Nicky Oppenheimer: “Diamonds Traded Outside The Kimberley Provisions Are By Definition Illicit.”

In a very carefully crafted speech in Johannesburg, De Beers Chairman Nicky Oppenheimer outlined what he sees as the “limits” of Kimberley Process. Nicky seems to go “further” than most of the industry would like, but “not as far” as some fear Kimberley would go if the NGO’s would have it their way. His clarifications came in the wake of presentations made at the recent CSIS Washington conference, where ideas were raised to widen the scope of the Kimberley scheme and to bring money-laundering, illicit trading, smuggling, etc. within the scope of a suggested Phase II in Kimberley.            

Oppenheimer has short-circuited this discussion by simply considering any rough diamond that crosses a border without a certificate as “illicit” – which would include diamonds that are legally mined by a licensed digger, but sold across the border without a Kimberley Certificate. The proceeds of such diamond sales are not used to overthrow governments, the proceeds of these diamonds don’t fuel wars, and thus such diamonds can’t be considered “conflict diamonds”. Nevertheless, and that is pointed out by Oppenheimer, the Kimberley Scheme, as enshrined in national laws, make the trade in “illicit” diamonds also illegal. “Illicit” isn’t necessarily “conflict” – but the consistent implementation of Kimberley will not make a distinction anymore.

Nicky spells out a reality that, so far, has never been spelled out in so many words. Oppenheimer never suggests that all “illicit” diamonds are “conflict diamonds”, but he does view Kimberley as an instrument to keep illicit rough diamonds also out of the cutting centers. Let’s carefully note Oppenheimer’s words: “At the conflict diamonds conference held in Washington recently the agenda spoke of ‘Phase Two’ of the Kimberley Process. It was pointed out by one delegate that there is no ‘Phase Two’, that the mandate of the Process was to tackle conflict diamonds nothing more, nothing less. This point has also been made in various quarters of the diamond industry. It is, of course, absolutely correct. There is no mandate to go beyond conflict -- not from the UN, not from your governments, not from the industry to the World Diamond Council. However, we must do all we can within Kimberley, as agreed by all parties, to prevent the abuse of diamond resources — vital to the producing countries — in any way. The diamond industry will continue to cooperate with and assist its national authorities, both directly and through the World Diamond Council, as it has from the outset — to insulate us all from any activities that threaten the societies in which we and our families live and work.”

“In order to do this”, says Oppenheimer, “there is no need to extend or exceed the mandate or to set up Kimberley 2. The provisions you have all so skillfully crafted provide the industry with precisely the insulation it requires. With national legislation in all participant countries now enshrining the Kimberley Process Certification Scheme in law, diamonds traded outside the Kimberley provisions are by definition illicit. What the industry must do is to implement fully and with vigor the self-regulation System of Warranties - properly verified - to ensure that any diamond that tarnishes the image of our beautiful product and threatens the integrity of our business is excluded utterly and completely.” These words should be read very carefully. Oppenheimer wants to keep illicit diamonds out of the industry – and that is indeed an objective everybody can and should support – and he further believes that Kimberley, if properly executed, can or should accomplish that objective. 

Oppenheimer identifies what is considered the “weak part” of Kimberley, i.e. the identification and certification of the first point of sale from alluvial miners to traders and other industry players. Research done by the undersigned has demonstrated, without doubt, that some of the diamonds mined by rebels in Sierra Leone have entered the certification scheme. That’s history now, as peace has returned to Sierra Leone and none of the diamonds from Sierra Leone can now be considered “conflict”, even though there are serious concerns about the use of the proceeds of some of the smuggled goods. Strictly taken, I also have concerns about the use of the proceeds of some of the officially exported goods and that shows the limitations of the process, as Kimberley Certificates will not stop any domestic party in any African country to support terrorism or be engaged in money laundering, as long as the diamonds are officially exported.

We have argued – and continue to argue – that these are matters to be dealt way by different authorities. When a Miami drug trader enters a West African country with a suitcase of $10 million worth of cash and these dollars are used to purchase diamonds, which are traded within the respective country and subsequently legitimately exported with a Kimberley Certificate, how can Kimberley prevent that? Or worse, Kimberley actually facilitates the laundering.

Oppenheimer may have had this in the back of his mind when he stresses that “fundamental to the credibility and success of the Scheme is the need to secure the chain of custody’ from mine to first point of export for the alluvial and artisanal productions that do not fall within formal mining sector safeguards. We - industry and governments together need to provide assistance to those countries where the logistics of control are more complicated to ensure that diamond revenues are retained by local communities and for redevelopment post-conflict. Failure to secure these productions will leave them, large number of diggers and many needy communities vulnerable to unscrupulous buyers seeking to circumvent the Kimberley provisions.”

We applaud these words and fully agree. Says Oppenheimer: “To achieve this goal we need to engage with these countries, encouraging a return to good governance, the rule of law, and sound fiscal policy in exchange for benign investment. Security of tenure, legal protection of property rights and contracts, courts immune to political whim, and bureaucrats free of corruption are essential pre-conditions. Industry, in turn, must ensure that profits gained make a real and lasting contribution to the countries and communities in which it operates, and this should be done in tandem with local and international NGO’s.”

These are words everybody would agree with, though few could express them as eloquently. My question is – and has been –to secure “good governance” in Africa, get honest courts, etc., whether that is something for which the diamond industry should take the “responsibility”. Here it certainly makes a difference if you are big business, government, a committed NEPAD “partner”, De Beers -- an African producer par excellence -- or a small rough diamond trader in Antwerp, Tel Aviv or Mumbai. If these noble objectives are accepted as “the outcome of Kimberley”, shouldn’t we fear a backlash on the industry if corruption in Africa is not wiped out?

According to Oppenheimer “transparent verification of both government and industry procedures is essential to the credibility of the Certification Scheme in the eyes of the world. It is for this reason that the industry wholeheartedly supports the NGO’s objectives in securing a credible system of monitoring.” I am not sure that Kimberley, even if monitored to the highest standards, will do the tasks and responsibilities that Oppenheimer would like the industry to take upon it’s shoulders. Will the very best monitoring of 99% of the rough, prevent the remaining 1% of conflict diamonds to slip through the net? With illicit diamonds mounting, by some estimates to some 20% of world production, could Kimberley ever succeed?

The Kimberley Process cannot stop mining theft from mines in South Africa, Namibia or Botswana. The owners of the mines should be able to secure their property. Kimberley cannot stop the flow of “dirty money” into Africa. Kimberley cannot control the use of the proceeds of officially exported diamonds from Africa. And because Kimberley cannot control these matters ---- even if there is the best possible kind of monitoring – we would rather propose that the proper international and local law enforcement and intelligence authorities be left to their job and we should ensure that nobody will consider this a Kimberley task. It isn’t. It is darned important that the industry itself, its clients, and other stakeholders realize what is seen to be responsible. The last thing we need, is to accept a “mission impossible”, fail – and then be held accountable.

In his presentation, Oppenheimer also lashed out against the 8% proposed diamond mining royalty on gross revenues in South Africa. He fears that “it has the unintended consequence of encouraging irresponsible producers to avoid legitimate and formal selling channels and thus jeopardize the credibility of the Kimberley Process in the country of its inception.” As De Beers itself produces over 90% of all South African diamonds (and De Beers would pay the royalty as required by law), Oppenheimer is concerned that some of the smaller upstream players in his country may not be law abiding companies.      

That shouldn’t jeopardize the credibility of Kimberley, because Kimberley was never designed nor intended to stop diamond miners that don’t like the royalties their government wants them to pay. Nicky Oppenheimer’s brilliant presentation first says that Kimberley’s mandate should not be widened --- and then he continues, pointing out that the governments implementing the UN mandate have created a system that has wider effects. Getting caught in Tel Aviv, Antwerp or Mumbai with a rough diamond smuggled out of a mine in Namibia now constitutes a violation of law. This is the effect of Kimberley, even though it has nothing to do with conflict diamonds.

What Oppenheimer clearly implies, and I am saying this in my words, is that the Kimberley mandate has never been changed, it shouldn’t be changed, but the implementation by the governments have created “prohibitions” on the trade in a far wider class or category of rough diamonds. Essentially, any rough diamond leaving a producer country without a certificate is hot, illegal, forbidden, and untouchable.    

It may be useful for all of us to recall what Kimberley was (past tense) all about – to prevent “the trade in conflict diamonds which can be directly linked to the fuelling of armed conflict, the activities of rebel movements aimed at undermining or overthrowing legitimate governments”….. in recognition of “the devastating impact of conflicts fuelled by the trade in conflict diamonds on the peace, safety and security of people in affected countries and the systematic and gross human rights violations that have been perpetrated in such conflicts.” That’s why Kimberley was created. As the major conflicts are now behind us, these original objectives are seen as “preventive” – Kimberley should help avoid future wars.

That is what Kimberley has been doing – and should be doing. The UN, NGO’s and the industry have called upon governments to create a system to implement the UN mandate – to deny rebels access to diamonds. Instead, governments have created a system which denies the diamond manufacturer access to any rough diamond that has no certificate with it.

Oppenheimer hasn’t widened the role of Kimberley. He has only brought home the message that governments have widened it already and that, de facto, after conflict diamonds have mostly disappeared (because the conflicts are over), the Kimberley system now serves to keep “illicit” diamonds out of the industry.

This may never have been the industry’s nor Kimberley’s intention -- but that is now what Kimberley is all about. This is not what the industry’s leadership has been saying, which always painstakingly distinguished between “conflict” and “illicit”.

After Nicky’s speech, no one has an excuse to continue a state of self-denial.

Chaim Even-Zohar