ZIMBABWE will sell Marange diamonds at far below market prices if it abandons the Kimberley Process (KP), while relations with international partners — key to economic recovery — will be further strained.
The KP, a 75-member voluntary grouping of governments, civil society and industry players formed to stem the flow of blood diamonds, meets in Russia on Wednesday to try and resolve an impasse over whether to authorise Marange stones to trade under its stamp.
The mini-summit on Zimbabwe, to be held on the sidelines of the World Diamond Council Annual Meeting in Russia’s second largest city of St Petersburg on July 14 and 15, follows a deadlock on a similar issue in Israel last month.
Civil society members of the KP say the continued incarceration of diamond monitoring activist Farai Maguwu will likely force another impasse, leaving Zimbabwe’s threats to sell outside the KP coming one step nearer.
Gabriel Shumba, an exiled rights lawyer who has used the international platform to campaign against military-led rights violations in Marange, said next week’s meeting was unlikely to provide a solution because of Maguwu’s victimisation.
“If Zimbabwe chooses to unilaterally sell the diamonds, it would only augment the perception that the country has no respect for international law and institutions, even those that it goes into voluntarily,” Shumba said from Pretoria, where he now heads the Zimbabwe Exiles Forum, a group working for the rights of Zimbabweans fleeing political and economic turmoil in their homeland.
“This could lead to the country being suspended or banned from the KP, meaning that diamonds that should have benefited the country would now have to be sold clandestinely, thus stunting the benefit Zimbabwe could reap from such a national resource.”
The KP controls over 90% of the rough diamonds market, and most major diamond-producing and trading countries are part of the organisation.
Eric Bloch, a Bulawayo-based analyst, said Zimbabwe could still find ready buyers for Marange diamonds outside KP-controlled markets.
“We will have those rebel countries such as Iran and many others in the Far East ready to buy, but only because they will be buying the diamonds at a bargain. They will get the diamonds for next to nothing,” said Bloch.
“Zimbabwe won’t get fair value because those who buy outside the KP, virtually illegally, will only buy if they buy at low prices. The diamonds will be disposed of at heavily discounted prices.”
Government, which runs two joint venture mines with some South African investors in Marange, has said it has stockpiled over four million carats as a result of delayed KP certification.
Government estimates this stockpile to be worth US$1,7 billion — money enough to finance about 60% of the US$2,2 billion 2010 national budget after private investors take their share. Government, through shareholding and taxes, should end up with 80% of sales, according to agreements used to set up the joint mining firms, Mbada Diamonds and Canadile Miners.
Global Witness, a group that campaigns to end resource-linked conflicts, alleged that Marange diamonds were already being smuggled out, and urged KP members to increase vigilance to stop the controversial stones from reaching international markets.
“Zimbabwe has everything to gain by playing by the rules and exporting its diamonds within the Kimberley Process,” said Annie Dunnebacke, a Global Witness resources campaigner who opposed certification of Marange diamonds at the KP Israel meeting.
“If Zimbabwe does not address the concerns around human rights and militarisation of mining in Marange, and exports diamonds outside the KP, these will be tainted diamonds sold at a cut-rate on the black market and will not be acceptable to consumers worldwide,” Dunnebacke said in an interview on Wednesday.
Leading economic consultant John Robertson said any loss from selling outside the KP would hardly make a difference to ordinary Zimbabweans whose fortunes have not changed since the discovery of the Marange diamond fields.
“The real measure of the loss is difficult to say because we have no trace of where previous money from diamonds went to and we don’t have many answers to those dealings,” he said.
Robertson suggested that Zimbabwe should copy the example of Botswana. Debswana, a joint venture between the Botswana government and De Beers, a private investor. The venture is making profits and contributing to that country’s economy through jobs and taxes that are used to fund social development.
Bloch said effects of selling Marange diamonds unconventionally would have ripple effects on the economy, worsening prospects of recovery.
“It would mean long delays in getting re-admitted to the KP and that would translate to many years of black-marketing (of Marange diamonds),” he said. “It would impact on the relationship with the international community and would send us straight back into being a pariah state.”
While Marange stones cannot be technically defined as blood diamonds, selling them to underworld dealers could provide a secure link with rebel groups in countries such as the Democratic Republic of Congo who use diamonds mined in war situations to fund conflict.