Months of labor and discussion involving the top echelons of the diamond and diplomatic worlds are about to come to fruition as the Kimberley Process (KP) is implemented in Angola, Conakry Guinea and Sierra Leone. It will be activated in all the other signing countries by November 1.
What this will mean to the clean, legal trade of diamonds was explained by Gregg Hupert, managing director of Independent Diamond Valuators: “When addressing the issue of the Kimberley Process, people often mix two different goals — fighting the sales of conflict diamonds and preventing unofficial trade. Both are key to a healthy business, but KP was developed, under the United Nations, with the very precise aim of finding a solution to conflict diamonds.”
The instrument through which KP is to be implemented is the certificate of origin, which summarizes essential information such as stones’ value and origin.
Within KP, independent valuators play a key role, hired by local governments to assess the value of rough production ready for export. “We often need the Rapaport Price List to evaluate the price of the rough that is submitted to us, since our reference is the polished that can be extracted from it,” says Hupert.
The spot value of rough is important to governments because they collect a certain percentage in royalties, usually paid before export. Since royalties often represent a considerable amount of the gross revenue of the country, such figures are closely monitored by such institutions as the IMF and World Bank. Their concern is that the governments applying for loans be able to make payments.
The other essential task of independent valuators is to confirm the origin of all goods submitted to them. They monitor mine outputs according to history tables and check such factors as the consistency of the quality, the size, the typical characteristics and the morphology of the stones. Producers are required to keep the output of the various mines separate so that the stones’ origin can be clearly identified. After it has, export companies are allowed to mix goods in parcels, but only in front of the valuators. The diamonds are then digitally photographed before being packaged in unbreakable sealed bags.
The parcels exported from producing countries must travel accompanied by certificates of origin (recording key elements such as serial number, photos, total weight and total value) issued by the governments based on the information supplied by the independent valuators. The certificates feature advanced fraud-proof systems and are in some respects similar to bank notes. The information they contain usually reaches the destinations before the goods themselves, which increases control.
Hupert said, “The idea of KP was to try to keep track of goods as they are reexported to other centers, but experience has shown that it was too burdensome a process, at least at the moment.”
As Hupert continued, “KP aims at establishing a transparent system between the production regions, the export capital and the destination location. This goal has now only been partially reached, since while mine outputs are rather easy to control the verification of alluvial sources by nature is much more difficult to do.
“But new control systems are being tested. In Angola, diggers are now required to buy a license. But the best system in my opinion is the one implemented by the World Bank in Central Africa, in 1982. No diamond can change hands without a form – from the digger to the collector and to the purchase and export offices.”
One of the biggest areas of vulnerability seems to be that the producing country hires the independent valuator. The system could probably be more efficient if they were hired by a control organ directly under the UN.
Another disadvantage is that several countries, such as Congo Brazzaville, have not subscribed to KP, weakening the entire system. “No system can be perfect and the fact that the diamond industry has taken concrete measures to prevent conflict diamonds from finding an easy way to the open market is a breakthrough in itself,” concluded Hupert.