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Diamond Industry Calls for Clampdown on Zimbabwe Smuggling

Dec 10, 2008 1:44 PM   By Avi Krawitz
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RAPAPORT... The World Diamond Council (WDC) called Wednesday for stronger vigilance in cracking down on the trade of illegal diamonds from Zimbabwe, which continues despite the country's compliance with the Kimberley Process (KP) Certification Scheme. The WDC, which is mandated to oversee KP implementation and monitor the flow of conflict diamonds, expressed concern that “some natural resources in the country, including a small number of diamonds, are reportedly being exported illegally for the personal gain of a few.” 

The majority of Zimbabwean stones, which account for about 0.4 percent of global diamond production, are exported by legitimate means and from known, secure sources, the WDC noted. There is a small volume, however, that is being traded illegally, the council added.

While these stones cannot technically be classified as ‘conflict diamonds,’ as they are not used to fund war, there has been growing concern over the unrest that has broken out in the country’s premiere diamond resource, the Marange diamond fields in the Chiadzwa area of Manicaland. Illegal diggers there have reportedly been smuggling their finds to gain some relief from the extremely harsh economic conditions that have plagued Zimbabwe in recent years.

The Wild West

The government, which claims ownership of the fields, embarked two weeks ago on a military operation to clear the territory of illegal diamond miners, reportedly killing around 200 people and evicting an estimated 35,000 illegal diamond panners, dealersand vendors who had descended on the diamond-rich area. Describing the region as the “wild west,” one industry source familiar with the Marange fields, who asked to remain anonymous, told Rapaport News that even before the government clampdown up to 100 people were being killed there each week as a result of civil unrest and internal conflict. “It was quite literally a war zone, and there was a real threat that another Sierra Leone situation was developing there,” he said.

The source suspects that Marange diamonds were being filtered out to most of the major diamond centers, including Israel, South Africa and Belgium for larger stones, and India and Dubai for the smaller goods. He described Marange diamonds as being unique in appearance and therefore very recognizable “even to the layman.” They vary in value from $5-per-carat industrial stones to $1,000-per-carat gem-quality diamonds, he explained.

The WDC reported that the industry has provided customs authorities, diamond bourses and the KP with expert instruction and photographic examples to assist in identifying diamonds that have been illegally exported from Zimbabwe. As a result, several parcels of rough diamonds have been successfully seized, it said. The WDC further warned industry members that they risk expulsion if it is proven that they are trading in these stones.

Government Profiteering

While the issue of smuggling has caught the attention of the industry, others have expressed concern about the government’s supporting itself by means of diamonds while the country spirals deeper into humanitarian and economic crisis. Maxime Verhagen, the Dutch foreign minister, called on the European Union (EU) this week to seek ways of stopping the government’s access to diamond revenues.

"People are being tortured, a human rights activist has disappeared without any trace, and the government blocks aid for people suffering from hunger and cholera," the Associated Press (AP) cited Verhagen as saying. The EU followed up by tightening its travel sanctions on Zimbabwean diplomats in an effort to pressure them to stop their support for President Robert Mugabe.

Whose Mine is it Anyway?

In contrast, Zimbabwean government officials claim that the state is losing out on $1.2 billion worth of diamond revenue each month due to smuggling. While most agree the amount is exaggerated -- given that global production hovers around an average of $1 billion a month -- the government has cracked down on smuggling during the past year, particularly around Marange. The history of the alluvial site, however, makes it clear that the government’s ownership is itself in question.

The state evicted London-based African Consolidated Resources (ACR) from the site in August 2006, leading to the free-for-all diamond rush there. ACR has appealed the eviction at the high court of Zimbabwe and is hoping to form a joint venture with the government to mine the site. The company claims it has lost out on hundreds of millions of dollars in revenue since being forced from Marange.

KP Ticks Intact but Time to Act

Despite these controversies, Zimbabwe passed its most recent KP review visit in June 2007, meaning it had a system of checks and balances sufficient to ensure that its diamonds were exported through the correct channels, and thus maintained its KP membership. The KP review team argued that it was not mandated to get involved in legal disputes over properties.

At its annual plenary in November, however, the KP “noted with concern the continuing challenges to KP implementation in Zimbabwe and recommended further monitoring of developments and concerted actions in that respect.” The plenary added that the KP’s Working Group of Diamond Experts had prepared a production footprint for Marange.

As such, Zimbabwe is expected to be a prevalent issue for the KP in 2009, when its neighbor Namibia takes over the chairmanship. For now, though, the WDC's statement was the most aggressive call for action by the industry regarding Zimbabwe yet, calling on all sectors to apply pressure for change there.

“We believe that restoring peace and stability to Zimbabwe is one of the most difficult and urgent challenges facing Africa today,” the WDC wrote. “It will prove impossible, however, if governments and the UN fail to unite with civil society, and the private sector, in their efforts to bring this about.”

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Tags: Belgium, Compliance, Conflict Diamonds, Dubai, European Union, Government, India, Israel, Kimberley Process, Marange Fields, Namibia, Production, South Africa, World Diamond Council, Zimbabwe
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