EXECUTIVE SUMMARY AND RECOMMENDATIONS
In the diamond mines of the Central African Republic (CAR), extreme poverty and armed conflict put thousands of lives in danger. President François Bozizé keeps tight control of the diamond sector to enrich and empower his own ethnic group but does little to alleviate the poverty that drives informal miners to dig in perilous conditions. Stringent export taxes incentivise smuggling that the mining authorities are too few and too corrupt to stop. These factors combined - a parasitic state, poverty and largely unchecked crime - move jealous factions to launch rebellions and enable armed groups to collect new recruits and profit from mining and selling diamonds illegally. To ensure diamonds fuel development not bloodshed, root and branch reform of the sector must become a core priority of the country's peacebuilding strategy.
Nature scattered diamonds liberally over the CAR, but since colonial times foreign entrepreneurs and grasping regimes have benefited from the precious stones more than the Central African people. Mining companies have repeatedly tried to extract diamonds on an industrial scale and largely failed because the deposits are alluvial, spread thinly across two large river systems. Instead, an estimated 80,000-100,000 mostly unlicensed miners dig with picks and shovels for daily rations and the chance of striking it lucky. Middlemen, mostly West Africans, buy at meagre prices and sell at a profit to exporting companies. The government lacks both the institutional capacity to govern this dispersed, transient production chain and the will to invest diamond revenues in the long-term growth of mining communities.
Chronic state fragility has ingrained in the political elite a winner-takes-all political culture and a preference for short-term gain. The French ransacked their colony of its natural resources, and successive rulers have treated power as licence to loot. Jean-Bédel Bokassa, the CAR's one-time "emperor", created a monopoly on diamond exports, and his personal gifts to French President Giscard d'Estaing, intended to seal their friendship, became symbols of imperial excess. Ange-Félix Patassé saw nothing wrong in using his presidency to pursue business interests and openly ran his own diamond mining company. Bozizé is more circumspect. His regime maintains tight control of mining revenues by means of a strict legal and fiscal framework and centralised, opaque management.
Since Bozizé came to power in 2003, industrial diamond mining companies have almost all left, in part because the authorities' high demands erode potential profits. Informal artisanal mining carries on apace, but the government's closure in 2008 of most diamond exporting companies - a ruse to better control the market - severely cut investment in the production chain, cost many miners their jobs and helped cause a spike in infant malnutrition. Expensive licences and corrupt mining police make it harder for miners to escape the poverty trap. A 12 per cent tax on diamond exports, the highest in the region, makes smuggling worthwhile and fosters illicit trading networks that deprive the state of much needed revenue.
The government's refusal to distribute national wealth fairly has led jealous individuals and disenfranchised groups to take up arms for a bigger slice of the cake. The Union of Democratic Forces for Unity (Union des forces démocratiques pour le rassemblement, UFDR), more ethnic militia than rebel group, has signed a peace agreement but still mines diamonds in the north east and sells them on the black market. Poor miners joined its ranks to improve their lot, and though taking power is no longer a prospect, diamond profits are a strong incentive not to disarm. Meanwhile, the Convention of Patriots for Justice and Peace (Convention des patriotes pour la justice et la paix, CPJP), the most active rebellion, preys on miners and traders in the east. This insecurity, largely banditry under a rebel flag, severely restricts economic activity, inhibits the holding there of elections set for 23 January 2011 and puts civilian lives at great risk.
Reform of the diamond sector is a crucial element, alongside wider governance and conflict resolution measures, for improving the living conditions of miners and their families, boosting the state's scant domestic revenues and helping break the cycle of armed conflict. The government needs first to improve governance of the mining sector, which is a question more of political will than capacity. Only when Bozizé has shown commitment to instituting more democratic control of mining revenues and enhancing transparency in management processes should international partners support mining authorities in the capital and mining zones. The reform strategy should prioritise artisanal above industrial mining, which has less direct impact on mining communities, aim to reduce incentives for smuggling and tighten controls to stop armed groups profiting from diamonds.
Recommendations
Improving governance of the mining sector
To the government of the Central African Republic:
1. Transfer the power to award mining contracts and grant licences to exporting companies from the presidency to the mines ministry and require the minister to give appropriate public airing to draft contracts, including by making them available to a parliamentary group with representation from major opposition parties for review and debate, before obtaining cabinet approval and signing them.
2. Adhere fully to the Extractive Industries Transparency Initiative (EITI), and in order to ensure external audits already carried out instigate more transparent practices, encourage the national EITI council and a multiparty parliamentary group to rigorously investigate discrepancies between government revenues and payments from diamond mining and exporting companies.
3. Request accession to the World Bank's EITI++ project.
4. Reduce incentives to smuggle by harmonising tax rates on diamond exports with neighbouring countries.
To the CAR's international partners:
5. Provide financial and technical support to the mining authorities only if the government demonstrates commitment to more democratic and transparent mining management; to this end, they and World Bank experts in the EITI++ framework should:
a) assist the mines and planning ministries to draw up a strategy for mining sector reform that prioritises improved governance and the formalisation and promotion of artisanal mining and incorporate it into the Poverty Reduction Strategy Paper (PRSP) for 2011-2013;
b) help the government create a new Special Anti-Fraud Unit (Unité spéciale anti-fraude, USAF) to replace the current mining brigade, incorporating it into the wider security sector reform; and ensure that the new force has a multi-ethnic, multi-regional composition and is accountable to an inter-ministerial body including the mines, internal security and defence ministries;
c) the World Customs Organisation (WCO) should propose to the governments of the region, in particular those of the CAR, Cameroon, Chad and Sudan, that it lead and coordinate their customs authorities in investigating smuggling methods and routes; and
d) the UN Peacebuilding Commission should help the government organise in 2011 a donors conference to mobilise funds for implementing the PRSP 2011-2013, including funds dedicated to mining sector reform.
Stopping diamonds from perpetuating armed conflict
To the government of the Central African Republic:
6. Prevent rebels profiting from diamonds by compiling a public blacklist of individuals, either in rebel groups or with links to them, prohibited from mining, trading and exporting the precious stones.
7. Create incentives for rebels to enter the disarmament, demobilisation and reintegration (DDR) process by drawing up a plan for their reintegration into civilian life that provides alternative sources of income to illegal diamond mining and trading.
8. Invite the Kimberley Process to carry out a review mission.
To the Kimberley Process:
9. Send a team to the CAR with a special mandate to investigate rebel activity in eastern mining zones and advise on how to ensure exporting companies do not trade diamonds mined or sold by rebel groups.
To the Mission for the Consolidation of Peace in the CAR (MICOPAX):
10. Deploy to the north east and combine civilian protection duties with implementing a mines monitoring program in coordination with mines ministry officials and the Special Anti-Fraud Unit.
11. Ensure the security of the afore-mentioned Kimberley Process team in the east.
Boosting development in mining zones
To the government of the Central African Republic:
12. Lower the price of artisanal mining licences, allow miners to pay in several instalments and make the licence valid for one year from the time of purchase, not just until the end of the calendar year.
13. Reduce the cost of starting a cooperative; increase transparency in the management of the National Union of Central African Mining Cooperatives; and initiate vocational training programs for cooperatives, including on literacy, mining techniques and financial management.
14. Put a portion of diamond export taxes into a community mining development fund for local projects and training schemes on diamond valuation and mining methods; and create local committees to administer the money in a collective and transparent way.
