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Bastardizing the Diamond Industry

Editorial

May 27, 2010 4:52 PM   By Avi Krawitz
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RAPAPORT... News that Zimbabwe’s minister of mines and mining development, Obert Mpofu, suspended all diamond exports from Zimbabwe brought an ironic twist to the Marange saga. It was just seven months ago that many argued, correctly, that an across-the-board sanction of Zimbabwe by the Kimberley Process (KP) would unfairly punish owners of the other two diamond mines in the country, Rio Tinto and River Ranch Limited.

Today, the minister discarded that argument. “As government, we view Zimbabwean diamonds as Zimbabwean diamonds, regardless of where they are mined,” he told The Herald newspaper. “We have a clear distinction where certain diamonds can be viewed as acceptable while others are not; can such a situation be allowed to continue?”

With these words, Mpofu is again showing his insensitivity to the issue of conflict diamonds and perhaps his lack of understanding of what precisely is at stake. It is one thing to claim that all three mines contain Zimbabwe diamonds, but it is quite another to view them in a morally equivalent manner.

His message to the industry is clear: “If you won’t allow my illegitimate diamonds to be exported, I won’t allow your legitimate trade,” he is effectively saying. Mpofu assumes the diamond industry and, in particular, Rio Tinto operates according to the same values as him.

Zimbabwe only stands to lose by discouraging the likes of Rio Tinto from operating freely in the country. Not only does the company contribute to government coffers, but it has made a tremendous contribution to the communities surrounding the Murowa mine.

It was therefore largely on a humanitarian basis that many of us shifted from calls to suspend Zimbabwe as a KP member toward focusing on just the Marange mine. We may also have realized that suspending the whole country, and the subsequent punishment of these companies, would not be sufficient motivation for the government to clean up its act and become compliant, while adding to the threat of smuggling.

The result was the 12-step joint working plan that was adopted by the KP’s November plenary and Zimbabwe to facilitate the country’s efforts toward compliance. In adopting this plan, the KP ensured that Marange diamonds would ultimately be exported with KP certificates, with the proper systems in place, moving forward.

We have previously voiced our objections to the move, given that it failed to address the core issue of human rights violations that occurred at Marange. We also recognize that there remain strong questions about the stockpile of diamonds that exist at Marange, legal disputes regarding ownership of the mine and ongoing smuggling from the mine by workers, security personnel and government/company officials.

Still, the KP should not be held to ransom. Mpofu’s patience appears to be running out and his timing seems well planned. Not only did his comments coincide with the second fact-finding visit by KP monitor Abbey Chikane, who reportedly said today that he would recommend that the scheme approve the exports, but he may be seeking to gain leverage ahead of next month’s KP intercessional meeting.

The minister all but hijacked the November KP plenary with his surprise announcement that the government had recruited South African investors to operate in Marange, convincing his audience that despite calls to the contrary, the KP indeed had a partner in Zimbabwe. His manipulation worked then, and he is assuming it will work again.

By bringing Rio Tinto and River Ranch into the equation ahead of the Tel Aviv meeting, Mpofu has raised the stakes by touting Zimbabwe’s “victim” status. This strategy increases the urgency around allowing Marange exports and will pressure Chikane, the KP working group for monitoring, and Israel’s KP chair, Boaz Hirsch, to act while the eyes of the world are on them at the intercessional.

Above all else, Mpofu is assuming that Rio Tinto will join his cause and compromise its own values. We expect the company’s message will be as stern as the KP’s should have been from the start: The legitimacy of diamond exports cannot be compromised. Let’s hope this minister will not be allowed to bastardize the trade again.

Note: This article is an excerpt from a market report that is sent to RapNet members on a weekly basis. To subscribe, go to www.rapnet.com or contact your local Rapaport office. The writer can be contacted at avi@diamonds.net.

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©Copyright 2009 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400. This Rapaport Market Report is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags: Avi Krawitz, Abbey Chikane, Avi Krawitz, Compliance, Conflict Diamonds, Government, Israel, Kimberley Process, Marange Fields, Rio Tinto, Zimbabwe
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