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Central Africa: Diamonds Economy
Central Africa: Diamonds Economy
Date distributed (ymd): 020621
Document reposted by Africa Action
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Central Africa
Issue Areas: +economy/development+ +security/peace+
SUMMARY CONTENTS:
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: pac@web.ca
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 Service (Antwerp,
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
+++++++++++++++++end profile++++++++++++++++++++++++++++++
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
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. ...
Definitions
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 U
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. ...
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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