Global Policy Forum

By Gorrel Espelund

Diamonds — a girl's best friend or worst enemy? A few years ago, when the precious gem bought deadly guns that fuelled civil wars in parts of Africa, the question was a pertinent one. It all depended on whether you were a victim of the atrocities committed in places like Sierra Leone and Angola; or if you were living far away from the war zones, wearing a glittering stone on your finger.

Now, the industry is doing its best to rid itself of any connection to the so-called "conflict diamonds". In fact, for South African diamond giant De Beers, the process has embodied more than just polishing away the stains caused by blood diamonds. It has proven to be a shift in business attitude as well.

Criticised by human rights organisations, the media and non-governmental organisations (NGOs), De Beers — the largest marketer (by value) of rough diamonds in the world — has been forced to take a stance in the fight against conflict diamonds. Thus it has sided with the NGOs in the so-called "Kimberley Process" — a certification scheme that aims to prevent blood diamonds from entering the legitimate market, while at the same time protecting the diamond industry itself.

"A diamond is a clean, pure commodity. Diamonds are about love, about commitment. They've got nothing to do with the atrocities carried out by a minority that hijacked and abused this wonderful and unique natural resource," says Andrew Bone, public affairs manager at De Beers. "We have a beautiful product and we must maintain its integrity, but we must also do it because it is right to do so. It goes beyond economics."

It all started when the London-based NGO Global Witness put a highly damaging report on the table in December 1998. The paper was critical of De Beers, the diamond industry and the United Nations (UN). It detailed how the Angolan rebel group Unita armed itself through illegitimate diamond sales. In some cases, parcels of rough diamonds were used as direct payment for weapons — thus financing the civil war raging in Angola since 1974.

A researcher at Global Witness, Alex Yearsley, says: "We had witnesses saying that, though they were not on De Beers' payroll, they bought diamonds from Unita that ended up at De Beers. So, even if the company did not have anyone directly dealing with Unita, they had a team of buyers that did the dirty work for them. ( . . . ) The UN sanctions were in force, but were ineffective. Our report was a wake-up call, and in January 1999 we had our first informal briefing at the UN Security Council."

In response, Bone says: "The first report, called The Rough Trade, put the whole blame on the industry, as if Jonas Savimbi [the late Unita leader] had nothing to do with it. Having said that, it was a good report, but biased and not well informed at that time. And they [Global Witness] were not terribly interested in knowing our side of the story. Anyway, that was the beginning." The report was focused on Angola and how the illegal trade made it possible for Unita to continue the war, thanks to the diamonds in areas under its control.

Yearsley says: "At first De Beers put its head in the sand hoping it would all go away, but then the management realised that the company's image was at stake and after that they took the lead [in pushing for reforms]. ( . . . ) I also think there has been an attitude shift within De Beers on how business should be conducted. It is moving from a colonial mindset towards slightly more enlightened business practices."

Global Witness, at one point in the late nineties, estimated that the trade of conflict diamonds made up almost 20 percent of the world's value of the precious stones. De Beers, which markets some 60 percent (by value) of all rough diamonds in the world, put the figure at 3.7 percent. Nevertheless, the industry panicked. And, according to Bone, the two sides were deadlocked until De Beers decided to engage with Global Witness. In 1999 the company stopped buying diamonds from Angola.

"By October 1999, De Beers had been faced with indisputable evidence that the certificates from the Angolan production were not wholly reliable. [In compliance with UN sanctions, diamonds from Angola had to be accompanied by a government certificate to prove that they did not originate from Unita-held territory]. ( . . . ) So we decided to stop buying Angolan diamonds from anywhere in the world," says Bone.

A year later the South African government and De Beers pushed further for reforms within the industry with the creation of what is now known as the Kimberley Process. The negotiations involved all parties of the industry as well as the UN and the NGOs. In November last year, a landmark agreement was reached. Today, some 40 governments as well as NGOs and the industry have committed themselves to new regulations and control systems launched this month.

Yearsley says: "Several Southern African countries already have the necessary mechanisms in place to go ahead with the implementation. ( . . . ) The negotiations leading to the Kimberley Process agreement could have moved more quickly, and it's a pity that the new certification system is being launched now, at a time when a couple of the worst conflicts are coming to some form of conclusion. ( . . . ) But it is a tough regulatory system for companies involved in a trade that used to make deals with a mere handshake. The Kimberley Process is a preventative system and yes, we missed the boat in Angola and Sierra Leone, but if things go bad again, we now have a system in place." According to the Kimberley Process, rough diamonds must be sealed in tamper-resistant containers, and a specific certificate is issued for each shipment.

From De Beers' side, Bone talks about the last few years as a learning experience. It hasn't always been pleasant — but it has been rewarding. "No other industry has collaborated with the United Nations, governments and the NGO community to address humanitarian problems in this way. It is unprecedented. ( . . . ) The Kimberley Process will not prevent conflicts, just as diamonds have never started a conflict in the first place. But we want to make it as difficult as possible to fuel conflicts through diamond trading," he says.

And he willingly admits that it wasn't only for moral reasons that De Beers decided to acknowledge the increased public awareness of blood diamonds; there were also commercial motives. Says Bone: "You cannot separate the two — commercial and moral imperatives go hand in hand. We, like all other companies, are competing for the most skilled people and who wants to work for an unethical company?"

Even though peace has been declared in Sierra Leone, and a ceasefire agreement has been signed in Angola, the issue of conflict diamonds is far from settled. The UN has lifted a travel ban imposed on Unita officials, but a UN Security Council resolution still obliges all member states to maintain sanctions on Unita, which involves maintaining the freeze on Unita accounts abroad, as well as banning any arms imports.

In accordance with this, the United States government has extended sanctions that also prohibit the importation of diamonds from Angola without a government licence. Diamonds sold outside the government's control are therefore still considered conflict diamonds. Yearsley says: "So the issue of conflict diamonds is there. Added to this, we now have reports from West Africa claiming that Liberian rebels mine diamonds in Sierra Leone. (. . . ) The next thing we should look at is terrorist financing. We are sure that Osama bin Laden's al-Qaeda network was partially funded by diamond dealing in Sierra Leone."

Another trouble spot and diamond-rich area is the Democratic Republic of Congo (DRC). Following the recent withdrawal of foreign troops, analysts fear a further fragmentation of the country, which is rich in diamonds and natural resources. The risk is that warlords will benefit from the rich interior and create fiefdoms controlled by weapons purchased with the help of natural resources. However, in the case of the DRC, the issue also extends to other valuable minerals and timber.

Bone is certain that other industries could draw wisdom from the Kimberley Process and thus stop the abuse of natural resources in Africa. "It's been recognised that the industry's action in conjunction with the United Nations resolution contributed to the weakening of Unita. I think our experience shows that industry-wide actions are much better than individual companies taking action. To be effective, an agreement must be binding right across the whole industry. It could be done in other industries too," he says.

South Africa is ranked the world's fifth largest diamond producer, and exported rough diamonds worth R9.3 billion last year. At present, most of the diamonds produced in South Africa are exported to be cut and polished elsewhere — something Jeremy Pinn of Pinns jewellers, does not agree with. "It doesn't make sense. I would rather see that the gemstones stay here, but in South Africa we don't have enough capacity, training and knowledge as yet," he says. (. . . ) When you cut a diamond, the value added is up to 100 percent. Polishing diamonds here would contribute to the GDP and create jobs in this country. I hope the cutting industry grows and incentives are given to set up schools and training centres."

Pinn is the fourth generation heading the family jewellery shops, which form part of the Centenary Group. His great-grandfather was a watchmaker from Lithuania and started his South African diamond business in the late 19th century. The original safe can still be seen at The Diamond Works, also part of the Centenary Group, a jewellery shop that opened a year ago in Cape Town, where stones are cut and polished on site instead of being sent overseas for beneficiation. Their rough stones are "clean".

"We buy all our raw material from De Beers; that is how we handle the issue of ‘blood' diamonds. I think the Kimberley Process and the new certification system is correct, and it is a good selling point too," says Pinn. "De Beers guarantees that the diamonds we buy are not conflict diamonds. We need transparency and it's good that we are able to trace the origins of the gemstones."

The Diamond Works is not just an ordinary shop; here tourists and visitors can actually watch the process of the rough stones being turned into beautiful jewellery in the hands of the skilled in-house cutters. Says Pinn: "We want to create a world-class jewellery experience here. However, I don't think people come to South Africa only to buy diamonds, though I think it has the potential to be used in marketing the country."

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