“As a military helicopter hovered over the diamond fields of Chiadzwa in eastern Zimbabwe, police on horseback moved in with attack dogs to remove thousands of illegal diggers who had poured in, hoping to get rich. The diggers resisted, attacking the dogs with iron bars. The police opened fire from the helicopter, routing them. By the time it was all over, dozens lay dead.” This is the opening paragraph in a full-page article titled “Battle for Zimbabwe’s Blood Diamonds,” which appeared this week in London’s Sunday Times.

The article describes the fields where this particular slaughter, as well as others similar to it, took place and how silent and mostly empty they were, sealed off by soldiers in an effort to stop any one from returning. Though the article didn’t really explain the quiet or almost barrenness of these fields, Dutch Foreign Minister Maxime Verhagen gave the answer. “The Dutch embassy in Zimbabwe recently uncovered evidence that poisonous chemicals are being used to drive residents out of remote areas where mines are being run by Mugabe supporters,” states Verhagen. This is as horrifying as it is tragic.      

The only reason for killing diamond diggers is to enable Mugabe’s government cronies to have free reign in the mining areas. Though the international diamond trade – and foremost the World Diamond Council (WDC) – has repeatedly rung the alarm bell on the Zimbabwe tragedy, it was articles appearing in the general press that propelled governments into some action. This week, a meeting of European Foreign Ministers in Brussels decided that “the EU had to cut off any possible illegal income being used by [Zimbabwe President Robert] Mugabe to support his government, such as his trade in illegal diamonds.”

Such a statement is many years overdue. It also opens a Pandora’s Box for the diamond industry. This is because, currently, the Kimberley Process (KP) only prohibits the trade in “rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments.”

However, governments that use diamond revenue to terrorize their own people are “quite all right” in terms of the KP system. A military that kills diamond diggers at random is no reason for a country to jeopardize its KP membership status. Incidentally, it is also “quite all right” for totally corrupt governments to allow and encourage diamond revenues to end up in the Swiss bank accounts of their leaders, their family members and their military. As of now, these corrupt governments maintain the full right to issue KP certificates.

Less than One Certificate per Month

In fact, in Zimbabwe, where anarchy prevails amid the breakdown of all governing systems, the country has virtually ceased issuing KP certificates; Mugabe’s government cronies and military officials have all set up their own mining operations and subsequently smuggle the goods out. A government official estimates that there are presently some 200 different mining syndicates operating.

Just last month at the Kimberley Process Plenary in New Delhi and in its official press release, KP authorities noted, in quite a shockingly simple manner, the Scheme’s “concern with the continuing challenges to KP implementation in Zimbabwe.”

The KP administration in Harare is actually fairly well organized; it functions properly and is headed by good people. They have, however, no work. Classified Kimberley Process data show that in the first nine months of 2008, the Zimbabwe Kimberley Authority issued exactly eight (!) certificates, for a total of US$18.8 million. These diamonds were all exported to Europe. They originate from one mine, Rio Tinto’s 78 percent-owned Murowa mine near Zvishavane in southern Zimbabwe.

Quite removed from the violent areas in the Northeast, Rio Tinto exploits three kimberlite pipes; this is a very different scenario from the country’s informal diamond sectors. Rio Tinto supports a wide variety of community projects in the area, which may provide the best justification to allow Zimbabwe’s continuing KP membership.

Smuggled Goods

We need to understand what is happening in Zimbabwe’s diamond fields – and what is happening to the country’s diamonds. According to press reports, the diamond fields have become the last resort for money for President Mugabe’s thoroughly corrupt regime. The rest of the country has already been plundered bare; there is nothing left. This claim is probably an exaggeration since there are more resources in the country, but it highlights the renewed interest and preoccupation of the general press and international governments with diamonds.

Until recently, Zimbabwe’s corrupt elite were using an estimated 4,000 diamond diggers, often children, who were paid a paltry fee to work the various diamond fields. The reality is that these people, who have been digging illegally, have been doing so for their lives and for their families’ survival. The goods they found were sold mostly to Lebanese diamond traders waiting across the Mozambique border, adjacent to the Chiadzwa fields. The diamonds ended up mostly in the Middle East, “easily distinguishable by their color and frostiness, whatever the paperwork gave as their origin,” to quote Jon Swain of the Sunday Times.

The money collected by Mugabe’s cronies would then partly be used to pay the military – the forces that keep the regime in power. What we have seen in recent days is that the military is not happy depending on others and is now clearing the diamond fields so that officers can use their own soldiers to do the digging.

It had been reported in this column a few months ago that a huge part of the rough processed in Surat originated from Zimbabwe. Lebanese traders in Mozambique will deliver the diamonds in Mumbai; home delivery, just like pizza.

The Indian police are trying to intercept smugglers. “Recently, two citizens of Guinea and Lebanon were held for ‘smuggling’ diamonds worth a few hundred thousand dollars. Both were known to have imported diamonds to India via Dubai, without KPCS and they are languishing in Surat jail now. Locals say there are hundreds of such cases which go unreported,” reports India Commodity On-Line.

But smuggled Zimbabwe diamonds don’t end up just India. This week, the Los Angeles Times published, in a syndicated article appearing in several U.S. dailies, interviews with a number of smugglers. According to an excerpt, “Itai, 28, got into trading diamonds 18 months ago. He smuggles them in his mouth across the border to sell to Lebanese and Israeli dealers in Mozambique. He has bought two houses and five cars. Three months ago, he says, he and his aunt traded a clear 30-carat stone as big as his thumbnail for $30,000 in a hotel-room deal with an Israeli.”

Many of the smuggled diamonds from Zimbabwe appearing in the markets have valid Kimberley Certificates – official paper purchased somewhere en route in South Africa, other African countries, the Middle East or elsewhere.

Undoubtedly, we have a problem.

KP Mandate Limited

Technically, these diamonds are not classified as “conflict diamonds.” They weren’t mined by rebels using the money to fight the legitimate government. Therefore, the diamonds meet the KP criteria. After all, they were merely mined by cronies of the “legitimate” government in order to keep that regime in power – or just to enrich themselves. 

It is quite disgusting. Zimbabwe is a full member of the KP, even though, officially, only Murowa diamonds are exported from the country. In 2007, according to the KP statistics, some 500,000 carats were shipped out valued at some $25 million (at $47 per carat). Export destinations were mostly Europe, Dubai and South Africa. Diamonds reaching the latter two jurisdictions may bypass now the KP process altogether.

How much money are we talking about? One of the most despised cronies of Mugabe is the governor of the Reserve Bank, Gideon Gono, who claims, “If Chiadzwa was properly managed, as much as $1.2 billion a month could be realized.” He probably referred to Zimbabwe dollars; otherwise, the figure would be idiotic and unrealistic. With the country’s millions of percentage points of inflation, Gono’s figure roughly translates to US$10,500. (One U.S. dollar equals 115,000 Zimbabwe dollars.) These are nonsense figures any way you look at them; based on the anecdotal evidence and reports from trading centers, we are talking about tens of millions dollars – but certainly not more than that.

WDC Chairman Eli Izhakoff’s statement that “Zimbabwe’s production of rough diamonds is relatively modest, and is estimated to be 0.4% of world production” is probably a correct assessment. But that is not something a newspaper reader in London or Seattle would know. We don’t have the complete picture. In the best of times, official exports were in the range of US$35 million.

Reporting from Mutare, in the heart of the Manicaland Province, Robert Dixon of the Los Angeles Times quotes a local source, saying: “The diamond game is the filthiest game in town, and everyone's into it. It's not even semi-organized chaos. It's a bunch of thieves who backstab each other. A lot of leaders of the political regime are involved in trading. They have their own diggers and traders. But it's all to their personal account. They've all got a vested interest in chaos."

What Choices?

The WDC said this week that the diamond industry has already taken action and is providing customs authorities, diamond bourses and the KP people with expert instruction and photographic examples to assist in identifying the type of diamonds being illegally exported from Zimbabwe. Also, the organized trade has been urged to exercise extreme caution and vigilance when trading in rough diamonds.

Are there other things that can be done? The NGOs have lately called for the KP mandate to be toughened in order to curtail this illicit trade, i.e. to curtail smuggling. As much as I sympathize with such an idea, this simply cannot be done. Smuggling is not an invention of the diamond industry and almost 100 percent of the smuggling in the world is in other products. Fighting smuggling is the responsibility of law enforcement and customs officials in the respective countries. This is far removed from the KP, which is mainly governed by officers of foreign or commerce ministries.

Smuggling is a predicate money laundering offense. Anti-money laundering/combating the financing of terrorism (AML/CFT) programs are in place in most of the diamond industry, and they are continuously being strengthened. They are also effective. But smuggled diamonds are not the same as conflict diamonds. If someone smuggles a Diamond Trading Company (DTC) sight box from southern Africa to Europe, that doesn’t make the goods “conflict diamonds.”

I am the last one to condone smuggling, but also the first one to warn the NGOs not to make the mistake of equating illicit diamonds with conflict diamonds, as was done in the NGO presentations at the Kimberley Process Plenary in New Delhi. None of this lament helps Zimbabwe.

Crying for Zimbabwe

Recently, I received a long letter from E.E.H in Harare, which I would like to partially quote: “I reckon that these are the last days of TKM and ZPF. The darkest hour is always before dawn. We are all terrified at what they are going to destroy next…I mean they are actually ploughing down brick and mortar houses and one family with twin boys of 10 had no chance of salvaging anything when 100 riot police came in with AK47's and bulldozers and demolished their beautiful house - 5 bedrooms and pine ceilings - because it was 'too close to the airport', so we are feeling extremely insecure right now.

“You know - I am aware that this does not help you sleep at night, but if you do not know - how can you help? Even if you put us in your own mental ring of light and send your guardian angels to be with us - that is a help - but I feel so cut off from you all knowing I cannot tell you what's going on here simply because you will feel uncomfortable. There is no ways we can leave here so that is not an option. To be frank with you, it's genocide in the making and if you do not believe me, read the Genocide Report by Amnesty International which says we are - IN level 7 - (level 8 is after it's happened and everyone is in denial).

“This Government has GONE MAD and you need to help us publicize our plight – or how can we be rescued? It's a reality! The petrol queues are a reality, the pall of smoke all around our city is a reality, the thousands of homeless people sleeping outside in 0 Celsius with no food, water, shelter and bedding are a reality. Today a family approached me, brother of the gardener's wife with two small children. Their home was trashed and they will have to sleep outside. We already support 8 adult people and a child on this property, and electricity is going up next month by 250% as is water. How can I take on another family of 4 – and yet how can I turn them away to sleep out in the open?

“Censorship! We no longer have SW radio [which told us everything that was happening] because the Government jammed it out of existence - we don't have any reporters, and no one is allowed to photograph. If we had reporters here, they would have an absolute field day. Even the pro-Government Herald has written that people are shocked, stunned, bewildered and blown mindless by the wanton destruction of many folks homes, which are supposed to be 'illegal' but for which a huge percentage actually do have licenses. Please! - do have some compassion and HELP by sending out the articles and personal reports so that something can/may be done.”

We, in the diamond business, ought to start thinking about tomorrow. When Mugabe and his cronies are gone, how will we help the country’s informal alluvial mining sectors mine diamonds for the benefit of the Zimbabwe people? How will we avoid the scenario in which a new government will just continue to do very much of the same in the diamond areas? The British and U.S. governments have considerable experience in mining “rehabilitation” programs – but this was always in the context of post-conflict programs.

There is no war in Zimbabwe – except for a government that fights its own people.

Have a thoughtful weekend.