods are re-sorted and re-exported.
What is surprising is that, overall, the figures seem rather plausible and the data collection system seems to be quite effective. Although Botswana’s, and most of Namibia’s, exports would not be at market value but rather at DTC’s Standard Selling Values minus 10%, the $5.6 billion figure would fairly approximate the estimated African production, out of a total 2003 rough production of some $8.5 billion.
It has always been claimed by authoritative sources that some 20%-30% of the African rough production is smuggled out, mostly from the informal alluvial sectors. The EC figures neither affect nor dispute those claims, although it seems to me – intuitively – that an increasing part of the smuggled goods are getting legitimized somewhere on the way to Europe – and the rest of the world (U.S.) for that matter. That should be considered a “positive” rather than a “negative” thing. It shows that the marketing of smuggled goods has become more complicated (and costly) than trying to legitimize goods.
As we go along, and the rough monitoring and certification systems gradually improve and controls tighten, smuggling may gradually lose its advantages, channeling more goods to legal exports in the source country. That will be mostly a victory for Africa.
Rough Diamond Exports from Africa to the EU (2003)
Data compiled by Michelle Moshelian