The Marange Imbroglio Need For a Long Term Solution

Diamond World examines the issues involved and asseses the long term prospects for a smooth flow of rough from the Marange fields, which some industry estimates say could contribute a significant share of the rough to world markets in coming years .
The Marange Imbroglio
Need For a Long Term Solution

The issue of Marange diamonds has long confounded the stakeholders of the diamond industry. With NGOs and other concerned parties ranged on one side and the Zimbabwe government on the other, the KPCS and other world bodies found themselves as mediators caught between the crossfire. At one point, the KPCS itself came within the firing line and found itself under a sharp attack. However, a consensus was reached at the crucial mini-summit at St. Petersburgh in mid-July, providing an immediate, albeit a temporary resolution of the crisis. Diamond World examines the issues involved and asseses the long term prospects for a smooth flow of rough from the Marange fields, which some industry estimates say could contribute a significant share of the rough to world markets in coming years . July 15th 2010 was a red letter day for the diamond industry. After several years marked by controversy, conflict and a confounded situation during which rough diamond exports from Marange were banned, a consensus was finally reached which allowed for two supervised exports from Marange to take place in the coming couple of months. This decision was reached at the mini summit of the KP which took place alongside the WDC meeting in St. Petersburg on July 14th & 15th.

The significance of the mini summit was underlined by the attendance of a high level delegation from the US led by Susan Page, the assistant deputy secretary of state, and Zimbabwe’s Minister for Mines Obert Mpofu and Attorney General Johannes Tomana, apart from other international delegates.

"If this is a victory for anyone, it is a victory for the Kimberly Process," said KP Chair Boaz Hirsch. "The past several months have been difficult, but they have clearly demonstrated that not only does the Kimberley Process have teeth, it also is able to achieve results."

This came as an answer to the months of criticism that the KPCS itself had been facing including doubts raised in some quarters about its efficacy and ability to achieve real results, or keep out conflict diamonds from the mainstream diamond business.

Under the consensus agreement, Zimbabwe would be allowed two exports from July to September. The first export would only take place after a review mission and KP Monitor Abbey Chikane go to Zimbabwe and give the go ahead for the export, on the basis of compliance. The KP Monitor Chikane will then return to Zimbabwe in September and certify the second export, if he is satisfied that compliance parameters are met.

In the meanwhile, the review mission will submit a report which will then be considered by the KP Monitoring Committee, which will then decide on future exports from the Marange field on the basis of the report. In any case, industry sources say, final decisions will probably only emerge and be ratified at the next Plenary scheduled for November 2010, in the normal course.

That the Zimbabwe government’s earlier hard stance had softened considerably was evident from Mpofu’s statement welcoming the deal and pledging cooperation with the KP. "We will be able to export Marange diamonds," African media quoted Mpofu as saying after the decision was reached. "Zimbabwe is ready and willing to work with the (Kimberly Process) because we know the value of cooperating with the organisation."

However, it was also reported that in Zimbabwe, Finance Minister Tendai Biti described the KP decision as "progressive," but said the country would export the diamonds only after resolving a legal dispute over the land involving UK based African Consolidated Resources (ACR).

So, while the industry has no doubt let out its breath on the arrival at a consensus, everyone is clear that this is by no means the end. What happens after September remains to be seen, including on what further steps the Government of Zimbabwe will take to secure control over the mines, and what legal issues arise with ACR.

Matters of Concern

The major concern in the entire issue, of course, has been of human rights violations and forced mining by government authorities, which has been widely discussed. And in a broader sense is the concern that rough which is not routed through legitimate channels deprives the country and its people the benefit of revenue for expending on basic necessities.

Also, apart from the question of blood diamonds entering the mainstream diamond industry, diamantaires all over the world have been concerned about some other aspects and repercussions as well, should the Marange production go out of KP control.

Firstly there is the concern that these diamonds were being smuggled out of the country and reaching manufacturing centres via dubious routes. The other is the impact on the market should there an irresponsible dumping on the market of the goods which have been stockpiled since the ban. Zimbabwe claims that it is sitting on US$1 billion worth of stockpiled goods.

On the other hand, diamantaires felt that a proper and legal entry of Marange rough into the market was necessary in this time of rough shortages so as to avoid speculation in the rough market and the resulting heating of rough prices. And, that ultimately in the processing centres this would mean the continued employment of the workforce.

At another level, at no other time has the KPCS come in the firing line as much as it did during these past few months. At stake was not just the authority and credibility of the KP system, but, it appeared that its very existence was threatened. Little wonder then, that the entire world community closed ranks, and worked night and day during the various meetings both in Israel in June and in St. Petersburg in July. Undoubtedly, the negotiations took place on and off the stage as well.

"Although we can regard this as progress, there remains much to do," said Eli Izhakoff, the president of the World Diamond Council at the conclusion of the metting in St. Petersburg. "Although the discussions were often intense, a great deal of good will was shown. We need to build on this and to continue the hard work of the past several months."

Future Possibilities

However as stated earlier, the future remains hazy, as there are various factors and various players whose actions will determine what happens, but which are hardly predictable. Firstly there is the dispute between The Government of Zimbabwe and the ACR. Then there is the approach of the Government of Zimbabwe itself, and the question as to how kindly it will take to monitoring of mining in the Marange fields. Earlier, President Mugabe had threatened to carry out exports with or without KP approval. While there seems to be a step down in the decibel level on that front, there can be little doubt that the government will want to maintain some sort of control over this most lucrative mining prospect.

Finally there is the US which has had its own agenda in the entire imbroglio. Aligned with the US were the NGOs, who have been blowing hot over the issue over these past months but seem to have accepted the consensus situation. How their strategy will evolve over the coming months is anybody’s guess.

Lastly, what is most worrying is that despite the best efforts of the international community, a section of diamond manufacturers will align with those parties within Zimbabwe who might illegally mine and sell the diamonds thus leading to ongoing chaos for the mainstream industry.

It will require the sustained and strenuous efforts of the world diamond community to work out a more lasting and long term and meaningful solution to the Marange imbroglio.

The Backdrop to the Crisis A quick glance at the background and the events that led to the crisis. * The Exclusive Prospecting Order (EPO) held by De Beers over Marange via their subsidiary Kimberlitic Searches Ltd. from the 1980s, expired in 2006. Exploration rights were then taken up by African Consolidated Resources (ACR), a British-registered company.

* As ACR was preparing for a trial run of mining operations in December 2006, the Government of Zimbabwe, through the Zimbabwe Mining Development Corporation took over the rights, despite a court ruling allowing ACR to continue mining.

* Meanwhile a diamond rush of sorts had begun in September 2006, in this alluvial area. It is reported that it reached a peak in by mid-December 2006, even after the government had taken over and that around 10,000 illegal artisanal miners were working very small plots at Marange.

* This led to major water, sanitation and housing crisis. Initially, the miners sold their diamonds to the government, but quickly a black market developed.

* By end 2006, the government started crackdown on these artisanal miners which continued, which included attacks from the air it is alleged, and which it is said led to 30,000-35,000 people being shot by December 2008.

* It was reported that in February 2009, Human Rights Watch (HRW) researchers conducted more than 100 one-on-one interviews with witnesses, local miners, police officers, soldiers, local community leaders, victims and relatives, medical staff, human rights lawyers, and activists in Harare, Mutare, and Marange district in eastern Zimbabwe.

* HRW reported that “those interviewed said that police officers, who were deployed in the fields from November 2006 to October 2008 to end illicit diamond smuggling, were in fact responsible for serious abuses - killings, torture, beatings, and harassment - often by so-called "reaction teams," which drove out illegal miners.”

* In June 2007 the KP annual plenary noted with concern the continuing challenges to KP implementation in Zimbabwe and recommended further monitoring of developments there.

* By late 2008, NGOs said, mining was being carried out by soldiers using local villagers for forced labour.

* In December 2008, the Kimberley Process Civil Society Coalition representing NGOs which participate in KP was formed and called for Zimbabwe's suspension.

* In November 2009, at the plenary of the KPCS, the call for suspension of Zimbabwe was rejected but a working plan was devised for monitoring diamonds mined in the Marange fields. The plan aimed at curbing illegal mining and smuggling, securing the area and for improving the accounting and audit of diamonds mined at Marange and supervising exports.

* The High Court of Zimbabwe ruled in April 2010 that the government could sell diamonds from Marange, even as it dismissed an urgent application from ACR asking that diamond sales from the disputed fields be stopped.

* On May 6, 2010, the KP Chair issued a notice to all participants that they should maintain vigilance to ensure that Marange diamonds comply with the KPCS.

* In June 2010, at the Intersessional meeting, KP appointed Monitor Abbey Chikane reported that "Based on evidence provided by the government of Zimbabwe and private investors, and on...first-hand assessment of the situation, Zimbabwe has satisfied the minimum requirements of the KPCS for trade in rough diamonds".

* However, very long and hard discussions followed as the NGOs maintained that the army was still in control of the Marange fields. For the first time the Meeting ended without resolution of the issues.

* President Mugabe threatens to export Marange production with or without KP sanction.

* NGOs also protested the arrest of Farai Maguwu shortly after his meeting with KP Monitor Chikane, sometime in May 2010, during which he had handed over documents.

* WDC Chairman, Eli Izhakoff invited stakeholders to a mini summit during the annual meeting of the WDC in St. Petersburg to continue the discussions.

* Farai Maguwu released few days before the mini summit, and is seen as a goodwill gesture.

* July 14-15, discussions by stakeholders leads to the consensus agreement.

Vasant Mehta, Chairman GJEPC

“The Consensus Agreement is a Good Development”

“We welcome the consensus arrived at between all stakeholders of KP at the recently concluded St. Petersburg meeting. It could have been better, as, for the moment, the agreement is limited only to the production from May 28, 2010. However, it is a first step in the right direction and it has broken the impasse.

“There is a real desire to move ahead and meet required standards on part of the Zimbabwe government, which has been noted by all agencies, and all the people concerned.

“I am glad that the alleged atrocities and abuse of power, if any, have come to an end. Various senior members of the industry who visited Zimbabwe have also said that there was no military presence on the Marange fields.

“There is an audit on at the moment and if all is clear and the review mission gives a clean chit at the end of the current process, then hopefully, exports will continue post September as well.

All of us in the diamond industry are interested in seeing that the production from Marange comes into the mainstream in a legal and orderly manner. After all, at stake is the livelihood of about 3000 diggers on that country affecting about 30,000 people counting their families and dependants; and about 300,000 cutters and polishers in manufacturing centres all over the world.”

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