Blood Diamonds Farce

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by Kieron E. Ryan

     

Naomi Campbell is in the ridiculous position of having to give testimony at the war crimes trial of former Liberian warlord Charles Taylor on the grounds that she received a blood diamond from him. One might question the company she keeps, but on the diamond issue she should tell her inquisitors to go to hell.

Blood Diamond was a fun movie and no doubt had elements of truth to it. Leonardo di Caprio's South Africa accent was passable (actually he portrayed an ex-Rhodesian who had moved onto bigger, badder battles fighting the white African cause wherever that calling took him). His real crime was attempting to smuggle diamonds supposedly obtained by slave labour and destined for the grand arms bazaar that turned countries like Sierra Leone and Liberia into giant, open-air slaughter houses. A somewhat embarrassing sub-text to this story is that it was a company of South African mercenaries, called Executive Outcomes, that brought peace to Sierra Leone in the 1990s, allowing 300,000 refugees to return home safely before the World Bank forced the bankrupt government of the time to terminate its contract with the company. The result? Aluta continua ("the struggle goes on") as they used to say in Mozambique, as the warlords recaptured lost ground and the blood diamond trade flourished once more. If there were no diamonds in Sierra Leone, the warlords would have traded cassava, cows or rhino horn.

Today, we have a semblance of peace in these countries. Whether we like it or not, it was mercenaries who did the job in West Africa with the kind of resolve noticeably lacking by our peace-loving UN troops. Even Goma in eastern Congo enjoys a tentative peace. For these tender mercies, are we to thank the great minds that brought us the Kimberly Process Certification (KPC) that forces traders in rough diamonds to certify the source of the stones as conflict-free?

As someone who has toiled the rivers of Congo for diamonds and interacted with traders of many nationalities, I have a somewhat jaded view of the monopoly-seeking grubbers who have criminalised trading in these precious stones. It is possible to buy stones in Goma, Angola, Zimbabwe or even South Africa, ship them to Kinshasa in Congo and then have them sanitised by way of a locally-issued KPC. A few hundred dollars is all you need. That's what happens when proscription enters the scene.

In truth, an experienced dealer will be able to tell you the source of the stones, since diamonds of every region carry their own unique DNA. But he will not be able to tell you whether that particular stone is conflict-free. Zimbabwean stones have flooded the market in recent years, and one has to marvel at the resourcefulness of Zimbabweans who scramble beneath the barbed wire of state interference. A few years back, close to the border with Mozambique, an enterprising Zimbabwean stumbled on what turned out to be perhaps the largest diamond field in the world and happily set about exploiting his find until the Zanu-PF big-wigs who control that country's black markets decreed it state property. The state unleashed the dogs of war and killed scores of diggers trying to eke out a modest living. Still the traders find ways to smuggle and bribe their way to South Africa, clutching parcels of stones to trade and feed their families back home.

This is the latest cause clbre of the blood diamond lobbyists, though Zimbabwe's case hardly fits the KPC template: the conflict, such as it is, is purely economic. That it sustains and nurtures a despicable regime is an argument without contest. The same diamond thieves who run that country also control the black markets in fuel and foreign exchange. Perhaps we need a Kimberly certification process for these too.

Reports from Mozambique suggest between 100 and 1,000 smugglers do errands for Zimbabwean army officers each day, taking stones to Mozambique's Villa da Manica, across the border from Mutare in eastern Zimbabwe, where they are purchased for about $25 a carat by Lebanese traders and then on-sold to overseas buyers for as much as $1,000 a carat. That still does not classify these stones as blood diamonds. There is no on-going war to warrant such a label. The KPC website says "The Kimberley Process (KP) is a joint governments, industry and civil society initiative to stem the flow of conflict diamonds — rough diamonds used by rebel movements to finance wars against legitimate governments."

I scratch my head and try to think of a rebel war anywhere in the world currently funded by diamonds. Maybe there is one I haven't heard about. Call Zimbabwe's diamond trade it an economic crime if you will, but these are no blood diamonds. A Congolese friend was recently robbed of R100,000 (US$13,500) at gunpoint in Lesotho when attempting to purchase stones and smuggle them across the border to South Africa. Should we classify these as conflict stones, or simply a trophy of crime?

In Congo you can visit the open air diamond markets any day of the week. You can buy stones — and, yes, they try to rip off foreigners — but no-one will ask about licences. Nor will the buyer insist on a KPC. The bureaucrats who handle this end of the paperwork are bought and sold. Every Comptoir (or diamond-dealing house) in MbujiMayi or Tshikapa, central Congo, has government officials present at all times to keep count of the diamond transactions. These officials are bought off with $50 or $100 a day. The under-count at this end of the global diamond trade is stupendous.

Despite all the hoopla about blood diamonds in Congo, the conflict was confined to the eastern Goma region of the country. Other than an occasional skirmish, there was no conflict in Kasai province, where some of the world's richest alluvial diamond deposits are found. In fact this is one of the most peaceful places I have ever had the pleasure to visit. You can walk around MbujiMayi at 11:00pm at night and feel safer than you do in Johannesburg, London or Nairobi.

The argument for free trade in diamonds is rooted in the ancient human struggle for economic liberty. If I buy a product with my hard-earned money, it is then my private property. The law says so. Not in the case of diamonds.

In South Africa it is illegal to carry rough diamonds without a rough diamond trading licence. Polished diamonds, no problem, according to the monopoly rules. The same is true in Congo, though I suspect less than 5% of Congolese diggers and traders carry such licences. Any day of the week at the heavily fortified Jewel City in central Johannesburg you will find traders of every stripe hawking rough stones from Zimbabwe (the newest source of "blood diamonds"), Congo, Angola and Lesotho. Few of them have the necessary licences. The diamond police set up snares to catch them, and those without licences are likely to have their stones confiscated. What then happens to these stones is anybody's guess, but it is a scheme ripe for corruption. We know that many of these stones then reappear on the market for resale. As a diamond trader recently remarked to me: "This must be the only country in the world where a private company has its own police force to enforce its monopoly." He was, of course, talking about De Beers, whose grip on the world diamond trade has ebbed in recent years.

State-sanctioned monopolies of any kind inevitably attract armies of bureaucrats, criminals and carpet-baggers. Like the hopelessly ineffective war on drugs, the war on blood diamonds has not only been lost, it is pointless and can never be enforced. Diamonds are small – five carats is equivalent to one gram. You can hide a 20-carat stone in your mouth and walk through pretty much any customs post. Depending on the quality, you can then sell that for perhaps US$50,000 and go home to repeat the cycle. You may not win the Ethics in Business Award, but smugglers don't play in that league.

In reality, bloods diamonds are a giant hoax. All over Africa, tens of thousands of diggers and traders make an honest living finding and selling stones. They carry no guns and do not trade with warlords. Few of them know anything about the KPC. Once the stones leave Kinshasa or Luanda, the exporter simply tidies up the paperwork for the recipient in Brussels, Tel Aviv or Mumbai. It can be done in hours. Every time. Without fail. Even if the stones are sourced in conflict areas, it is guaranteed that for a small fee they can be laundered through the KPC process and end up on someone's finger in North America or Europe.

This is not to say that the diamond trade is rotten to the core. Not all stones are handled this way — there are many dealers who stick rigidly to the rules of the game. But diamonds are a perfect store of movable value: they are small, light, easy to conceal.

The old argument that diamonds are a fabricated market holds some truth. The diggers in Congo will be mining diamonds 300 or 500 years from now, such is the abundance of stones under its rivers. I have seen yields of 35 carats per cubic metre of gravels in one location, and have heard of pockets of diamonds as much as 800 carats per cubic metre. Compare that with the 2 carats per hundred cubic metres you typically find in the Ventersdorp diamond field in eastern South Africa. Africa is awash with precious stones. No matter the source of the stones, we all turn to the Rapaport price list to determine the selling price, based on colour, clarity, carat and cut ("the four C's"). Rapaport prices continue to rise, despite a temporary dip following the 2008 commodity bath.

Are diamonds in short supply? Not really, it just costs a lot of money to extract them, and poor diggers will work the most accessible ones. Are they the most beautiful stones? That is a matter of taste.

Wherever taxes and prohibition are involved, smuggling will occur. Diamonds are harmless, if over-priced, commodities, and it's time we started to fight back against the ridiculous and ineffective encroachment on our freedoms that the KPC represents.

August 11, 2010

Kieron Ryan [send him mail] is a South African-based writer and commodities entrepreneur who has worked in the diamond trade in Congo, South Africa and elsewhere on the continent. He grew up in Africa, studied in Dublin, lived for a while in the US, but prefers the freedom and chaos that Africa offers over just about any other place.

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