For release 14th November 2011

UK Jewellery Industry Confused by KP Decision

The UK jewellery industry has been left baffled following the recent announcement that Zimbabwe is once again to be included in the Kimberley Process. The message from inside the UK trade has been of confusion and disappointment on the lack of effectiveness of the KP to prevent diamonds mined from the troubled Marange diamond fields from entering the supply chain.

At a meeting in Kinhasa on the 1st November 2011, the Kimberley Process agreed to allow the export of rough diamonds from two KP compliant operations in the Marange region.

A third site at Anjin will be inspected within 14 days to check for compliance. This inspection may be subject to Zimbabwean army and central intelligence approval.

Since 2009, Marange diamonds have consistently been refused KP accreditation owing to human rights abuses and alleged non-compliance with KP certification requirements.

However the diamond stockpiles accumulated by Zimbabwe in 2008 and 2009 when the bouts of violence against artisanal miners were at their height will now too enter the world market.

In a press statement Zimbabwe’s Minister of Mines Mpofu announced “We want to shock the world with our stockpiles. We are going to unleash our worth to the world and Zimbabwe will not be asking for anything from anyone. I hate begging myself and Zimbabwe will not be begging from anyone,”

The Kimberley Process was established in order to prevent the flow of conflict. In allowing the market to become flooded with Marange ‘Blood diamonds’, has the KP failed in its duty and is it now fit for purpose?

Michael Hoare of the NAG said:
“NAG members are concerned about the future of the KP and have been contacting me suggesting that it has to take a firm line; being more transparent and rigorous in pursuit of its objectives. I had sincerely hoped that the Kinshasa meeting would counter retailer’s doubts once and for all so that they could pass on credible assurances to the public about the provenance of their diamonds. I fear that it has in fact generated a ‘lot of heat but not a lot of light’ and failed to put their doubts to rest.”

One of the unintended consequences outside the remit of the KP is that the largest customers of Marange diamonds, India and China are already discounting stones owing to the abundance of new supply. This will have a serious impact on the world market particularly in the supply of cut, polished diamonds and finished jewellery.

China is a huge investor in Zimbabwe and in March of this year lent $585m to the Zimbabwean government in the biggest deal of its kind.

The owners of Marange Resources; Mbada and Anjin Field; are owned or co-owned by ZMDC which remain under US, UK and EU sanctions, therefore no trade of rough can be made in these territories
However, will it now be impossible to prevent Marange Blood diamonds from entering the UK as long as retailers continue trade with China? It looks likely that any item of diamond jewellery manufactured in the Far East will now present an open route to market for a Marange diamond on to the UK high street.

The BJA has been very close to the KP process. CEO Simon Rainer comments

’At its inception, the KP was designed to prevent the sale of rough to fund conflict against democratically elected governments. Today, the KP under the same remit struggles to prevent “democratically” elected governments from using the profits of diamond rough to sponsor political violence against its indigenous population.
Whilst Marange diamonds maybe now compliant to the KP scheme, they are not compliant with the moral and ethical standards that the majority of the world subscribes to”

On November 1st, MP Under-Secretary of State for Foreign and Commonwealth Affairs, Henry Bellingham stated in the Hansard report on the situation “This will help the Zimbabwean Finance Ministry to collect tax and royalties owed to it, and thereby ensure the financial benefits of the diamond sales can reach the Zimbabwean people”.

That view was today slammed as ‘naïve in the extreme’ by Fair Trade Jeweller and Activist Greg Valerio. He went on to say ‘I support the view that to allow Zimbabwe diamonds into the KP system is a grave mistake. It will erode consumer confidence in the diamond. It’s permanently comatosed the credibility of the KP and forces the jewellery trade back to square one in terms of integrity of the diamond supply chain. It’s a sad day for the diamond industry and a sad day for human rights’.

Vivien Johnston of Ethical Jewellery brand Fifi Bijoux agrees
“This does nothing actually to address the torture, beatings or sexual assault to miners in the Marange diamond fields. It has been alleged by BBC reporters and witnesses as recently as August of this year that miners are being held captive and subjected to brutal assaults, rape and extreme violence in Marange. Under no circumstances should the perpetrators of crimes against humanity be allowed to openly profit from their corruption. Whilst the export ban has only been lifted from two sites so far, this opens the door to middle men who will exploit any opportunity to profit from the lifting of the ban. I understand the pressure on the KP to engage with Zimbabwe but this action has only weakened its integrity and thrown the diamond industry further into disarray. We must not forget why Zimbabwe was excluded”.

Talk of the need for a ‘KP Plus’ to provide a new coherent compliance suitable for today’s political challenges give rise to further speculation that the KP in its current format is creaking under the responsibility to make itself fit for purpose.

Certainly, the feedback from the UK jewellery sector demands further assurance on the provenance of diamonds entering our market.
In the US the new Dodd Frank legislation is making strides to prevent metals from “areas of conflict” entering their supply chain. Perhaps this, with other due diligence and chain of custody initiatives to prevent the trade of conflict minerals will become vehicles to prevent cut and polished stones from entering the US market.
Simon Rainer of BJA has already noted activity:

“In Washington on November 17th, the US State department will be holding a series of informal meetings engaging with US jewellery industry representatives, UK/EU public office officials and NGO’s. The purpose of these meetings will be to invite US industry to set its own set of voluntary measures to combat the frailties of the KP in its current form. If agreement cannot be met, then expect the State department to enter the fray and impose an amended version of the Dodd Frank Act or similar that will include diamonds from “areas of conflict”.

He added
“It is a fair reflection that the worldwide jewellery industry is confused by the current situation and that those with most to gain financially from the release of Marange diamonds have been the most vociferous in their support for Marange KP compliance”.