Sierra Leone to Tender for Independent Government Diamond Valuator
July 14, 05The Government of Sierra Leone, at the highest level, has decided to internationally tender the Independent Diamond Valuer’s contract. The contract with the current valuator,
The leaders of this west African diamond nation have made this decision as it adheres to international custom and practice and is also consistent with the country’s own domestic legislation and international obligations. The tendering process will begin shortly with a view to issuing a contract that will begin on January 1, 2006. The duration of the contract has not yet been established, but it may just be for one year and it contains a renewal clause. From my knowledge of the country, I surmise that a relatively short contract period would be preferred in order to not jeopardize the possible implementation of diamond marketing reforms which are currently being contemplated by the Law Reform Commission.
The Government deserves to be applauded for this clear demonstration of its commitment to “good governance” and to accepting international best practice in the diamond world. The incumbent valuator has expressed his opposition to the tender, reportedly raising various arguments, including his concern about the government’s ability to administer a fair international tender. We think that view is wrong, outdated and not doing justice to the government. There is no doubt that the incumbent valuator will be welcomed to tender a bid along with any other potential valuator as part of a transparent bidding process. We have faith that the tender process will be legally robust - and it will enhance the prestige of Sierra Leone in the international diamond world.
The success of the government's diamond policies is further demonstrated by the ever increasing official export figures. In June, the figures reached $22 million, the highest monthly figure since the end of the civil war. Mineral Resources Minister Alhaji Mohamed Swarray Deen confirms that diamond exports for the first half of 2005 had already reached around $76 million, roughly the same amount as exported in the whole of 2003. Sierra Leone’s official rough diamond exports last year were close to $130 million. This figure has risen considerably in the past few years: in 2001 (after the restoration of peace) official diamond exports were $26 million, growing to $41.7 million in 2002, and to $75.9 million in 2003. So in 2004, official exports doubled - and so did the income for government. The current contract was negotiated a few years ago, when official exports were much lower - so there is indeed a need to review the fee structure. Present exports for 2005 are showing a continuation of this improvement.
As the mining sector in Sierra Leone is fully privately-owned and operated, the government’s sole income from the alluvial artisanal diamond mining sector is derived from a 3% export tax (or a 5% royalty in the case of industrial mining operations, such as the Koidu mine) and from revenues from licensing and/or corporate income tax. It is believed that an additional $175-$250 million worth of diamonds may still bypass the official export channels, though there is a clear trend to move more and more goods away from smuggling into the formal economy.
And this cannot happen one day too early, as, in practice, the direct governmental earnings from diamonds are rather small - and depend mostly on the accuracy and the integrity of the valuation system. So there is a lot at stake. This is the first time a truly independent competitive international tender for Government Diamond Valuator (GDV) will be held in Sierra Leone which will meet the World Bank’s Procurement Guidelines and broadly follow procedures established in the GDV tender processes in Botswana, Namibia, South Africa, Canada and elsewhere.
Currently, all exports are valued by two different valuation bodies: the Government Gold & Diamond Department within the National Revenue Authority (headed by the experienced Laurence Myers) and the Independent Government Diamond Valuator – and, in case of differences, the figures of the two parties need to be reconciled.
A GDV can do much more than just valuate. In other countries, the usual terms and conditions include the GDV’s provision of unbiased market intelligence on the global diamond business as well as an objective interpretation of the implications of such information for the local industry. The GDV is expected to monitor conditions and price movements in all sectors of the rough diamond market to ensure that the market price used for valuation is true and fair. It has to assist government to be informed about price developments. In some countries the GDV provides expert testimony with respect to the valuation of diamonds in court to support government in relevant court proceedings. What is of utmost importance is that a GDV keeps the government informed on the business interests of the valuators.
In some parts of the diamond world, the issuance of a tender for Diamond Valuator will be hardly noticed. [There is another tender outstanding that will close in the days ahead, and most potential participants may not even know about it.] In countries like Sierra Leone, where poor governance and management of the diamond sector was a contributory factor to the outbreak of civil war, appointing an Independent Government Diamond Valuator through an international competitive process is a giant step forward.
It is important to recognize that the final decision came solely from the Sierra Leone government. Undoubtedly, the decision was influenced by the Government’s commitments to the World Bank and by its commitments to donor countries, including the United Kingdom. But the bottom line is that the Government will be demonstrating its ability to manage a transparent tendering process. This will enhance Sierra Leone’s reputation both within the diamond community and in the international political community. The government of Sierra Leone has made the right decision - and all potential candidates for such a prestigious contract ought to follow the trade press closely to remain updated on the relevant application deadlines. Well done, Sierra Leone.
Have a nice weekend.