UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Angola: Diamond Trade and War Date distributed (ymd): 981215 Document reposted by APIC
Region: Southern Africa Issue Areas: +economy/development+ +security/peace+ Summary Contents: This posting contains a press release and excerpts from "A Rough Trade -- The Role of Companies and Governments in the Angolan Conflict." The report by Global Witness documents how funds from diamond exports have enabled UNITA to continue the war despite a 1994 peace agreement and UN sanctions, details the involvement of De Beers and the Central Selling Organization, and provides case studies of the sanctions violations through Belgium and Zambia. It calls for accountability and transparency in the international diamond industry in order to permit peace in Angola.
APIC Announcement: Holiday Special at APIC's Africa Web Bookshop. Books (www.africapolicy.org/books/gifts.htm) plus music and more (www.africapolicy.org/books/cdvid.htm)!
Correction: In the posting Africa: Debt Update, of December 13, 1998, we cited three URLs for documents on the website of Africa Recovery. Unfortunately, we only managed to get one right. The corrected URLs are http://www.un.org/ecosocdev/geninfo/afrec http://www.un.org/ecosocdev/geninfo/afrec/freepubs.htm
Note: The 27 November issue of the Angola Peace Monitor, published by ACTSA on behalf of the Angola Emergency Campaign, with additional updates on the current situation in Angola, is available on the web (http://www.anc.org.za/angola). It is also available from ACTSA, 28 Penton Street, London N1 9SA e-mail: firstname.lastname@example.org; fax: +44 171 837 3001 telephone: +44 171 833 3133.
Press Release Global Witness
Global Witness Ltd. is a UK investigative human rights and environment not-for-profit oganisation which has built up a reputation for its investigations and lobby work on the illegal trade in timber in Cambodia and the way in which that has funded the conflict. It is non-partisan.
For more information, including the full report in English and a summary in Portuguese, see http://www.oneworld.org/globalwitness/ Contact: Tel +44 (0)171 272; 6731, Fax +44 (0)171 272 9425, email: email@example.com
The full report includes, among other sections, "Angola: A Brief Outline," "The Diamond Industry, De Beers and the CSO," case studies on the roles of Belgium and Zambia, an overview of the Angolan diamond trade, and a "Do-It-Yourself Diamond Trading Guide."
December 14, 1998
Is the price of diamonds too high?
How Angola's return to war has been funded by the international diamond trade.
Global Witness report, "A Rough Trade - The Role of Companies and Governments in the Angolan Conflict," published today, uncovers the role of diamonds in funding the continuing civil war. "As Angola once again slides into full-scale war the United Nations and the international diamond business must examine their role in the conflict." Charmian Gooch, Global Witness.
Diamonds have been UNITA's major source of revenue during the 1990's - gaining an estimated US$3.7 billion between 1992 and 1998 [Diamonds have also funded conflict in Sierra Leone and Liberia.] - which has enabled them to re-arm and maintain supplies despite the UN sponsored peace process. UNITA has sold its diamonds on the unofficial, "outside"' market and has found willing buyers within the diamond industry.
The diamond business is dominated by De Beers and its Central Selling Organisation (CSO), set up 60 years ago to control the international diamond trade and maintain steady prices. De Beers and the CSO sell about 80% of the world market. Angola, as a major producer of high quality unworked diamonds [Angola's diamonds are some of the best in the world, and are in demand within the diamond business.], the majority originating from UNITA held territory, has been a threat to market stability, and De Beers are clearly involved in this trade. The report includes a detailed analysis of their involvement.
With the tragic return to war, which between 1992 and 1994 cost the lives of an estimated 300,000 Angolans, "There is an urgent need for the diamond business to fundamentally change the way in which it works, because it is clearly unacceptable for diamonds to be used as a major source of revenue in conflict." Charmian Gooch, Global Witness, "How many people, when buying a diamond for their loved one have any idea of the horrific price that Angolans have had to pay?"
Furthermore the UN has failed to ensure that member states are rigorously implementing the embargo on unofficial diamond exports from Angola, which came into force on 1 July 1998 (UN Security Council Resolution 11734) as part of a series of measures. The EU has also adopted the UNSC embargo, and this too has been a dismal failure. Belgium, one of the key diamond centres, bears a particular responsibility to strive to meet the embargo, yet Global Witness investigations have revealed serious failings, and it is business as usual in Belgium's diamond capital Antwerp. The failure of the UN member states and the diamond industry to fully implement the embargo has meant that UNITA have been able to restock munitions and supplies and this has fatally undermined the peace process.
Diamonds and Angola's Recent History
It is well documented that the decline into renewed civil war, following the failure of the 1992 elections, was financed for the major part by natural resources - oil and diamonds. The war cost the lives of at least 500,000 Angolans, with thousands more maimed due to land mines - a continuing blight for the population. Economic chaos suffered by the majority of the population has resulted in the country's steep decline as defined by all internationally accepted social indicators.
Since 1992, UNITA have consistently controlled 60-70% of Angola's diamond production, generating US$ 3.7 billion in revenue, enabling them to maintain their war effort.
UNITA's diamonds reach the major international markets through a worldwide diamond industry that operates with little transparency or scrutiny from the international community.
De Beers, the CSO and the Diamond Industry
The De Beers company and its Central Selling Beers and the Organisation (CSO) have dominated the international diamond industry for the last 60 years; sorting, valuing and selling around 80% of the world's diamond production. Company literature boasts that the cartel structure provided by the CSO is of benefit to all involved in the international diamond trade.
De Beers annual reports during the 1990's clearly state the company's heavy involvement in embargo buying Angolan rough diamonds, at the height of resumed fighting and a time when UNITA controlled the majority of Angola's diamond production. Given that De Beers were, according to their own reports, buying a substantial proportion of Angolan rough diamonds, at a time when a large section of the country's diamond mines were under Unita's control, one could conclude that the drive to keep the lucrative outside market buoyant was a primary concern - despite the consequences this might have for the people of Angola during this period.
The UN Security Council Embargo
In response to the lack of progress over UNITA's implementation of the Lusaka protocol, the UN Security Council passed Resolution 1173 and 1176, which prohibit the direct, or indirect export of unofficial Angolan diamonds - those defined as not accompanied by a Certificate of Origin (CO) issued by the Government of Unity and National Reconciliation (GURN) in Luanda.
Whilst resulting in some reduction of revenue for UNITA, the implementation of UNSC Res. 1176 appears token at best. Investigations reveal that significant diamond exports still take place, mainly by air and in smaller quantities, through countries such as Zambia. Most of the diamonds are sold on the open market in Antwerp and in other countries. Belgium, as home to the world's premier diamond market, bears significant responsibility for this situation.
This illegal trade is made possible through a combination of inadequate control and verification of CO's from the GURN, and the fact that diamonds imported from neighbouring countries do not require any effective verification of source. The latter situation, especially given the involvement of corrupt officials, provides a perfect loophole for the laundering of UNITA sourced diamonds through Angola's neighbouring countries, and on to the international market.
Publicly, the diamond industry declares that it is not possible to identify the source of diamonds. In fact, notable international diamond experts are clear that diamonds are readily identifiable by source - often to the level of the mine they were extracted from. It is clear that the professional capacity of the international diamond industry is such that Angolan sourced rough diamonds are clearly identifiable.
* All member states of the UN should fulfil their reporting obligations under UNSC Res. 1173.
* The UNSC should immediately amend UNSC Res. 1173 to require that all diamonds in trade carry a Certificate of Origin (CO) and be subject to independent scrutiny by internationally recognised diamond experts.
* The UN Secretary General, in his report to the UNSC, which is due by 15th January 1999, should identify those countries not fully implementing the embargo, and specify actions to be taken to improve implementation.
* De Beers and the CSO should publicly clarify what changes to their internal structures they have made to ensure full compliance with UNSC Res. 1173.
* De Beers and the CSO, as the most powerful and expert monitor of the diamond industry, should notify the UN and relevant governments and enforcement agencies of any company or trader that offers them Angolan diamonds, so that all documentation can be subject to official scrutiny.
* De Beers should revoke sight holder status from any trader found to be dealing in UNITA sourced diamonds.
* De Beers and the CSO, as the original shaping force behind the current way in which the industry operates, should lead the necessary process of reform within the industry to address current issues of transparency and business ethics.
* Traders that deal in UNITA sourced diamonds should be penalized with confiscation of diamonds, heavy fines and, in Belgium for example, loss of tax concessions. Resulting revenue should be put towards reconstruction in Angola.
* Any diamonds originating from Angola's neighbour states should be subject to especially rigorous inspection, as it is known that they are recipients of UNITA sourced diamonds and that forged documentation is rife.
* The governments of Angola's neighbours and major diamond trading nations (including Belgium, Israel, South Africa and the UK) should exercise the precautionary principle and prohibit the import of diamonds unless it can be proven that they do not originate from combatants.
* The Belgian Government needs to take immediate action to improve the ability of the diamond experts who work with Customs, to identify Angolan diamond imports.
* The government of Angola should ensure that official diamond exports are accompanied by internationally recognised COs, stamps and are signed by named authorised officials.
* An independent review of the issues surrounding the identification of the country of origin of rough diamonds urgently needs to be carried out.
Business is Business
As Global Witness investigations into the trade in rough diamonds from Angola show, the lack of transparency and corporate responsibility in the diamond industry has been central to the continued financing of UNITA, and hence the fuelling of civil war in Angola. If transparent and responsible business practices had been in place, as claimed in corporate statements, this situation would not have arisen. Bilateral and Multilateral institutions such as the International Monetary Fund (IMF), World Bank, Organisation for Economic Community and Development (OECD) and the World Trade Organisation (WTO) now consider transparency and corporate responsibility to be essential to all areas of business.
However the International Chamber of Commerce - ICC, WTO and OECD all refuse to accept a need for legally binding codes of conduct for multinationals. As this document details, it is the inability of the diamond industry to adhere to its own corporate codes of conduct that has contributed to the continuation of the conflict in Angola. It is internationally accepted that the sale of rough diamonds by Unita has been an integral factor in the continuation of the conflict. Yet the diamond industry has done nothing to ensure that they are transparent or accountable. The diamond industry does not have to deal with public scrutiny in the way that many multinationals now have to.
"Accountability imposes discipline on management; firms that have to justify their actions publicly are less likely to take actions of which their shareholders and creditors might disapprove." -- Source: IMF Manual of Transparency, 1998.
"There is no one concerned with diamonds, whether as producer, dealer, cutter, jeweller or customer who does not benefit from it. It benefits not only the shareholders of diamond companies, but also the miners they employ and the communities that are dependent on their operations. We are very conscious of our responsibilities not only to our shareholders, to the industry as a whole and to the consuming public, but also to the governments of the countries in which we operate." -- Harry Oppenheimer, De Beers 1995 Annual Report.
"The Corporation (Anglo American) and the companies with which it is associated strive to create wealth and to contribute to sustainable development by operating their businesses with due regard for economic, social, cultural and environmental concerns." -- Environmental Policy Document of Anglo American Corporation February 1998.
The diamond industry must include themselves in the debate on transparency and accountability if they are to be taken seriously. There are numerous examples of companies that have done too little too late and are now spending millions of dollars in order to preserve their corporate reputation. John Browne, CEO of BP, (member of the Corporate Advisory council of the US - Angola Chamber of Commerce), is clear that responsibility in business is key:
"So business has a key role to play. But it must do it responsibly. With economic development must come environmental stewardship and social responsibility and there must be a new acceptance of this responsibility." -- John Browne Ceo BP at Amnesty International Dublin 26th September 1997.
Nicky Oppenheimer recently stated, "I do hope people will think that we are open and prepared to answer real questions and tell them what we are up to as far as we are able." It remains to be seen how serious about 'openness' Nicky Oppenheimer will be.
1. THE ROLE OF DIAMONDS IN ANGOLA IN THE 1990'S
"In the mining areas of Lunda Norte, historically the most exploited of the country's range of reserves, diamonds have played an important role in sustaining the conflict since the 1992 elections. UNITA is thought to have reaped about US$1.5 bn from sales of diamonds mined in areas it has controlled during much of this phase of the civil war. In 1995 Angola's total diamond output raised about US$700 m, according to industry sources, of which only US$147 m was accounted for by legal sales by minor producers and the parastatal company Endiama. most of the rest was mined by UNITA and smuggled out unofficially." Economist Intelligence Unit (Eiu) Country Report, 4th Quarter 1996.
"Oil and diamonds, in particular, have been used to pay for the wars that have plagued the country since the 1960's... Much of Angola's wealth is unaccountably taken up by UNITA and government elites, with little reaching the grassroots." CIIR Peace Postponed: Angola since the Lusaka Protocol, 1998.
"They have occupied the most productive areas than the government and the same thing (occupation of the diamond rich areas) is being used to buy the arms which they are using on innocent people." Paulo Mafundama, Angolan Consul General in Mongu, Zambia
The importance of diamonds in funding UNITA'S war effort over the last decade is well known and fairly well understood. Diamond revenue became increasingly important for a number of reasons including the political changes in the post-Cold War era. Diamonds have provided the majority of UNITA's funding although gold, coffee and particularly in the late 1980's wildlife products and timber were all sources of funds. Between 1992 and 1998 UNITA obtained an estimated minimum revenue of US$3.72 billion from diamond sales. This does not include revenue from other sources, nor interest generated in overseas bank accounts.
The international trade in diamonds has become a major obstacle to any possible progress towards peace; and has played the major role in enabling UNITA to restock its munitions and maintain a flow of supplies which in turn has enabled it to disregard the 1992 election results and to avoid meeting its obligations under the Lusaka Protocol. The workings of the international diamond trade are opaque and difficult to penetrate. However, it is clear that 80 per cent of the trade is controlled by De Beers through the CSO. It is also clear that the key role of the outside (unofficial) market in controlling the world price of diamonds needs to be re-examined.
To the millions of Angolans who have survived the repeated years of conflict and the estimated 300,000 that died violently between late 1992 and 1995, the workings of the international diamond trade may seem an abstraction, but the revenue that UNITA has been able to generate from diamonds and the direct and indirect impacts of this revenue are real enough.
The income generated from of UNITA's diamond sales, as with much of the diamond business as it currently operates, is impossible to record with absolute precision but it can be approximated as follows: 1998 US$200 m, 1997 US$700 m, 1996 US$700 m, 1995 US$320 m, 1994 US$600 m, 1993 US$600 m, 1992 US$600 m.
From: firstname.lastname@example.org Date: Tue, 15 Dec 1998 09:33:53 -0500 Subject: Angola: Diamond Trade and War
Editor: Ali B. Dinar, email@example.com