No Reason for Cheer

The just achieved Kimberley Process agreement on Zimbabwe's export of rough diamonds from Marange is no source of pride for some of the involved. In fact, a few might feel embarrassed by it all, among them the U.S., NGOs, Abby Chikane and Zimbabwe. This is an agreement that could have been concluded a year ago. In fact, the agreement is nearly identical to the Jerusalem Agreement drafted last year.

The U.S., once the force behind most issues at the KP, took a step back and abstained on the vote approving the agreement. Some claim that in the past the U.S. has bungled matters at every opportunity, others add that the main reason the U.S. did not stand in the way of an agreement is its deep desire to lead the Scheme in 2012. The U.S. was mute, and got the necessary support to become Chair next year.

The U.S. very much wants to see an alternative to the KP emerge, probably born out of the Chain of Custody system currently being drafted by the Responsible Jewellery Council. The current outcome – Zimbabwe OKed and KP Chair in 2012 - will probably delay these plans because it would like to prove effective as Chair as well as have an opportunity to try to fix KP from within.

The NGOs, true to themselves, did not miss an opportunity to turn good intentions to ill feelings. After they declared that the system they helped draft was flawed, they decided to boycott the meetings in Kinshasa this week and missed a chance to shape the Zimbabwe agreement in anyway to their liking. They quickly criticized the new agreement, but can only point to themselves for not having the diplomatic skills to remain inside and have greater say.

Abby Chikane is probably at one of the oddest moments of his long and distinguished career in the diamond industry. After serving as the first head of KP (when it was first launched) and later entrusted to serve as KP's monitor to Zimbabwe, the members decided this week to extend his mission but to also appoint another monitor, Mark Van Bockstael. Awkwardly, at least one insider described the two as a mistrusted agent and his supervisor (the actual terms used were far more offending).

Zimbabwe, on its part, did nothing but waste time. Many believe that the country's leadership had no interest in being KP approved. It is a good affront to the U.S., and allows illegal funds to stream steadily into the private pockets of army generals, police commanders and a large number of politicians.

So why the change of heart? One likely explanation is the Chinese owned Anjin mine, the third and most recent diamond mine in the Marange area. China is not investing in African countries because they are good Samaritans. China is interested in influence and the financial benefits that direct access to natural resources provide. Millions of carats of diamonds are stockpiling in Harare. A local Chinese representative may have voiced dismay at the costly stalemate.

The big winners are the miners and Indian manufacturers. Mining is costly and selling the mined goods is necessary to generate a cash flow. In India, factory owners want large quantities of low cost rough to keep their operations running as well as give them the ability to offer lower cost polished to price conscious buyers.

For the rest of the diamond industry, the events of the last two years were nothing but a waste of time. Decisive and swift action was needed, and the industry can only hope that international politics will not get in the way in such a harmful manner again.

There are two additional important outcomes from the KP meetings this week. The decision to form a permanent secretariat will help form continuity when the chairmanship changes hands, something currently very lacking by all accounts.

The other achievement is that we have some peace of mind about ethics and source of goods as we enter the all-important November-December holiday season. May this achievement not be lost.

Have a great holiday season!