The KP Chair’s office in collaboration with the UAE KP office discovered that Blockchain could be immensely important to the future of the Kimberley Process, and help to eradicate false KP certicates and reduce the impact of human error while uploading data signicantly.
I personally think this is such a good idea, that I called for it in December, 2015:
There are many well-known complaints of the KPCS, but the process certificate issuance and integrity is easily the most addressable one and it’s incredible to see the UAE taking the effort to address the important issue. There really is little excuse for fake, forgeable, smuggle-able paper certificates as it regards to securing such an expensive good.
Limits, and The Reality on the Ground
A few months ago, I had a great lunch with my friend Rob Bates (insightful as ever), in which he quite easily parried my excitement with a reminder of what happens when the rubber hits the road: “So, every shipment would be accompanied by … a bar code? A QR code for its address on the blockchain?”
And here is where Silicon Valley hype and excitement often dies:
What if a KPCS officer doesn’t do his due diligence and waves a shipment through without looking up the certificate’s validity on the blockchain or that the shipment matches the data on the certificate?
What to do in geographic areas where internet connectivity is non-existent?
If an importing/exporting party becomes suspended, under what conditions do they get re-admitted to the process? Who/what controls that parties really are who they say they are? How is the integrity of KPCS officials controlled?
Is the KP going to consider amending their certificate issuance rules so that expiration dates become significantly less generous, sidelining the problem of certificate reuse?
Would the KP consider making notification of receipt of the shipment mandatory? (it’s currently not)
A few months ago I had the pleasure of attending a tech/kiteboarding networking event called Mai Tai in Cabarete, Dominican Republic. If there were ever an event designed almost specifically to appeal to me, this is it: kiteboarding, technology, startups, add in a few dashes of Burning Man / Robot Heart parties, and you have “me” encapsulated.
I met a rather idealistic, optimistic, wild-eyed and fascinating young lady who, after telling her of my odd interest in diamonds, quickly interrupted me to tell me a bit about Diamond Foundry, confidently boisting of how they were going to blow the diamond industry apart, completely uninterested and even a bit flippantly dismissive in what I had to say about the DDI or ForeverMark or Botswana.
“There have already been a few companies attempting such with lab-made diamonds. They never can quite get the color up there, can they? Mostly H-L colored stones, and most of them max out at about a carat.” I retorted.
“No, but they’ve figured it out and they’re perfect diamonds now”
I told her about the DDI and the good work they do in the field, helping artisanal miners in Sierra Leone, Angola, DRC, Côte d’Ivoire how to do their risky work, yet also minimizing the chances of death by drowning, cave-ins, geological prospecting and rough diamond valuation, and mitigation of environmental impact.
“I wonder if that’s actually even a good thing”, she posited, as I about gasped. “The people of Sierra Leone need to all become programmers.”
I’ll leave judgement of the wisdom, feasibility and maturity of that statement to my readers. “How could it be that, with no other economic options available to them at all, saving them from drowning or death by cave-in is somehow a bad thing?” I thought.
This week, Diamond Foundry came out of stealth mode with their billionaire and celebrity backers, and I’m trying to gather my thoughts. The goods listed on the rather tiny inventory on their site seem near identical to what has been offered by Gemesis / Natural Grown Diamonds for years, with colors mostly in the H-L range, and most stones under a carat. Maybe the better goods are forthcoming; They certainly have the hype. Furthermore, the stones are apparently not graded by a trusted 3rd party, but by a GIA-trained gemologist. Not to infer that those stones are incorrectly graded, but is there not a conflict of interest when the grading is done by the same party as the one doing the selling?
DF has already announced that they won’t be competing on price. Rather, they may price their goods at higher prices than competitors. With colors mostly in the H-L range, they certainly aren’t competing in quality either, it seems. What then are they competing with?
Assurance of origin. Diamonds born in California, from renewable energy, in a sustainable process. A 100%, nerve-soothing guarantee.
How is this better than assurance of diamonds being “responsibly sourced” by ForeverMark? Does this not seek to capitalize off of a common thinking that all of “Africa” is straw huts and AK-47’s, unsuitable for “ethical” consumers? Does this not do the same that CanadaMark may do, with assurance of Canadian origin, and allowing consumers to draw whatever conclusions they like (no matter how correct) from there?
Undoubtedly, DF’s customers will pay the premium for equal or lesser goods, and walk away from the jewelry counter thinking they’ve done something “ethical” and “good”. But what if they pick DF because of their opinions on De Beers being the “monopoly” that they no longer are? What if they pick DF because of fears of “conflict diamonds” that mostly don’t exist any more, or disappearing Marange diamonds that probably can’t be found in US stores anyway? What would be the “ethics” of collapsing national economies and livelihoods because of mutable and incorrectly-placed stigma? Will DF make diamond customers out of people that otherwise wouldn’t be?
It’s been difficult finding any positive news coming out of diamonds lately.
CAR, KP, and the Nice Narrative
A report from Amnesty International on the Central African Republic and a Time Magazine article on conflict diamonds and the KP offer a sobering reminder that, no matter, what positive narratives can come out of Botswana, Canada, Russia, South Africa or Namibia, no matter what the KP reports for how many carats come out of this and that country as a share of global supply, the temptation to focus on the sore points of the supply chain will always be too easy to pass up, and for good reason. Artisanal diamonds may take up only 15% of carats and 5% of gem production, but the press and public attention will always come back to the artisanal diamonds.
Foxes in Charge of the Chicken Coop
The KP released its figures for 2014, showing that, once again, a certain volume of rough diamonds enter the UAE, about the same volume of rough diamonds leave, yet somehow they magically increase in price by about 40%. I know “conflict diamonds” is a worthy news story and getting photography of such misery is easy, but how is the wholesale looting of national resources not worthy of significant press attention? Fittingly, the UAE has become vice-chair of the KP, and will become the chair in 2016.
Rough Diamond Gemologist resurfaces to remind us that rough buyers are most assuredly the most tough-as-nails street-smart people on the planet.
“When a man with experience meets a man with money, the man with the money gets the experience, and the man with the experience gets the money.”
Seeing as the most non-industry news outlets don’t tend to do a very good job preserving important nuance or incorporating all the necessary complexities and caveats when trying to summarize such things — example here, where it was written: “The Kimberley Process system for certifying the origin of diamonds is meant to inform customers about where the stones originated” (it does no such thing) — I reached out to a friend of mine that has worked with the KP on such issues. My subject was this:
As expected, my friend’s response was awesome. What I learned:
Regardless of the ability/inability to keep conflict diamonds out of the supply chain, it would be bad policy to succumb to an apathetic “don’t bother” approach.
Yes they do work, as there are considerations and reputational risks all the way down to the retail level.
CAR diamonds, when banned in 2013, did not fit the KP’s own definition of “conflict diamonds”, as the suspension was not strictly matching the KP’s definition or scope, but as a result of a lack of guarantee of safety to the review team, as well as lack of monitoring and internal controls, due to the lack of governance.
There was no assistance offered to bring CAR back in to compliance, and thus, they are in a similar limbo-esque position as is Venezuela as it regards to the KP
This is therefore case-in-point, of how the definition of “conflict diamonds” needs to be broadened at the KP.
On an off-tangent note, is it possible for a journalist to title any diamond-related article without a variation of “Diamonds are a Girl’s Best Friend”?
While in the main research phase of my project, I wanted to learn what were the places in the world whose diamonds should be sought out by consumers, and which should be avoided, even if, in a perfect world, that sort of thing were possible (it’s not). Generally, recommending an entire country be considered on or off-limits is a risky and foolhardy errand, and as I’ve learned, conditions and operations can vary greatly within a country and region. For example, diamonds from Rio Tinto’s mine in Murowa, Zimbabwe have evaded all tinge and drama that have generally accompanied diamonds from Marange. Obviously Marange is an easy entrant in to the latter category and not in the category of “diamonds doing good”, though the American jewelry industry has done a good job at keeping these stones out of their jewelry cases. The quality of diamonds coming out of the DRC is extremely low (and therefore the chances that these stones end up set in jewelry) at $8.84/ct, with the caveat that this depends on KPCS statistics being an accurate representation of production.
But what about Angola? There, the quality of diamonds is generally high at $136/ct (for comparison, in Botswana, the world’s greatest producer of diamonds by value is $156/ct), but equally high is the corruption, yet also the opportunity and the growth. Unfortunately, I’ve had an extremely difficult time getting accurate information out of this country through the few sources in-country that I’ve been able to connect with, but what I have found has only made me more curious. My full thoughts are available here.
Once upon a time…
BICC has an excellent report entitled “Legacy of a resource-fueled war: The role of generals in Angola’s mining sector” detailing the history of diamond mining, and in particular, artisanal diamond mining in the Lundas. This report specifically details the often-intertwined nature between the military and artisanal diamond mining in the country.
“Conflict”
Angola is one of the countries against changing the term “conflict diamonds” to encompass all violence, no matter the technicality that the current definition is restricted to: that the perpetrators be rebels (thugs on the government or private payroll are kosher). This seems like a no-brainer to me as well as to the countries where most diamonds are bought (U.S.A and the E.U.), but is a harder sell to the Southern and Western African producer countries.
Angola’s national diamond company Endiama this year plans to purchase gold to make jewellery from the Central African Republic, the Democratic Republic of the Congo, Niger and Mali, the company’s chairman said in Cape Town.
“Value added activities in the diamond sector can have a positive impact on employment and economic diversification,” said the EIU in one of the most recent reports on Angola, while noting that these initiatives are just being launched.
Angola recently resumed diamond cutting and polishing, at a unit in Luanda and is planning to build a second unit in Lobito, Benguela province.
The Chairman of the Kimberley Process stated that the diamonds that were used to feed armed conflicts today are called in Angola “Prosperity and development diamonds.”
Eureka!
Australian mining company Lucapa has been pulling type IIa diamonds out of the ground at the Lulo diamond concession, including an exceptional 131.4ct stone. In fact, I’ve read that the Lucapa operation has the potential to replace the country’s Catoca mine as the country’s largest.
So…
What I, as an amateur observer, can see:
Current chair of the KP.
Opposition to changing the definition of “conflict diamonds”.
This is simply an appeal to better information about the diamond production in this country. In my report I concluded that consumers might consider avoiding diamonds from Angola almost entirely because of admitted stigma, corruption and uncertainty, though I must admit I can be swayed to the other side based on better information.
“The road to hell is paved with good intentions. Just because it doesn’t work doesn’t mean you don’t have good intentions, so you’re not a bad person, you just realize that the unintended consequences or your good intentions, that’s what’s gonna rule. So be careful with your intentions. And just because you’re a nice person trying to do a nice thing, doesn’t mean you are doing the “right” thing.”
Let’s assume you’re a resident of the DRC, specifically in the borderlands with Angola. Your economic opportunities are largely minimal, and one of the most promising paths is illegally entering comparatively more promising lands of the Lundas of Angola to mine for diamonds with a shovel and sieve. You risk torture and rape by Angolan private security companies, in addition to the usual risks of being an artisanal miner, such as death by cave-in, drowning, violence, malaria, etc. Or perhaps at no fault of your own, you live in Marange or the Central African Republic under similar circumstances. But you’ve also got hungry mouths to feed, so Dodd-Frank, the KP or other feel-good schemes be damned: the risks must be assumed.
Along comes a crazy-haired white New Yorker and self-styled researcher (really just a guy with an internet connection) who’s never lived in a war zone, and has been on TV a few times, specifically telling the relatively few consumers that do care about where their diamonds come from, to specifically avoid the resources that are your only economic option and livelihood, all because your government is corrupt and our country can’t meet some Western feel-good standard. Instead, he says, consumers should buy diamonds coming from your comparatively wealthy neighbors in Botswana. He’s certainly well intentioned, but how “good” is it to advise avoiding my diamonds (and everybody that brings them to market), just because, far downstream of me, they transit through Dubai or through some manufacturer with a checkered past and shady ties? How rational is it to essentially punish the people most ill-equipped to meet your “responsibly sourced”, “conflict-free” standards? Moreover, clearly it’s not rational to essentially sanction an entire large country because of problems existing in some regions with some companies and some resources, but that is what has apparently happened in the DRC. Shouldn’t the accent be on responsible sourcing, and on being “conflict-managed” rather than on a possibly unachievable “conflict free”?
The biggest thing I’ve learned through this whole experience is that complex problems imply complex solutions. The more I think about diamonds and the words “good” and “bad”, the more confused and less pointed I get. There is often very little connection between raw materials and finished products, and as far I’ve learned, little to nothing we can do on the consumer end to make that connection. We’re left to simply take a company’s word for it.
The WDC and The Southern Times highlight two opposing viewpoints fueling the current conflict in the diamond world as it pertains to, um, “conflict”, and a possibly expanded KPCS.
The Kimberley Process limits its scope to addressing the problem of “conflict diamonds”, which are defined as “rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments”. Violence committed by “legitimate” governments and polished diamonds are beyond the KP’s scope. That the diamonds are ethically sourced, that their production is free of human rights abuses, or that they have not been used to assist in money laundering is unaddressed.
My initial reaction is of disbelief: “With abysmal consumer confidence, and a shrinking share of the luxury customers’ wallet, they’re really arguing about whether ‘conflict’ diamonds are only ‘conflict’ diamonds if they’re used to help rebels, and whether or not steps should be taken to limit their use in money laundering or terrorism? What the …”
But is it not coincidental that a country’s position in the value chain, and whether they stand to benefit or feel targeted from an expanded KPCS, seem to imply its position on the matter? Is it not in the interest of the entire industry encourage consumer confidence?
On the other end of the spectrum, who makes it difficult for me to do this job and tell this good story to whoever will listen, at significant risk to myself?
Peter Meeus is the chairman of the Dubai Diamond Exchange (DDE), and someone I’d like to one day meet, but also, to learn a bit more about. I want to understand his point of view better, so that I don’t fall victim to surface pronouncements, because what I read on the surface does make my mission much more difficult.
I’d like to know why he had appointed to the board of the DDE, Robert Mugabe’s former personal helicopter pilot (Robert Mhlanga), who now chairs Mbada Diamonds, one of the leading companies mining in scandal-plagued Marange. Does this fit in to a “positive” view of the diamond industry, while some of the industry’s largest and most influential retailers (Tiffany, Ritani, Blue Nile) and trading networks (RapNet) have specific anti-Marange sourcing policies?
I’d like to know why he walked out of the Precious Stones Multi-Stakeholder Working Group in Paris when confronted with allegations of under-invoicing and transfer-pricing (An issue which he already acknowledges exists).
I’d like to know where this tirade and this tirade come from, why he seems convinced that there is “a broader and hidden agenda”, and why the US, Israel and Botswana (amongst others) view a KP chaired by Dubai to be a threat enough to coax Australia in to running for vice-chair?
Finally, I’d like to know if he thinks the KP is really even necessary any more. After all, there is no civil war in either Angola or Sierra Leone, and since Guinea, Côte d’Ivoire and CAR represent less than 0.2% of global production, why the expense and effort?
From the perspective of a concerned consumer trying to do the right thing, there are plenty of legitimate gripes to be had about the diamond industry: lack of traceability and therefore the general absence of a guarantee that my diamond is doing ‘good’, weakness of the KP, under-invoicing and transfer pricing, enabling corruption, environmental damage, etc (I’ve made my gripes known here). But consumers are extremely powerful, and we are less powerful, not more, when we act on incorrect information. A speed-reader could be occupied for weeks reading one similar-sounding anti-diamond article after another, but there some are global standouts that actually deserve attention … that they should be ignored (I’m aware of the irony).
This is mostly a rehash of the old and boring “diamonds have no intrinsic value, are a bad investment and we only desire them because of De Beers” argument, as if the consumer is mindless (false), diamonds have no desirable qualities (false), and the only value to consider is what I am offered at a pawn shop or on eBay (false). This reasoning is, well, intrinsically “bullshit”, and Jewelry Atelier does a better job than me of responding to this argument and its other claims here. This argument appears to be more frequently-deployed to diamonds than other equally “valuable” goods for some reason. If the writer’s article is to be true, then it is also true for a multitude of other items people widely consider “valuable”. I won’t even bother reacting to the claim that we only demand diamonds because of “A Diamond is Forever”…
In addition to making nearly all the same claims made by the piece above, my favorite claim made here is that “De Beers has a global monopoly on diamond mining”. Words matter, especially when you have several million views. I remain perplexed about how exactly a company could create and enforce such a monopoly, unless they had somehow confiscated all shovels, pans and sieves in the world. Nevertheless, what they had, was a near-complete monopoly on the supply of rough (very different). It’s also important to note the tense of the verb: had. What they have now is far from it, unless CollegeHumor believes that 22% of global rough production and 37% of sales constitutes a “monopoly”. Being that this piece of trash was published in 2014, it seems that they either do believe so, or started with a conclusion and then lazily hacked together evidence to fit. I lean towards the latter. De Beers also liquidated their stockpile over a decade ago.
Mr. Miklian’s figure has been intensely debated, and there seems to be some confusion between the terms illicit diamonds and blood diamonds. Important nuance of the difference between “up to 25%” (which is a rather large range, but strictly means 0% at the low end, to 25% on the high end)” was therefore manipulatively lost in the headline when Jezebel.com reported that a full “quarter of all diamonds in stores are blood diamonds”: when given a range, they picked the highest end and saw it fit to publish, because it was more headline-worthy. In our tl;dr world, this may be all that most people read.
Moreover, it’s further dishonest to say that a full “quarter of all diamonds in stores” being blood diamonds. By writing “in stores”, we can assume that we’re talking about gem-quality diamonds, and not diamonds in general. While artisanally-mined stones (those most likely to be called “blood diamonds”) represent roughly 15% of world rough production, their share of world gem production is about 4%. However, it would also be dishonest to claim that diamonds mined artisanally are by definition “blood diamonds”, as the tough conditions of which they are mined — and who benefits — vary greatly dependent upon the mine, and when they are extracted. AADM is also ineradicable, and the more proactive approach as advocated by the DDI is most promising. Furthermore, “of all diamonds in stores” seems to lazy assume that all retailers have the same sourcing policies and therefore the same chances of winding up with a blood diamond. This is not the case, and Mr. Miklian himself even suggested to me that I look at Tiffany and Forevermark as viable options.
One could easily call alluvial Marange diamonds “blood diamonds” (or at the very least, less “diamonds doing good”), but those diamonds are not as likely to wind up behind a jewelry counter, as their quality is generally low and they have a noticeable green tint (casting further doubt on the headline “and nobody can tell which ones they are”). For what it’s worth, Ritani, Blue Nile and Brilliant Earth all have explicit an anti-Marange sourcing policy displayed on their respective websites, and trade in green-tinted stones is banned on the polished diamond trading network RapNet. Simply put, these companies understand reputational risk, and have been proactive about publicizing their efforts.
This business has recently gone defunct, but its literature is forever in my memory, and in that of Archive.org. Consider the following sentences: “Since [man-made diamonds] are in fact real diamonds, there is little remaining reason to endure the stigma now attached to natural diamonds. We feel the time has come to start transitioning those employed in diamond mining to sustainable livelihoods in other industries, while phasing out diamond mining altogether. It simply isn’t needed any more.”
Man-made diamonds certainly sound nice on paper, but are not without their limitations: the difficulty of removing nitrogen from the synthesis process generally results in diamonds of a color in the H-K range (if you don’t believe me, go ahead and look at Pure Grown Diamonds’ inventory yourself), the stones tend to max out at just under a carat, and environmental impact depends on how those HPHT machines get their energy.
I can find every reason in the world for being insensitive about future unemployment in the fossil fuels industry should we immediately transition to renewable energy sources, but to call for replacing all of what many countries, communities and millions of people depend on (some with no other options) with rows of HPHT machines, simply because of fungible “stigma”, is a sophomoric argument at best.
Diamonds, like Middle East geopolitics, are an issue that I’ve read a lot about, and the more I read and the more complexities I realize, the less pointed I become. Every time I’ve been linked somewhere, like clockwork this toad emerges from beneath his bridge to call me a shill for the diamond industry, including, as he foolishly and tastelessly somehow saw appropriate, on my fiancé’s Facebook page. Frustratingly, I’m still trying to figure out what exactly the point of this person’s argument is. Is it that by paying taxes to the Israeli Government, all business and citizens are complicit in the occupation, and therefore all diamonds cut and polished in Israel are “war diamonds”?
Frankly, I have too many friends that both live in Israel and disagree with their governments’ policies to buy in to this argument. I’ve already spent too much time thinking about this sad person.
With diamonds, much like the other subjects (religion, politics, foreign policy, etc), the more I read about the subject and the more complexities I realize, the less-pointed and more confused I get. There’s few greater joys to me than stumbling upon a fact or quote that turns my entire world upside-down. Here are (some) of those which launched me down longer roads of reading, research and rethinking:
1. De Beers is now 15% owned by the Government of the Republic of Botswana (GRB).
In 2004, the GRB acquired 15% of De Beers. For what it’s worth, this was also complete news to a Forevermark retailer I recently spoke with (given that being accepted into the Forevermark program was described to me as being the toughest application process with the most invasive background check this person had ever consented to, how do they not know this?). The remaining 85% is owned by Anglo-American, who increased their share from 45% when the Oppenheimer family sold its remaining 40% to … the company founded by Ernest Oppenheimer (Anglo), naturally.
“Anyone closely following the governmental strategies towards diamond mining and diversification will come to the inevitable conclusion that Botswana will sell – and probably sooner rather than later. Selling its stake in De Beers is, for many reasons, in the best interest of Botswana.” — Chaim Evan Zohar
“for a major diamond producer like Botswana, it would be national folly to prescribe that any percentage of their diamonds needed to be beneficiated locally.”— Former Managing Director, Gary Ralfe (2001)
Curiously enough, this position was reversed six short years (and a 15% acquisition by the Government of Botswana) later, under a new Managing Director:
“For the African diamond producing countries, beneficiation is not optional, not a passing whim motivated by political correctness, but an imperative, an absolutely essential and critical part of their macroeconomic policy designed to uplift their economies to provide education and jobs and healthcare for their people and to make poverty history…. We [De Beers] don’t embrace this out of misguided enthusiasm or altruism. No, we embrace it because it makes good business sense and because it is the right thing to do.” — Mr. Gareth Penny, Managing Director, De Beers
A simple query of IMDB confirms this simple fact, but Ian Smillie, Executive Chairman of the Diamond Development Initiative, told me: “Small piece of info: the beach scenes in the movie were shot in Mozambique, but there are no mountains in the background in Mozambique, as in Freetown. But if you look at the movie, there actually are mountains – they used CG graphics to do it. Hollywood: dedicated to getting it right.” The country is still desperate to shake the stigma left from that movie, and of course now with the Ebola crisis, the urgency and difficulty of that job has increased dramatically.
EDIT: Rob Bates of JCK tells me: “You are correct about BD, but there were some stray shots filmed in Sierra Leone. (Zwick calls out one in DVD commentary)”
To compensate for the loss of diamond revenue caused by international sanctions, Taylor sold Liberia’s forests to logging companies – shifting his sources of financing from blood diamonds to conflict timber. Among those who received logging concessions during this period was international arms dealer Leonid Minin who, at the time of his arrest in 2001, was planning a large arms deal for Liberia.[xiii] Also holding major concessions was Dutch national Gus Kouwenhoven, who ran the notorious Oriental Timber Corporation, which was involved in importing arms into Liberia and developed infrastructure that was used to transport weapons to Sierra Leone.
