DRC Problems Threaten Kimberley System

October 30, 2003

DRC Problems Threaten Kimberley System

The Democratic Republic of Congo, still attempting to uphold a fragile peace after a prolonged war that killed millions, has become a crucial test case for the effectiveness of the fledgling Kimberley Process Certification Scheme, according to a variety of published reports. Evidence in DRC of continued diamond smuggling and exploitation suggests the government is unable to control its diamond resources, a crucial requirement for membership in Kimberley. DRC was admitted as a member of the certification scheme in July.

Kimberley member governments, diamond industry leaders and human rights groups are meeting in Sun City, South Africa, Oct. 29-31, and the issue of whether to institute regular monitoring of Kimberley participants to ensure they are following its rules, is a key agenda item. The World Diamond Council and various human rights groups lobbied for such monitoring in the run-up to the meeting. But various governments have been resisting the idea by citing privacy concerns. "Failure to take action [on monitoring] will damage the Kimberley Process beyond repair," says Clive Wright, an official at the United Kingdom Foreign Office. If that happens, Wright told the Financial Times, "The implications for industry are surely at least as grave as they are for governments and probably more so."

The dilemma facing stakeholders in DRC's future is that barring DRC from Kimberley membership because of it breaking the rules could damage the country's rehabilitation fatally, since 60% of its official export earnings come from diamonds. Yet if Kimberley members don't act to police their own, the system could be labeled a sham. "What we don't want is for the DRC to undermine the whole [Kimberley] Process. At the same time, if Congo can't legitimately trade its diamonds, the whole country could collapse," one western diplomat told FT.

The United Nations was also concerned enough about the fragile nation building in DRC to remove some of the details from its new panel report concerning the ongoing illegal exploitation of diamonds and other resources in DRC, according to several published sources. Several former rebel factions now playing a role in the government were implicated in the report and the U.N. is hesitant to criticize them right now and risk undermining the peace process.

The U.N. panel continues to accuse certain diamond companies based in Belgium of playing a role in the exploitation of DRC's gems, an accusation it also leveled last year. De Beers was also named as a company whose role in the exploitation remains "unresolved," due to two sightholder clients' involvement in suspect diamond purchases. De Beers issued a vigorous defense Oct. 29 in a written statement, saying it told the U.N. Panel of Experts on DRC earlier this year it "cannot legally exercise any form of management control or supervision of sightholders' purchases of rough diamonds on the open market. It is thus entirely inappropriate for the Panel to continue to tarnish De Beers' reputation on the basis of third party action." The company plans to resolve the issue with the United Kingdom Department of Trade & Industry, which has been asked by the U.N. panel to investigate. It also said it received assurances from the accused sightholders that their buying activities were documented properly by DRC authorities.

The Mail & Guardian, Johannesburg, South Africa, and FT also published articles this week detailing dissension within the DRC coalition government over how its main diamond producer, state-run MIBA, is selling its gems and to whom. M & G reported MIBA is selling diamonds at discounted prices to a firm that may be backed by another company implicated by the U.N. in an arms-for-diamonds scheme. While one minister opposed a shipment of diamonds under the deal, another authorized it anyway. Such infighting is adding to doubts that DRC can effectively monitor or manage its resources.

FT also said reports by an independent security company hired by MIBA's creditors to prevent corruption cite a "systematic undervaluation and theft of diamonds" at MIBA, which is costing millions of dollars annually. The reports, by Overseas Security Services, say a criminal syndicate has been operating within MIBA and siphoning off high-value gems. It also says there are serious shortfalls in the application of Kimberley Process recommendations at MIBA. Eugene Diomi Ndongola, DRC's mines minister, told FT that diamonds worth $450 million, roughly half the country's annual production, are being smuggled to various destinations.

FT says there is concern within DRC that smuggled gems are being used to fund armed opposition groups in a central province where there has been a surge in ethnic nationalism. The new U.N. report on DRC also recommends the Congo government break up MIBA because it says it is channeling away revenues that should be used by the Congolese people.

In other news this week, De Beers announced it was waiting to hear from the DRC's mining license authority about a series of applications to return to the country. The World Bank, which is involved in a post-conflict reconstruction program in DRC, is pushing for multinational involvement to rehabilitate the country's resources through new mining exploration. DRC is rich, not only in diamonds, but also gold, cobalt and coltan, a crucial element used in making cell phones.

by Peggy Jo Donahue

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