‘Conflict diamonds’ getting through loopholes

Commentary

— The following was presented by De Beers chairman Nicky Oppenheimer earlier this year at the World Diamond Congress in Tel Aviv, Israel.

De Beers, of course, is a company born in South Africa, and it is there that our corporate roots lie.

It is of Africa I wish to speak today. Not in any parochial way, nor indeed just as the source of so many of the diamonds cut here in Israel and elsewhere, but as a continent with which we in the diamond business in particular, and as members of the international community in general, are inextricably linked by ties of history and moral responsibility.

And so this is the right forum, indeed the correct and proper forum, for us to recognize our link with Africa. Not just the important historical links, but real and immediate links that lie at the very heart of our industry’s success and survival. These are not theoretical links, not links of high-minded liberal imaginings or those of mere academic interest. No, these links bind us — each one of us in the industry, you and me alike — to Africa in an absolute sense, for our very livelihoods, the future of our families, our companies and our communities depend upon them.

As one of Africa’s major natural resources, diamonds are helping to transform Africa and the lives of its people. Through diamond exports and revenues, countries such as Botswana, Namibia and South Africa have been able to build a more prosperous future for their citizens and the same must apply to the rest of diamond-producing Africa.

Africa’s success stories must be celebrated. Diamonds are one of nature’s most unique and fascinating products. Around the world they are symbols of love, status and self worth, and are used to mark life’s great occasions and reward personal achievement. They should also be properly acknowledged for the great benefit they bring the nations, communities and people where they are found. 65% of the world’s diamonds, worth US$8.3 billion a year, are produced in African countries. Diamonds have and continue to contribute significantly to the growth of African economies, healthcare provision and education.

It is only through developing and maximizing all its natural resources that a sustainable future for Africa and its people can be secured. Diamonds are a key component of the campaign to “make poverty history.”

So what is our role in ensuring that diamonds continue to benefit the lands and people of their birth, along with our own livelihoods and prosperity?

It is six years now since the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers’ Association (IDMA), at the 2000 World Diamond Congress in Antwerp, Belgium, passed a joint resolution supporting the international campaign — initiated by South Africa — to eliminate the traffic in “conflict diamonds” and implementing a series of practical measures for greater supervision, compliance and accountability in the diamond trade.

It is to the great credit of the leaders of the WFDB & IDMA that they recognized the very real threat to the integrity of our business posed by “conflict diamonds” and established the World Diamond Council to represent the industry in the international arena. The WDC now represents the whole spectrum of our business, from the producers through the various stages of cutting and polishing in the centres to the retailers in the markets of the world.

The WDC has, since its inception in 2000, been the public face of the diamond industry in the exhaustive negotiations with the United Nations, national governments and civil society in the creation of the Kimberley Process. This process, mandated by the United Nations General Assembly and endorsed by the Security Council, is an international agreement (between some 70 nations, non-governmental organizations representing over 100 advocacy groups and the WDC on behalf of us all) which, through its certification scheme, ensures that all rough diamond trading between participant countries is properly recorded, cross-checked and verifiable.

During the negotiations, in order to prevent onerous burdens being imposed upon us, the WDC put forward industry self- regulation measures to secure transactions of rough after the first point of import and all subsequent transactions in both loose polished and diamond jewelry. This involved a “system of warranties” whereby we are all committed to a written statement on our invoices guaranteeing that the diamonds or diamond jewelry we are offering for sale are conflict free.

The governments of the Kimberley Process welcomed this proposal for self-regulation and the system of warranties is enshrined in the final agreement signed in 2003 and laid before the United Nations. The reputation of the industry in the international arena was much enhanced by this demonstration of its concern and commitment.

What was proposed is not exactly a hardship, as long as you know — and can show through the warranties you have received from your suppliers — that your sources of supply are legitimate. As this is a self-regulation measure, the only other requirement is that warranties received and issued are audited — along with our other accounts in the normal course of business — by our companies’ independent auditors.

As the audited records may be required by national government agencies in the course of a “conflict diamond” inquiry, it is clearly in our interest to be compliant and, indeed, it is our duty as good corporate citizens. Even more importantly, it has to be good business to be in a position to assure one’s customers that the goods they are buying are free of the taint of conflict. Our product is seen as the ultimate gift of love and can never be associated with horrors.

You might be asking yourselves why I am going on about conflict diamonds and the Kimberley Process. Surely the conflicts in Africa are over, no government department has ever asked for audited records of warranties, and this is all “old hat.”

Well, I’m here to tell you it is not. We cannot be complacent or allow conflict diamond fatigue to gain hold. It is possible that the Kimberley Process — and thus the diamond industry itself — will be subject to a U.S. Congressional Hearing towards the end of the year.

Of course the Kimberley Process is an astonishing achievement with a very high degree of success, but it is not a perfect construct. Remaining shortcomings include some failure of intergovernmental systems, discrepancies in official import/ export statistics and the illegal shipment of rough diamonds from non-participant countries. These are matters for the Kimberley Secretariat and governments, but industry compliance will also be under close scrutiny.

On Valentine’s Day this year, Amnesty International and Global Witness, two of the lead NGOs on conflict diamonds, conducted a survey of retailers in the U.S. and the U.K. Their survey showed an abysmal ignorance of the system of warranties by jewellers’ store personnel and an appalling low level of compliance by many of the companies themselves. Research carried out by the DTC demonstrated that the findings of the NGOs were very largely correct.

It is no good saying that this sort of survey is unfair or unscientific, or, “the warranty system is voluntary so I don’t have to do anything.” It may be all those things, but it is a clear indication that at the vital retail interface with our most important customer — the consumer — we as an industry are failing to live up to our commitments. That is unacceptable.

Sitting here in Tel Aviv, a cutting centre, it might be comfortable to think that the heat is all on the retailers so we can relax, but I can assure you it is not confined to them. International media and NGO attention at the end of this year, driven by the high-profile trial of Liberia’s ex-president Charles Taylor and the Blood Diamond film starring Leonardo DiCaprio, will focus once again on what we are all doing or, more importantly, not doing.

There is evidence to su
ggest that some diamantaires are still purchasing rough diamonds of dubious provenance directly in Africa while others are buying second-hand in the cutting centres without conducting due diligence into the origin of the rough. Although they may be doing so inadvertently, unaware of, or unconcerned by, the Kimberley provisions, ignorance of the industry’s commitments will be no defence. If they don’t wish to feature in a television documentary, be named and shamed in a United Nations report or be subject to a government investigation, they need now to get their act together. For any DTC sightholder to be involved in such purchases would be a major breach of the organization’s Diamond Best Practice Principles, with all the consequences that would entail.

The other area where the diamond industry is particularly vulnerable is the informal artisanal mining activities in central and West Africa. Countries in the region have now largely emerged from conflict and are looking to their diamond revenues for essential post-conflict reconstruction and future development, and are exporting quite legitimately with Kimberley Process certificates. However, the circumstances in which many of the miners, or diggers, are working are not acceptable and fall far short of those we would allow in our own operations.

How can any decent member of the diamond industry allow themselves to gain from the misery of others, or turn a blind eye and pretend that they are unaware? We have to be deeply concerned, not just because this situation has the potential to blight our business, but because we cannot allow such abuses to go unchallenged or cruelty to be visited upon fellow human beings on our behalf. We owe it to Africa, from whence we have derived so much of our wealth and our comfortable lives, and with which our industry, as I said at the start of these remarks, is inextricably linked. We owe it to ourselves.

I should add that Liberia and Ivory Coast remain subject to UN sanctions, so diamonds originating there are illegal, and the South American producers are currently under close scrutiny. So it is essential to know, to question, to check the source of any rough you may be offered and demand the warranties. De Beers has been active in capacity building in Sierra Leone and has now been asked by the United Nations to extend such assistance to Liberia, so it too can become Kimberley compliant.

De Beers has joined with the NGOs Partnership Africa Canada and Global Witness in the Diamond Development Initiative to seek ways to address the social, economic, environmental and development impact of informal, or artisanal, mining. We aim to devise — in concert with affected governments and other key stakeholders, such as the World Bank and development agencies — mechanisms to bring these mining activities within the formal, legal framework to ensure that countries receive their proper revenues and that miners themselves — and their communities — benefit appropriately and with the protection of law. Diamond companies have much to offer in expertise and capacity building and we urge those who have the best interests of our industry at heart, and concern for those who work in it, to join us as partners in the Diamond Development Initiative.

As you have heard in your sessions, the WDC, on behalf of the whole industry and with the full support of the WFBD and IDMA, and all the leading trade and industry bodies, has reinvigorated its program of education and awareness to ensure that in every part of our business there can be no doubt about our obligations under the Kimberley Process and our moral responsibility to be fully accountable for our ethical standards and behaviour. I cannot stress too much the importance of the international diamond business — and its downstream partners — recognizing it is answerable in the court of public opinion and that, should it be found wanting, the consequences are dire indeed.

We must understand and accept that today’s world is very different from the past. Accountability and transparency are the watchwords, and we — as all other industries — have to accept that some of the “traditional” practices of the past are simply no longer acceptable. Whether we like it or not, true or not, the public perception of the diamond industry remains one of secrecy, of hidden dealings, of tax evasion, of political intrigue, of money laundering, of undisclosed treatments and substitution, of false certification, of willfully misleading the consumer and, indeed, even of connections with the funding of terrorism.

I wish I could say with complete confidence that this is all utter nonsense, but the truth is that there are still elements in our industry that operate with blatant disregard for the law, for the rules that govern our business, for the norms of acceptable behaviour. If we are to ensure that our children can inherit our businesses, that the children of Africa can benefit from the great blessings that diamonds can bring to their communities, that the livelihoods of everyone working in diamonds across the world are protected, we must adopt a policy of zero tolerance towards those who bring our industry into disrepute and jeopardize our future.

I look to the leaders of the industry assembled here — and all diamantaires of good faith — to drive out, isolate and eject from our business those who refuse to accept and embrace the absolute imperative to operate — in all we do — in an ethical and morally responsible manner. We will be judged not by our words, but by our actions. We must demonstrate clearly and publicly that the diamond business is a great business, devoting its efforts to a real and sustainable contribution both to the societies in which we all live and work and to those less fortunate than ourselves.

Having said that, I am very much heartened by the excellent progress made in your deliberations here in Israel and I am confident that WFDB and IDMA and all of us by working together will meet the challenges that lie before us in the same spirit of unity and determination shown over the past six years. De Beers will continue to help and support your work in this crucial area.