UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Central Africa: Diamonds Economy Date distributed (ymd): 020621 Document reposted by Africa Action
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Region: Central Africa Issue Areas: +economy/development+ +security/peace+ +US policy focus+
This posting contains excerpts from the summary of a report on the role of diamonds in the economy and ongoing conflicts in the Democratic Republic of the Congo and neighboring countries. The summary was originally distributed by Partnership Africa Canada (PAC), in both English and French.
For more information on the report, contact: Partnership Africa Canada, 323 Chapel Street, Ottawa, Ontario, K1N 7Z2, Canada. Tel: 1-613-237-6768. Fax: 1-613-237-6530. E-mail: email@example.com Web: http://www.partnershipafricacanada.org
The Study is an Occasional Paper of the Diamonds and
Human Security Project, a joint initiative of Partnership
Africa Canada (Ottawa), The International Peace Information
http://users.skynet.be/ipis/mainuk.htm) and the Network Movement for Justice and Development (Freetown, http://www.nmjd.f2s.com)
Other recent related reports include:
Human Rights Watch, "Sexual Violence Rampant, Unpunished in DR Congo War," June 20, 2002 (also available in French) http://www.hrw.org/press/2002/06/congo0620.htm
and action alerts from Amnesty International http://takeaction.amnestyusa.org/action/index.asp?step=2&item=1604 http://takeaction.amnestyusa.org/action/index.asp?step=2&item=1615 and http://takeaction.amnestyusa.org/action/index.asp?step=2&item=1606
Hard Currency: The Criminalized Diamond Economy of the Democratic Republic of the Congo and its Neighbours (Summary)
by Christian Dietrich
[excerpts of summary only. Full summary and complete report are available on the web site of Partnership Africa Canada at: http://www.partnershipafricacanada.org The French versions are available at: http://www.partenariatafriquecanada.org
Central Africa's main diamond exporters - Angola, the Democratic Republic of the Congo (DRC), the Central African Republic (CAR), and the Republic of the Congo - are among the least developed countries in the world. Diamonds are one of the most easily obtained, most easily transported forms of hard currency, for state and non-state actors alike. Inadequate controls in neighbouring and regional transit countries such as Rwanda, Burundi, Uganda, Zambia, Zimbabwe, Tanzania and South Africa, and in trading countries like Belgium, Israel and India, along with secrecy within the industry, make diamonds - licit or illicit - easy to sell. The correlation between poverty, instability, protracted warfare, violence and diamonds suggests that the region is afflicted, rather than blessed by its diamond wealth.
Central Africa's collapse into poverty, social upheaval and war is rooted in colonial exploitation and abuse, and in the enduring corruption and state predation that followed the independence movement. Within a context of corruption, economic collapse and growing military strife, diamonds have formed a parallel economy that allows hundreds of thousands of miners and middlemen to survive. Diamonds can benefit artisanal miners, exporters and state coffers, but they can also be redirected through illicit channels, financing government strongmen, criminal networks and rebel groups. The informal economy - in which diamonds serve as one pillar - has served as a source of loot for state officials and for those seeking to overthrow them. ...
Since 2000, the international community has placed a priority on controlling these illicit diamond networks, in order to stop the wars that they fuel, and to allow diamonds to benefit the state. This is a major reversal of policies that, until the late 1990s, ignored diamonds. The governments of industrialized countries paid no attention to readily available and startling information: that the volume of diamonds reaching international markets from countries such as Angola, the DRC and the CAR was significantly higher than what these countries officially exported; that hundreds of millions of dollars worth of diamonds were appearing on international markets every year, and nobody could say where on earth they came from. Angola officially exported US$740 million in diamonds in 2000, the DRC US$240 million and the CAR US$60 million, but their actual combined output was closer to US$2 billion. Ironically, the people of these countries are becoming poorer, while others - entrepreneurs, thieves and killers - are becoming richer.
The Democratic Republic of the Congo
The diamond economy of the Democratic Republic of the Congo (formerly Zaire) defies accurate definition. Statistics on official exports and government revenue give no indication as to the role of diamonds in Congolese society or in its informal economy. Informal commerce sustains the Congolese population, which has simply retreated from state predation. Massive devaluation and currency manipulation over three decades caused a 'dollarization' of the informal economy, which the ruling strongmen hoped to tap once their looting of the formal sector could no longer be sustained. These strongmen, all close associates of long-time dictator Joseph Mobutu, aligned themselves with criminal networks to exploit informal commerce, with particular emphasis on easily exploitable minerals such as diamonds (including those mined by rebels in Angola) and on variations between official and black market foreign exchange rates.
Diamonds formed a nexus between the informal and criminal economies. The failed Zairean state survived on the strength of informal networks that overlapped with criminal syndicates. These circuits fed into the structures of a growing war economy as Laurent Kabila's rebels and their external supporters gained momentum in eastern Zaire in late 1996. Kabila's May 1997 arrival in Kinshasa, the capital of a nation that now existed only in abstract form, marked the emergence of a new clan of predators. ...
The Congo's long, sorry history of bad government, corruption and foreign pillage does not seem likely to end any time soon. The main external protagonists in the DRC's current war became involved for reasons ostensibly linked to their own security concerns. Rwanda and Uganda justified attacks on the DRC's sovereignty in 1998 as a means of depriving insurgents of bases in eastern DRC. Angola also justified military assistance to Kinshasa as a means to further isolate UNITA, and to protect its Cabinda oil enclave on the Gulf of Guinea. Zimbabwe and Namibia cited a joint security pact of fellow Southern African Development Community members. ...
Military and political considerations do remain central, but many facets of the present war can be reduced to little more than jockeying for the Congo's mineral resources. Diamonds have become a central feature of this plunder, and participating countries such as Rwanda, Uganda and Zimbabwe - with few or no diamonds of their own - have now become diamond exporting countries. ...
A Tale of Two Cities: Kinshasa and Brazzaville
The report describes in detail the import of hundreds of millions of dollars worth of diamonds into Belgium from Brazzaville, capital of the Republic of the Congo - a country with no diamonds of its own. What is the explanation? One partial explanation is Angola. Angolan diamonds originating either from the informal market or from UNITA rebels often pass through Brazzaville, or the DRC, or are declared in Antwerp as having come from there. Congo-Brazzaville played an important role as an outlet for UNITA diamonds when the rebels still controlled industrial mining sites in the Cuango valley prior to 1998, partially illustrated by Belgian rough diamond imports from Congo-Brazzaville valued at over US$1 billion between 1995 and 1996. Smuggling of Angolan diamonds also increased in 2001, with Brazzaville and Kinshasa the most likely outlets. Diamond regulations in Congo-Brazzaville are lax and taxes are low, major attractions for corrupt international diamond dealers positioning themselves along African smuggling routes. ...
A further explanation is that the DRC traders simply continued to smuggle diamonds through Brazzaville, fearful that the flip-flop in laws, ministers and even governments in Kinshasa could backfire on their local activities again. Brazzaville is only one of many transit countries that Congolese conflict diamonds now use en route to Antwerp and elsewhere. Bujumbura, Lusaka, Harare, Kampala, Kigali and Dar es Salaam all provide licences and onward permits. None seem keen to end the trade, as it represents in some cases more informal economic growth than their formal economies are producing.
The Central African Republic
Diamond production in the Central African Republic (CAR) is almost exclusively artisanal, with an estimated 80,000 miners working in the sector. ...
There is significant overlap between the diamond deposits in northern DRC and the CAR, and diamonds mined in the DRC's Equateur province, much of which is controlled by the Congolese MLC rebel group, are often sold or laundered through the CAR. The CAR is also connected to diamonds from the DRC's other main rebel faction, the RCD-Goma. This group is backed by Rwanda, and controls the diamond town of Kisangani. ...
The link between diamonds in rebel-held DRC and the CAR has taken on a more sinister form. Bangui serves as a vital platform for criminal networks arming a variety of rebel groups in Africa and elsewhere. These networks may profit occasionally from diamonds, although this is not their primary business. One such network was run by Victor Bout, a renowned arms trafficker who has supplied UNITA and the MLC in Central Africa, the Liberian government in violation of UN sanctions, as well as armed groups in Afghanistan.
Official diamond exports from the CAR are significantly lower than the volume of CAR diamonds appearing on the international market. Buyers in Antwerp have for years been declaring imports from the CAR that are collectively higher than the country's assumed production capacity. The Central African Republic is a small player in the diamond business, and would not normally be considered of great consequence internationally. But the country is being used as a conduit - or its name is being used as a cover - for as much as $100 million worth of illicit and conflict diamonds every year.
Angola is where the conflict diamond phenomenon was first observed. Angola's rebel movement, UNITA, financed a large part of its war effort for more than a decade on diamonds, generating $3.7 billion between 1992 and 1999 alone. The problem of diamond smuggling multiplied considerably between 1990 and 1992. More than US$100 million in diamonds was smuggled out of Angola in 1990, approximately US$300 million in 1991, and US$500-600 million in 1992. When UNITA leader Jonas Savimbi rejected the results of the national elections at the end of 1992 and returned to war, he took control of the Cuango valley and other vital diamond territories. Astonishingly, UNITA exported as much as ten per cent of worldwide diamond production in 1996 and 1997. ...Zaire's burgeoning internal diamond market offered an ideal channel for the export of UNITA diamonds, whether by the rebels themselves, or through foreign dealers licensed by the Kinshasa authorities.
When war resumed in 1998, UNITA was left without the prized portions of the Cuango valley. Rebel diamond exports declined precipitously in 1998, to perhaps US$250 million. It is likely that the rebels were able to increase production to a certain degree in 1999 - to around US$300 million - but government offensives in the central highlands in late 1999 annihilated Savimbi's ability to pursue a conventional war. ...UNITA's diamond output crashed to perhaps US$100 million in 2000, and less in 2001. The downward spiral of UNITA's financial and military capabilities culminated in the death of Savimbi in a raid by the Angolan army in February 2002. ...
Conflict diamonds are generally considered to be diamonds that finance wars in Africa, waged against legitimate, although not necessarily democratic, governments. The intergovernmental 'Kimberley Process' defines conflict diamonds as "rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments, as described in relevant United Nations Security Council (UNSC) resolutions" ...
... there is a very gray area between conflict diamonds and the much larger trade in illicit diamonds. The voluminous illicit traffic, long tolerated by the legitimate diamond industry and governments worldwide, provides the cover under which the much more pernicious conflict diamonds move.
The trade in conflict and illicit diamonds is not only about the problems of African governance. It is about the governance of imports in and around Europe, India, Israel, North America, Japan and other wealthy nations, something that must be faced much more squarely by governments if conflict diamonds are to disappear. And it is about the governance of the diamond industry itself. ...
Conclusions and Recommendations
... Governments must take charge, and they must take responsibility for managing their diamond industries properly, fairly and transparently. ... Part of this includes ensuring governments' access to the fair and legitimate income that might be derived from the country's resources, including diamonds. Part of it includes good management of these diamond resources, and ensuring that those who mine them receive fair compensation.
The Kimberley Process
One way of dealing with both the supply and the demand side is the creation of a full-fledged, global diamond certification system. The Kimberley Process proposes such a system. It aims to ensure, in the first place, that all rough diamonds moving between countries are accompanied by a government certificate of origin. It will also deal with the issue of statistics. Bad statistics, false statistics, and no statistics at all have plagued the diamond industry for years. The sometimes accidental, but often deliberate statistical confusion created by governments and the industry have made it not just possible, but virtually effortless to conceal huge transactions in illicit and conflict diamonds.
A second issue has to do with controls in both exporting and importing countries. The minimum standards proposed by the Kimberley Process require effective government oversight. Details have been developed, but these will only be as effective as the monitoring systems that accompany them, and by the deterrents that are established for non-compliance. These must be clear and automatic. If a country cannot manage its diamond resources and industry, it must be ostracized from the legitimate diamond trade. If a company cannot demonstrate that the diamonds it buys and sells are clean, it too must be ostracized.
Few diamond dealers anywhere have been arrested for smuggling diamonds or evading taxes. None has been arrested for breaking UN sanctions. Dealers committing these crimes are not spurned by the diamond industry, unlike those who cheat fellow diamantaires or diamond banks - crimes taken very seriously by the entire industry. And yet hundreds of millions of dollars worth of diamonds from Central Africa evade borders, taxes and oversight every year on their way to the world's cutting, polishing and trading centres. Sanctions, therefore, cannot be limited to African countries or to producers alone. Countries with trading, cutting and polishing industries, such as Belgium, India and Israel will be obliged under the Kimberley Process to guarantee that rough diamonds will be handled in a certain way. None of this can be done with any level of assurance or credibility unless there is an international inspection system as part of the overall scheme.
The Kimberley Process agreement of March 2002 brought together more than 35 governments and the EU, dealing satisfactorily with all of these issues except one: regular independent monitoring of all national control systems. Without this, the system, expected to begin late in 2002, will be neither credible nor effective. ...
The Democratic Republic of the Congo
The United Nations Security Council should treat DRC diamonds in the same way as it has treated Angolan and Sierra Leonean diamonds. It should require all states to restrict the direct or indirect import of rough diamonds from the DRC except those controlled by the Government of the DRC through a certification system that complies with the provisions of the Kimberley process. ...
The Kimberley Process should appoint an independent review mission to ensure DRC compliance with Kimberley Process minimum standards, as soon as the Government of the DRC has made the appropriate changes to its systems and legislation.
The Republic of the Congo
The Republic of the Congo has become a major hub for the trafficking of illicit and conflict diamonds. ... The United Nations Security Council should take up this issue as a matter of urgency, and should place an embargo on all diamonds exported from the Republic of the Congo until a complete and credible international audit can be conducted into the origin and legality of its diamonds.
The Central African Republic
The Central African Republic is being used as a conduit (or its name is being used as a cover), for tens of millions of dollars worth of illicit and conflict diamonds every year. It is essential that the CAR be brought into the Kimberley Process as quickly as possible, in order to halt the use of its name and its territory in the trafficking of illicit diamonds. This must be accompanied by a credible, international review to ensure compliance.
Diamonds from Other Non-Producing Countries
United Nations Expert Panels have examined the connection between resources and conflict in the DRC. They have shown that foreign armies are actively involved in resource plunder, including the theft of diamonds. The Security Council has yet to take effective action on this. As a matter of urgency, the Security Council should halt the trade in diamonds from countries that do not mine them within their own borders, unless they can prove beyond doubt that the diamonds were obtained legally. This ban should include Uganda, Rwanda, Zambia and Burundi.
Aberrant Belgian diamond imports from Tanzania require more investigation, as does the Zimbabwean diamond trade.
Further, the Security Council should endorse the proposed Kimberley Process certification system, but should insist that it contain tough and unequivocal provisions for the regular, independent monitoring of all national control mechanisms. ...
Message-Id: <200206220016.UAA09168@server.africapolicy.org> From: "Africa Action" <firstname.lastname@example.org> Date: Fri, 21 Jun 2002 21:02:34 -0500 Subject: Central Africa: Diamonds Economy
Editor: Ali B. Ali-Dinar
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