News

Advanced Search

Diamond Person of the Year 2010

Editorial

Dec 23, 2010 12:55 PM   By Avi Krawitz
Comment Comment Email Email Print Print Facebook Facebook Twitter Twitter Share Share
RAPAPORT...   Back in November 2009, delegates from roughly 78 governments, along with nongovernmental organizations (NGOs) and representatives from the diamond industry, gathered in a small town along the coast of Namibia called Swakopmund for the annual Kimberley Process (KP) plenary.

Although there was a full program on the agenda, one issue had dominated discussions preceding the event, capturing global media attention: Zimbabwe. After all, it was only a year earlier that the Zimbabwe government, at the behest of President Robert Mugabe, had deployed its defense force to take over the Marange diamond fields in an operation that reportedly killed more than 200 people, while numerous and serious human rights violations were committed.

These claims were confirmed in a report published by a subsequent KP review mission in June 2009, leading the press to focus on calls to ban Zimbabwe from the international diamond community.

What followed in Swakopmund, however, took everyone by surprise and proved to be a public relations coup for Zimbabwe within the confines of the KP, setting the agenda for the organization and the diamond industry for the year to come.

In his address to the Swakopmund opening session, no less, Zimbabwe’s Mines Minister, Obert Mpofu, introduced two foreign investors who were partnering with the government to mine at Marange: Canadile Miners and Mbada Diamonds. While KP members were contemplating how to convince Zimbabwe to self-suspend until it cleans up its act, in one short speech, Mpofu changed the discussion, convincing his audience that suspension was not an option.

“Those giving report would do well to visit Marange in the weeks before the plenary,” Mpofu said indicating the developments that had taken place with the Canadile and Mbada investments. “Zimbabwe remains committed to the noble principles of the KP and that these are upheld at all times. What was said before and in the KP report is a deliberate misrepresentation.”

His message would be repeated many times in the year that was to follow: “Zimbabwe will sell its diamonds.” How right he would prove to be. The KP approved two sales from Marange in August and September 2010 while withholding its approval for further sales through the November 2010 plenary in Jerusalem and to the end of the year. Negotiations continue as of this writing as the KP prepares to pass the reins of its chairmanship from Israel to the Democratic Republic of the Congo (DRC) in January.

What happened in the interim, between Swakopmund and Jerusalem, and soon to Kinshasa?

Quite simply, the discussion shifted from whether to allow Zimbabwe’s Marange diamonds to enter the market to how to bring the Marange stones onto the market with KP certification. As negotiations stalled, it appeared that from Zimbabwe’s perspective, the KP remains an outside body trying to exert control over its sovereignty, even if it has not “officially” exported additional Marange rough.

But the Zimbabwe discussion at the KP had wider consequences in 2010: It exposed market conditions in the diamond industry. Diamantaires from all of the major trading centers aggressively sought to position themselves to buy the Marange rough if and when the KP grants its approval. As snippets of information about the Marange resource surfaced, including the claim that it will catapult Zimbabwe into the world’s largest producer of rough diamonds, diamantaires appeared to exert their own pressure on the KP to approve the Marange stock.

Perhaps out of a need to fill shortages in the market and manufacture, or possibly in a bid to capitalize on the buoyant rough market seen through the year, they believed it necessary to court Zimbabwe. China gained access to mine the third and fourth Marange concessions; Indian cutters held a royal-like procession for Mpofu through the streets of Surat and asked for an annual supply of $1.2 billion worth of Zimbabwean rough; Belgium sent a delegation of its diamond representatives, including bankers, on a fact-finding mission to Zimbabwe; while Israel bent over backwards to accommodate Mpofu in Jerusalem and dealers in the United Arab Emirates (UAE) were prominent among those who bought the Marange goods. All the while, reports of smuggling continued, implicating individuals from all of the above countries and adding Lebanon, South Africa and others to the mix.

To its credit, the industry kept a lower profile after the Jerusalem talks failed and reiterated its commitment not to trade in noncertified Marange stones. On the whole, however, the message during the year was clear: It’s a rough market out there and he who has the goods is king.

Therefore, even as diamond manufacturing further centralized in Surat and sprouted in China, with growth of the consumer markets in India and China outpacing the West, cutters needed the rough supply to ensure industry growth. If the Marange resource is truly as rich as annual estimates indicate – in some cases as high as 40 million carats – it will indeed change the long-term diamond supply-demand dynamic.

Finally, there is the question of who in Zimbabwe is pulling the Marange strings and would potentially benefit from KP-approved Marange exports – or any sales from the mine, for that matter. A number of developments that have broken in the past two months point to the likely answer.

Just as the Jerusalem meeting entered its final day, news broke that six directors of Canadile were arrested in Harare, accused of fraudulently gaining its Marange concession. The state-owned Zimbabwe Mining Development Corporation (ZMDC), Canadile’s former partner at Marange, subsequently took full control of the concession.  

About one month later, whistle-blower website WikiLeaks published a cable from former U.S. Ambassador to Zimbabwe, James McGee, describing how “high-ranking Zimbabwean government officials and well-connected elites are generating millions of dollars in personal income by hiring teams of diggers to hand-extract diamonds from the Chiadzwa mine in eastern Zimbabwe.”

The cable quoted Andrew Cranswick, chief executive officer (CEO) of African Consolidated Resources (ACR), which was ousted from the Marange fields in 2006. He named Reserve Bank of Zimbabwe governor Gideon Gono, First Lady Grace Mugabe, vice-president Joyce Mujuru and other Zimbabwe African National Union (ZANU-PF) officials as all being involved in the Marange diamond trade. The First Lady later denied the claim and filed a lawsuit over the report.

Also in December, government ministers intensified calls to nationalize the country’s mines and last week, Voice of America (VoA) reported that Zimbabwe’s Cabinet had agreed that the government should take over all alluvial diamond mines and demand a 51 percent stake in all other mining operations. President Robert Mugabe himself endorsed the move in the form of a threat to “read the riot act to the British” over sanctions imposed on Zimbabwe.

Mugabe subsequently announced that presidential elections will be held in 2011 and that the coalition government between his ZANU-PF party and the Movement for Democratic Change (MDC) will likely dissolve. ZANU-PF endorsed the 86-year-old Mugabe’s candidacy so in spite of reported succession battles within the party, Mugabe has managed to hold onto his power.

It therefore appears that the rock still falls from the top in ZANU-PF circles and one should not be surprised if the Marange fields were to emerge as the ace up Mugabe’s sleeve during the pending election campaign. Mugabe has shown he’s prepared to do whatever it takes to hold onto power – the violence aimed at opposition officials during the last election, which he effectively lost, being a case in point. Marange may well provide him, and his henchmen, with a wealthy resource to use at their peril. Concurrently, additional pressure will mount for the KP, with the neighboring DRC as the chair, to approve the Marange exports, while the illegal trade of this rough may well intensify.

Whether that forecast will hold true in 2011 or not remains to be seen. Either way, one cannot deny the impact that Zimbabwe has had on all aspects of the diamond market in the past year. The country betrayed weaknesses at the KP, brought ethical questions back to the industry fore and exposed the dynamic demand for rough in a market where resulting polished stayed relatively stable. For these reasons, and more, there was no individual who exerted greater influence on the market, this year, even if it was behind the scenes, than Robert Mugabe – the Diamond Person of the Year 2010.

The writer can be contacted at avi@diamonds.net.

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.


Disclaimer

©Copyright 2010 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 Weekly 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.

Comment Comment Email Email Print Print Facebook Facebook Twitter Twitter Share Share
Tags: Avi Krawitz, Avi Krawitz, Marange Fields, Zimbabwe
Similar Articles
Ahmed Bin Sulayem KP plenary November 2016KP Approves Plan for UN Secretariat
Nov 17, 2016
Attendees at the Kimberley Process (KP) plenary in Dubai voted in favor of a proposal to set up a United Nations-mandated permanent
Comments: (0)  Add comment Add Comment
Arrange Comments Last to First
© Copyright 1978-2018 by Martin Rapaport. All rights reserved. Index®, RapNet®, Rapaport®, PriceGrid™, Diamonds.Net™, and JNS®; are TradeMarks of Martin Rapaport.
While the information presented is from sources we believe reliable, we do not guarantee the accuracy or validity of any information presented by Rapaport or the views expressed by users of our internet service.