Marange - Relief at Resolution of Crisis

When the KPCS members met for the Plenary session in Kinshasa end October, there was a certain challenge before them. For almost two years the world diamond community had been confronted with an impasse on the question of exports from Zimbabwe’s fertile Marange fields: the NGOs and the western countries like the US, Canada, Australia and the EU strenuously objected to exports out of Marange, alleging continuing human rights abuses; and the African nations and many diamond manufacturing centres of the opinion that the abuses had ceased and therefore exports should be allowed. Ongoing debates and discussions had failed to throw up a solution. And everyone knew it was a make or break situation for KP. Failing a solution, the credibility, indeed the very existence, of the KPCS was threatened.

Behind the scenes, and in prior meetings, there were continuous efforts being made at various levels. The World Diamond Council, led by Eli Izhakoff, was particularly active in trying to broker normalcy, as was Mathieu Yamba, KP Chair for the past year.

As a result, on November 1, 2011, the announcement was made that an agreement had been reached, based on a proposal put forward by Yamba. The agreement stated that exports from two mines – Marange Resources (erstwhile Canadile) and Mbada – certified by the KP Monitoring Team as being compliant, were allowed to commence forthwith. The Plenary also agreed that exports from other mining operations could take place after verification of their compliance according to KPCS minimum requirements. Immediately, a third mine, the Chinese-owned Anjin, was to be inspected and was expected to be cleared.

Under the agreement, Mark Van Bockstael, Chair of the World Diamond Council Technical Committee together with Abbey Chikane, a former Chair of the Kimberley Process and KP Monitor would now form the Monitoring Team, for future oversight of Marange operations. In case of differences between the two, the issue will be referred to the Working Group on Monitoring for recommendation to the KP Chair.

The Plenary viewed transparency of operations as a key element of the agreement, and compliant mining operations in Marange are required to share mine level data with the KP Monitoring Team on an ongoing basis. Also, as part of the agreement, the KP Civil Society Coalition representatives in Zimbabwe will have access to the Marange area so as to allow continued reporting on KPCS implementation.

Zimbabwe, on its part, has made a commitment to uphold the KPCS minimum requirements and agreed to report to KP Meetings in 2012 on issues related to identification of further investors, the regulation of artisanal mining, and the fight against illicit digging and smuggling.

The agreement, which has been widely welcomed by various segments of the diamond industry, will be closely monitored and will be reviewed in the KP Plenary Meeting in 2012.

Expressing the hope that the decision will usher in a period of stability through the diamond pipeline, Avi Paz, President of the World Federation of Diamond Bourses said, "Zimbabwe has a great role to play in the future of world diamond production. The country's diamond wealth can and must serve as a means to raise the living standards of all its citizens.”

Paz urged all stakeholders to uphold the decision. "It is of utmost importance that all players in the pipeline support this resolution, regardless of their criticism of it,” he stressed. “We must all understand that the alternative, which is disassociation and rejection, would create havoc. That would negatively impact not only the lives of the Zimbabwean people, but also of millions of others worldwide, who depend on the diamond industry for their livelihoods." Calling it “an opportunity not to be missed”, Paz warned that this was “just the beginning of a long process”.

“The agreement doesn’t only mean stability,” said Antwerp World Diamond Centre CEO Ari Epstein, “it also proves once again that the Kimberley Process is the only framework that really works. It protects both the integrity of the rough diamond chain and the benefit of the producing countries.”

In India, Vasant Mehta, Vice President of the International Diamond Manufacturers Association echoed these views saying, “The agreement on Marange is a welcome step. The entire industry has understood the fact that the artisans of Marange are entitled to their bread and butter as is the global industry, particularly the workers in manufacturing centres. In the absence of human atrocities, the natural resources of a country should be allowed to flow for the economic benefit of all.”

Praveenshankar Pandya, Chairman of Diamond India Ltd, a consortium of diamond companies, said “The stalemate was not good for the industry. The two mines were compliant for some time, and the majority was for allowing exports, but KP could not come to a unanimous decision as some members were opposing this.” Highlighting another important facet, Pandya comments, “When you block something which is legitimate, the danger is that advantage can be taken by people who are not committed to doing things in an ethical manner.”

Ashit Mehta, Chairman of Surat Rough Diamond Sourcing India Ltd, another buying consortium in India which has been recently actively pursuing rough from different producing countries and companies, pointed out that , “Unfortunately in our business which is comparatively quite small, there are very few new resources. Marange was one of the most important discoveries in recent years and these mines are very important for India and the workers here.”

Currently, a notification from the government is awaited by the Indian industry to commence the flow of Marange goods into India.

The consistent fear has been that if these goods did not come to India, they could go to China. Sources in the industry feel that China is on a diamond accumulating spree much like major economies buy gold, to hold as reserves. And therefore, these goods would not necessarily benefit, or flow through, the pipeline.

While there is general euphoria at the agreement, the industry is not oblivious of certain problems which exist, but are nevertheless optimistic that these will not be a major hurdle to the smooth and legitimate flow of goods.

For one, there is the OFAC. “The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals….”, states the official site. It lists a number of entities with whom all dealings are banned, and any company known to have any dealings with these listed companies are also liable to invite sanctions. The Zimbabwe Mineral Development Corporation (ZMDC) the nodal state agency responsible for diamond exports is on this list, amongst others. In legal terms, imports into the US of Marange goods is still an issue.

This has been reiterated by media reports of the official US position, even after the agreement was reached. The United State Department spokesperson Victoria Nuland, in the course of a daily press briefing, stated that those in the U.S. must follow the ''American-targeted sanctions against individuals and entities in Zimbabwe'', who she claimed were undermining democracy there.

“There is a lot of confusion on the US position, and they must come clean,” says Pandya. “As they have been a part of the solution, they must now really work towards allowing the flow of goods through the pipeline without sanctions.”

Ashit Mehta feels that the US really has nothing against the Zimbabwean people but is against the Mugabe regime and keen to see a democratic government installed.

The Indian industry generally does not envisage problems. “In case of any issues, the global diamond industry can always hold talks with the US authorities,” said Pandya, confident that they would be able to get the US authorities to see reason.

The US, which was up for taking the KP Chair next year, has received the support of African countries – which may have been a factor in them not raising an objection to the agreement. So next year US will be KP Chair; however, South Africa has been named Vice Chair by the Plenary, something which the US was not too happy about.

Meanwhile, in a press statement, the Jewelers of America and the Diamond Manufacturers and Importers Association said that the agreement which allows exports out of the Marange region, poses a “challenge” for US jewellers and diamond dealers. The bodies warned members to exercise “due diligence”, stressing that members “should continue to ask their suppliers to provide additional written reassurances, beyond the World Diamond Council’s System of Warranties statement, that the diamonds they supply have not been obtained in violation of applicable national laws..”

Ashit Mehta said “Indian companies procuring Marange rough should keep track of their inventories from Marange and keep those quite separate from their other goods”, to make sure that these did not get into the US till such time as the sanctions are in force. Technically, that does not prevent the US invoking sanctions against companies dealing in Marange goods and preventing their “other” goods from entering that country. However, members of the industry are confident that the US will not do so, unless, as one industry insider put it, “there is concrete proof of some money laundering or terror-linked activities”.

So, while the agreement has marked a most important milestone, it is not the end of journey on this issue; not quite yet. The industry will need to remain alert to make sure that a stalemate of the kind existing for the last couple of years doesn’t materialise once again.