Conflict Diamonds are Forever
from the 11-part series
Making a Killing
The Business of War
The Center for Public Integrity
Until the Kimberley Diamond Exchange opened
in 1999 with tight security, surveillance cameras and two
double sets of iron gates the birthplace of the South African
diamond industry had all but disappeared from the radar of most
serious diamond buyers. What had been the epicenter of the country's
diamond rush had since become best known for the world's largest
manmade pit, the "Big Hole" as it is simply called,
created by diamond diggings in the diamond rush of the late 19th
The history of the place is entwined with
that of De Beers Consolidated Mines Ltd., better known simply
as De Beers, which was founded by British imperialist Cecil Rhodes
in 1888, when the fabulous wealth of the newly discovered Kimberley
diamond fields gave rise to the company that would become the
world's diamond monopoly. At the height of its powers, De Beers
controlled about 80 percent of the world's diamond supplies, striking
joint venture deals with most producing countries that enabled
the company to control the release of diamonds onto the world
market and thus maintain its prices. De Beers, now a privately
held company with offices in Kimberley, Johannesburg and London,
today controls about 60 percent of the world's diamonds.
De Beers gradually offloaded its Kimberley
diggings during the 1990s because of a supposed dearth in diamonds,
leaving the city as little more than a nostalgic base for the
company's board meetings and Harry Oppenheimer House, its main
diamond sorting center for southern Africa, named after the man
behind the modern De Beers diamond cartel. But
in the last two years, there's been a boom in diamond sales in
the small town.
Twice a month, the exchange offers its
diamonds for sale, putting this little town back on the world
diamond map. Foreign dealers, packed into small prop planes, make
the 70-minute flight from Johannesburg International Airport to
Kimberley's own small airport. From there, they drive to the single
story building with opaque windows on the outskirts of the town's
dilapidated business district that serves as the Kimberley Diamond
Exchange. After submitting their tenders, or bids, the diamond
traders usually fly out the same day.
The sudden renaissance of Kimberley has
been attributed to new diamond discoveries in what De Beers regarded
for years as worthless land at least for mining. And that
has fed rumors in the close-knit international diamond community
that Kimberley has become a major laundering center for Africa's
"conflict diamonds" diamonds from areas of Africa
wracked by civil war, where combatants use their control of the
mines to fund arms purchases for their fight.
Officials from the South African government
diamond valuator an independent company appointed by the
government to value and monitor diamond exports say they
suspect that diamonds from countries to the north are being laundered
through the diamond "diggings," or small mining operations,
around Kimberley. Local diggers who have habitually mined only
a few carats a month have been turning up in Kimberley with the
equivalent of a small mine's production. Their explanations range
from "I hit a good pocket" to "I put these away
for a rainy day," according to the officials, who spoke only
on condition they not be named.
Derek Corns, who together with his brother
has spent time on diamond diggings in Angola, runs the Kimberley
Diamond Exchange, and is popular with international diamond traders.
Corns does not believe his exchange deals in conflict diamonds,
but he is pragmatic. As long as dealers supplying him with diamonds
provide invoices, he said, "It's legal, in my book,"
even though the invoices provide no proof of the diamonds' origin.
Corns says his buyers include some of the biggest names in the
diamond business including top clients of De Beers
and they would be able to pick out suspect stones with ease. "If
it's that illegal, why be here?" he asked.
The word in the industry, which Corns
acknowledged is making the rounds, is that easily identifiable
diamonds from other African countries, such as the Democratic
Republic of the Congo, have been identified by people familiar
with such stones. One dealer recently
brought in a parcel of Russian diamonds, Corns said, and police
While there have been several investigations
into conflict diamonds in Kimberley, no charges have ever been
filed and, in fact, South African authorities have never convicted
anyone for dealing in conflict diamonds, in part because of the
difficulty in proving the origin of the stones.
Yet intelligence sources have named some
players in the Kimberley Diamond Exchange as traders in conflict
diamonds. One prominent diamond trader who is a De Beers "sightholder"
the term used to denote the elite cadre of about 120 dealers
selected to buy and market the company's rough stones was
alleged in a 1999 classified European intelligence report to have
continued buying diamonds from Angola a hub of conflict
diamond trading after the United Nations banned purchases
from African nations known to deal in conflict diamonds. He is
also known in the diamond industry for having ties to Hezbollah,
the Islamic terrorist organization.
Corns explains the increase in the exchange's
business this way. Local diggers have made up to 30 percent more
money selling through him as opposed to selling their stones
themselves and so they have been able to invest in more
equipment and find more diamonds. His main contributor and shareholder
in the exchange, Chris Potgieter, has a large digging operation
near Kimberley and is now reputed to be the biggest diamond miner
in South Africa after Trans Hex, a South African diamond company,
and De Beers. Potgieter bought the main area he mines from De
Beers in 1997 for about $200,000. Between January 2000 and October
2001, sources told ICIJ, Potgieter recorded $40 million in diamonds
sales up to $2.6 million in some months alone with
the South African Diamond Board, which is supposed to monitor
and regulate the country's diamond mining industry and diamond
Diamond experts are divided as to whether
he could produce such amounts from his mine. One expert, speaking
privately, said he thinks Potgieter's operation is legitimate
and essentially a mining miracle and does not believe that Kimberley
is being used for large amounts of "hot diamonds."
Potgieter simply employs old-fashioned diggers
who have proved themselves extraordinarily adept at handling their
sorting pans, the expert said. He also has one of the biggest
fleets of mechanical digging machines in the country and runs
a lean, efficient operation. In comments to ICIJ, Potgieter said
his operation had expanded considerably, and that his original
De Beers' plot was now "one of 10 [mining] operations."
De Beers' original prospecting notes
regarding some of these same diamond sites suggest that no such
bounty was in the offing. In August 1965, the company's geologist
recorded that "No diamonds were discovered during the month"
at Koppiesfontein, a mining area near Kimberley. The same was
reported for that September. In October, the notes said, "Three
diamonds were recovered from Paddock 20 during the month with
weights of 1.47, .32 and .17 carats." One year later, De
Beers' geology department again reported to the mining commissioner
that no diamonds had been found. The report concluded "Diamonds
recovered nil. Labour used 16 Africans (26-day month). Loads excavated
648. Loads washed 52."
Yet more than 35 years later, those same
mines are supposed to be the source of Kimberley's sudden flood
The gem squad
Not far down the road from the Kimberley
Diamond Exchange are the offices of South Africa's gold and diamond
police squad. From their musty, forlorn two-story building on
a residential street just outside the town center, the officers
are tasked with policing illegal diamond buying the acquisition
of unregistered stones or by people without diamond licenses
as well as any trade in conflict diamonds. South Africa and Namibia,
which it ruled until 1990, are the only countries in the world
where it is illegal to possess an unlicensed uncut diamond. Laws
prohibiting "IDB," as illegal diamond buying is known,
were an important mechanism engineered by De Beers to entrench
With only a few cars to patrol the province
of the Northern Cape which comprises about 30 percent of
South Africa the gold and diamond police are no match for
wealthy smugglers on the Atlantic coast who have helicopters at
their disposal. In addition, more than half the squad's 27 offices
across the country have closed, as the South African police turn
already scarce resources to fighting the country's notorious violent
Superintendent Danie Bruwer of the Kimberley
gold and diamond squad and members of his team say they have never
found any conflict diamonds in their area. These policemen, who
are wary of discussing the problem without hard evidence, say
they get occasional tips about local traders possessing conflict
diamonds, but have never managed to obtain enough proof to make
a prosecution possible. They are dismissive of stories about large
amounts of conflict diamonds being laundered in Kimberley. "Why
bring them all the way down here, instead of straight to Europe?"
Bruwer asked in an interview with ICIJ.
But back in Pretoria and Johannesburg,
senior South African authorities are convinced that Kimberley
has become a center for conflict diamond laundering, though no
one will say so on the record without hard evidence. Despite its
stringent diamond-policing laws, South Africa is a relatively
amenable place for smuggling because of lax law enforcement. Additionally,
the "export" of illicit diamonds from South Africa is
an effective way of laundering their origin because of South Africa's
first-world infrastructure, respectable reputation in the diamond
industry, and indigenous source of stones.
For years, De Beers has created the impression
that most of South Africa's diamond fields have been fully excavated
and that there is little left of interest. As one source close
to the company told ICIJ, De Beers' modus operandi for many years
was to be tentative about what diamond fields it developed anywhere.
It is, therefore, possible that areas believed to be bereft of
diamonds are now worth developing. And improvements in digging
equipment means prospectors like Potgieter can get to diamonds
his predecessors could not. Nonetheless,
the fact that the biggest diamond company in the world sold off
areas around Kimberley that are now producing substantial amounts
of diamonds has fueled suspicion that something is wrong.
The problem for the small, poorly resourced
band of South African officials charged with monitoring the Kimberley
diamond trade is that even if a digger turns up regularly with
strikingly large parcels of diamonds that do not appear to be
local, successful prosecution is difficult. That's because diamonds
cannot be reliably traced with sufficient, court-proof accuracy.
A collection of diamonds from the same area can, in many instances,
be pinpointed, but if the stones are mixed it's nearly impossible.
Conflict diamonds got their start in 1992
in the bush war of Angola, where UNITA leader Jonas Savimbi, seeking
new ways to finance his army, looked to the country's vast diamond
fields to extend the smuggling business that his rebel movement
had pioneered in the 1970s and 1980s. By 1993, Savimbi had in
place the world's largest diamond smuggling network, netting hundreds
of million dollars a year with which he bought arms. Among those
companies dealing with Savimbi's diamonds was the South African
company, De Decker Diamonds, which admitted selling the diamonds
directly to De Beers. De Beers has acknowledged doing business
with De Decker, but has said it never knowingly bought diamonds
This pattern in which diamonds were
used as war currency was replicated in other African conflicts,
particularly in Sierra Leone, Liberia and the Democratic Republic
of the Congo. But it was not until 1998, when the United Nations
first began investigating conflict diamonds, that the issue grabbed
the attention of the industry and diamond buyers and the public
worldwide. Canada's ambassador to the world body, Robert Fowler,
oversaw in-depth conflict diamond reports, which named some of
the individual culprits and highlighted the lack of oversight
at key diamond centers worldwide, such as Antwerp and Tel Aviv.
Subsequent reports in 2000 by Global Witness, a London-based,
non-governmental organization, further highlighted the trade in
what came to be known as "blood diamonds."
The United Nations ultimately created
a "monitoring mechanism" to investigate conflict diamond
peddling in Angola, and the Security Council imposed sanctions
on diamond dealing with UNITA in 1998 a ban later expanded
to Liberia and the rebel-held areas of Sierra Leone. But only
a handful of countries enacted laws to implement the sanctions,
and the only known prosecution for trading in blood diamonds is
expected to begin in the coming months in Belgium.
The conflict diamond issue took on greater
significance, however, after the Sept. 11, 2001, terrorist attacks
on the United States, when media reports cited evidence that diamonds
were used by terrorist organizations, including al Qaeda, as a
means of transferring their wealth globally.
But, as the ICIJ investigation found,
the ties to terrorist organizations go back even further. The
diamond dealer identified in the European intelligence report
is known in the industry for his association with Hezbollah, according
to two diamond dealers who have worked closely with him but who
would not speak on the record. The intelligence report also says
that the dealer's company has done business with the terrorist
organization, and that the dealer is connected to a web of influential
Lebanese families working in the Congo and West Africa that includes
Imad Bakri. Bakri was identified in a 2000 U.N. report (under
the name Imad Kebir) as a major supplier of weapons for UNITA.
Responding to the heightened attention
on conflict diamonds and seeking to protect their industry, southern
African officials launched the Kimberley Process a name
recalling not only the birthplace of the country's diamond industry
but, ironically, the home of its latest controversy. Set to begin
in January 2003, the process provides for an international framework
in which to identify and record the origin of the world's diamonds
under the auspices of the diamond industry's World Diamond Council,
which includes senior De Beers' executives. But even that process
has been criticized. The General Accounting Office, the investigative
arm of the U.S. Congress, said in a February 2002 report that
the Kimberley Process was inherently flawed. "[T]he
period after rough diamonds enter the first foreign port until
the final point of sale is covered by a system of voluntary industry
participation and self-regulated monitoring and enforcement. These
and other shortcomings provide significant challenges in creating
an effective scheme to deter trade in conflict diamonds."
De Beers creator of the "a
diamond is forever" marketing campaign knows better
than anyone that its industry depends heavily on perception. After
initially being defensive about the issue of conflict diamonds,
De Beers came to see the advantage of it. With its monopolistic
hold on the world supply of rough diamonds slipping by about 20
percent in recent years, here was a way of regaining control and
decreasing the supply of diamonds, or at least socially acceptable
ones. De Beers stopped buying diamonds on the open market
in Africa and in Antwerp, the world's diamond trading capital
relying instead on its own mines and other countries where
it has marketing joint ventures with local producers. It also
created the concept of "branded diamonds" stones
engraved with the De Beers' brand on special machinery developed
in the United Kingdom guaranteeing, among other things, that the
stones are conflict free.
"Conflict diamonds were one of the
greatest marketing tools ever invented," one South African
trader said on condition he not be named. De Beers has dismissed
any suggestion that it is actively promoting the campaign against
conflict diamonds. But, asked in December 2000 whether the conflict
diamonds issue had turned out to be a blessing in disguise, De
Beers chief executive Gary Ralfe replied, "Absolutely,"
adding that the company hoped to eliminate conflict diamonds.
De Beers has taken several steps to reduce,
if not eliminate, its exposure to conflict diamonds. Apart from
halting its open market buying operations in Africa and in Antwerp,
De Beers has stopped buying stones from official government mines
in African countries, such as the Congo. Unless such operations
can guarantee that no diamonds from rebel areas leak into the
system a guarantee that is impossible to give in most cases
De Beers says it cannot take the risk.
But given its dominance in the diamond
field, some question whether De Beers has been as untouched by
conflict diamonds as it has claimed or whether there aren't blood
diamonds in its vast vault of stones. De Beers' tentacles stretch
into most corners of the diamond industry, and it bought diamonds
from rebels in Angola until the 1998 U.N. sanctions took effect.
In addition, De Beers' opaque operating
procedures make it impossible to trace the origin of its diamonds.
For example, the company mixes its collection of stones, making
it nearly impossible to determine their origin. All the stones
De Beers purchases are combined at the company's offices in central
London before being sorted into 16,000 categories for its sightholders
to examine. "De Beers' system is based on the mixing of all
supplies into one production for sale. The origin of the diamonds
is deliberately obscured for commercial and logistical reasons,"
Emma Muller, a journalist specializing in the diamond industry,
wrote in South Africa's Business Day in March 2002.
De Beers has long given the perception
that it exercises considerable control in the African countries
in which it operates. The government of Botswana is often jokingly
referred to as a division of De Beers, and in both South Africa
and Namibia, De Beers has had close relationships with the government.
Since the conflict diamonds debacle began, this reputation for
control has ironically obliged De Beers to seek to underplay the
company's strength or ability to peddle influence.
"We certainly don't have the powers
people vested in us. We are influential, 'not omnipotent,'"
Andrew Bone, the company's public affairs chief in London, said
in an April 2002 interview. When asked about the situation in
Angola, Bone said that since the company moved out of the open
market there, it has had little intelligence on what is happening
in the country. Shortly after Bone's assertion, however, De Beers
hosted a conference at its game reserve in the Richtersveld, in
South Africa's Northern Cape province. Attending
the "Governance Development and the Logic of African Stability"
conference were diplomats, academics, journalists and Angolans.
The Angolan contingent included Abel Chivukuvuku, listed on the
program as a civil society leader and parliamentarian. He is,
in fact, being tipped as a future star of UNITA.
De Beers' position on conflict diamonds
is further complicated by the company's intimate relationship
with its sightholders, who receive their allotments of diamonds
from De Beers in London. The system allows De Beers to reward
favored sightholders with what are called "special stones"
windfalls that can dramatically affect a sightholder's fortunes.
The De Beers monopoly hinges on influence,
knowledge and trust, and the sightholder network is a crucial
part of this axis. Favoritism also
plays a role. Benny Steinmetz, an Israeli diamond dealer, is now
widely seen as De Beers' king among sightholders, according to
industry insiders. He has historically
been an important presence for the company in Angola and is believed
to be involved in the company's plans to return there now that
war has ended. He is also influential in South African politics,
with close ties to African National Congress luminary-turned-businessman
Tokyo Sexwale, whose Mvelaphanda Resources is now partnered with
De Beers in South Africa. Sightholders of Steinmetz's caliber
get to be part of the club, in part, because they use their political
influence to look after the interests of the company.
All of which means that De Beers is exposed
to any indiscretions on the part of its sightholders, such as
the European dealer with alleged ties to Hezbollah and conflict
diamonds, named in the intelligence report. One of De Beers' problems
is that its methods of control have bound it to so many players
in the diamond industry that it has to keep an eye on what all
these players are up to where suspect diamonds are concerned.
If, for example, there was any action taken against the sightholder
trading at Kimberley, De Beers would be exposed and have to take
action itself. The company has tied its sightholders to an ethical
pledge, which precludes trading in conflict diamonds. Bone, the
De Beers spokesman, says that as far as sightholders are concerned,
"we speak to them time and time again on the issue. They
are acutely aware of the issue and what it means even if they
inadvertently [receive a suspect stone]. But our powers are limited."
International efforts such as the Kimberley
Process and the United Nations monitoring mechanism on conflict
diamonds have spotlighted the helplessness and ineptitude of the
South African authorities whose monitoring efforts are,
by comparison, among the best on the continent.
There are, for example, no officials from
the South African Diamond Board in Kimberley to monitor what kinds
of stones go through the exchange. The only regularly monitored
stones in Kimberley are those in De Beers' Harry Oppenheimer House,
the company's sorting center for southern Africa, which are examined
by the government diamond valuator.
In Johannesburg, the situation is not
much better. The diamond bourse, on
the fifth floor of downtown Johannesburg's Jewel City, has dealt
with between U.S. $360 million and $490 million worth of diamonds
a year for the past three years. Diamond buyers are required to
be licensed by the government a license which foreigners
cannot obtain but licensees are allowed to be accompanied
by foreign associates, who generally provide the financial backing
for most serious South African diamond dealers. Although South
African law requires diamond producers to offer their stones to
local cutters first before exporting them, no more than 10 percent
of the diamonds passing through the bourse stay in South Africa.
Diamonds coming into the bourse are also
supposed to be checked by Diamond Board representatives to be
valued and identified. But they rarely are, and when checked,
not by anyone with sufficient experience to identify the origin
of the stones, officials at the government diamond valuator concede.
In November 1999, the South African government
diamond valuator filed a report on the bourse stating that inspectors
weighed incoming diamonds, but did not "examine or check
them as prescribed under the [1986 Diamond] Act."
The report continued: "The Bourse
personnel say this has been the practice for sometime, and were
not aware of this requirement. No one seems to know the rationale
behind this legislation, but this process could help particularly
small diamantaires against being duped into buying fake diamonds.
In the present situation Angolan diamonds supply would be minimized."
The clear implication being that Angolan diamonds were being laundered
through the bourse.
The report encapsulates the irony of the
diamond business in South Africa. There is an extensive armory
of legislation to monitor the progress of diamonds from the moment
they are mined to when they are sold. These rules were established
in the late 19th century following the discovery of diamonds and
the creation of the De Beers monopoly in South Africa and later
also implemented in neighboring Namibia to protect De Beers. They
were so tightly written that they obliged diamond dealers to register
with the police even the transfer of diamonds between different
magisterial districts. Such rules could now make South Africa
a relatively easy country in which to monitor the flow of illicit
diamonds. But the rules are seldom observed.
In fact, diamond dealers in Johannesburg's
Jewel City quip that the porous bourse means smugglers no longer
have to bother with the "anal express" a reference
to the smugglers' practice of taking uncut diamonds out the country
in condoms secreted in their rectums.
The Kimberley Process, which includes
representatives of the industry and non-governmental organizations,
is headed by the chair of the South African Diamond Board, Abbey
Chikane. Appearing out of touch with the diamond situation in
his country, Chikane incorrectly told The Mail & Guardian
newspaper in December 2001 that there was a satellite office of
the South African Diamond Board monitoring the trade in conflict
diamonds in Kimberley. Meanwhile, the
South African Diamond Board, which should be at the forefront
of monitoring illicit diamond activities, is wracked by internal
squabbles and denuded of resources and staff, according to industry
insiders. It did not send inspectors to investigate the allegations
of conflict diamond laundering in Kimberley and does not have
enough staff to check the detailed documentation diamond traders
are supposed to submit on all diamond transactions.
Amid this chaos, De Beers still exercises
considerable influence over the government organizations handling
the diamond industry, including the South African Diamond Board,
by dominating its main board and various committees with directors
and sightholders close to the company. The board, in theory, has
massive powers. The preamble to the country's 1986 Diamond Act
says the board should exercise "control over the possession,
purchase and sale, the processing and the export of diamonds;
and for matters connected therewith."
In reality, the board does little of this,
and its senior office holders appear to have little grasp of their
duties. Five weeks after being asked in early 2002 for statistics
on the operations of the Johannesburg Diamond Bourse, Chikane
said he could not obtain the information. Days later, he said
the bourse president, Ernie Blom, a De Beers sightholder, could
and would provide them, but was under no obligation to divulge
them to either the board or the public. The Diamond Act mandates
that Chikane's board should not only have an up-to-date record
of all the bourse's figures, but it should also monitor closely
the source of all incoming diamonds. Further regulations require
that "the management of the said diamond exchange shall examine
and check the physical particulars of the diamond before putting
the diamond out to tender."
The politics of the board have grown increasingly
turbulent since the appointment in 1999 of a new, independent
government diamond valuator. The chosen
company, a Belgium-based operation called DVIC headed by Claude
Nobels, soon crossed swords with De Beers. The new valuator, which
compiled the critical bourse analysis, has questioned the 1993
transfer to London of De Beers' South African stockpile of diamonds,
ahead of South Africa's first democratic elections in 1994. Nobels
also alleged that De Beers has consistently undervalued its diamonds
through transfer pricing a process by which international
companies transfer the value of goods and services within the
corporation and its subsidiaries from various country bases, finally
declaring it where the tax is lowest. Nobels
has also focused attention on the opaque relationship between
De Beers' South African operations and its London office and exposed
the cozy relationship between De Beers and the South African Diamond
In December 2001, the Diamond Board's
assets were attached by a South African court and its phone cut
off after Nobels sued for nonpayment of fees. Since paid, Nobels
and his team cost the South Africans about $1 million a year,
the bulk of the Diamond Board's budget. De Beers, having initially
favored Nobels, now considers the Belgian intensely irritating,
according to sources in the diamond industry.
Nobels' revelations have raised questions
about De Beers' commitment to combating conflict diamonds. On
many fronts, the company has helped to raise awareness and to
combat the flow of conflict diamonds, through public statements
and through helping international bodies such as the United Nations
with information and advice. But De Beers which virtually
since its inception has been intimately involved in the South
African government's management of the diamond industry
has done little to help prevent the collapse of the institutions
that could check the flow of Africa's blood diamonds, which have
fueled so many of the continent's conflicts.
If anything, dealers and sightholders
close to De Beers have sought to undermine Nobels and the former
chief executive of the diamond board, Victor Sibiya, who often
stopped consignments of diamonds scheduled for export. Sibiya
was suspended in May 2002 and replaced by Louis Selekane, the
former head of the Kimberley branch of South Africa's Department
of Minerals and Energy, which was raided in May 2002 for improperly
distributing licenses. It subsequently emerged that Selekane had
commercial interests in at least one mining company that benefited
from mining licenses given out by his department. Sibiya later
told ICIJ that the diamond board needed "considerable strengthening
if it is to help enforce the Kimberley Process."
Selekane told the Mail & Guardian
that he was unaware of the charges against him, and said he did
not believe he had a conflict of interest, adding that he had
declared all his personal interests to the government before his
appointment. Tom Tweedy, De Beers' spokesman, said suggestions
that the company controlled South African diamond monitoring institutions
In addition to doing little to help improve
the Diamond Board, De Beers' employees privately express the opinion
that South Africa's existing diamond institutions serve little
purpose. In the days when the company needed illegal diamond buying
legislation to neutralize competition to its South African mining
operations, the system it influenced heavily worked smoothly.
But with De Beers' delisting from the Johannesburg Stock Exchange
in 2000, the South African mining giant, Anglo American, the Oppenheimer
family and the Botswana government are the only shareholders in
the now-private company. The move, ostensibly taken to avoid the
complicated cross-holdings between Anglo and De Beers, has taken
De Beers outside the public spotlight.
Many believe the conflict diamonds saga
will continue, if for no other reason, because the diamond industry's
operations are complex and opaque. "The international diamond
system is monopolistic, in many instances corrupt, and bogged
down by issues such as transfer pricing, smuggling, drugs and
tax evasion," Charles Wyndham, an independent diamond consultant
and the Canadian government's diamond valuator, told ICIJ. "I
would argue that the opaqueness of the industry actually attracts
scrutiny from the likes of those pushing the conflict diamond
Despite the attention, no one has ever
been convicted in South Africa for selling conflict diamonds.
But change may be on the horizon. De Beers' new "supplier
of choice" strategy, where only those sightholders with the
best retail prospects will be honored with De Beers stones, is
set to launch as soon as the company addresses satisfactorily
the European Commission's concerns about the scheme's monopolistic
implications. The strategy will have the effect of making the
relationship between De Beers and its sightholders less personal
and more commercial. It will also allow De Beers to edit its sightholder
list, erasing those who are not presentable enough for the new,
more open system. And, for the first time, there will be contractual
obligations for sightholders regarding their conduct. Those in
the company charged with monitoring the conflict diamonds situation
indicate that this new system will make it far easier to deal
with errant sightholders.
The demands of certification processes
like the Kimberley Process also will force out some suppliers.
Only those with reasonable resources will be able to comply with
the restrictions, and De Beers' "supplier of choice"
initiative is likely to concentrate on the upper end of the market,
leaving the lower end exposed to market forces without the protection
of cartel. As one person close to the company said, "There
will be De Beers diamonds, then there will be diamonds that are
deemed OK with the 'forever' mark [a De Beers brand], and then
there will be the rest."
But others, outside the De Beers' family,
are also catching on to the idea of branding diamonds, especially
Canadian companies, which have opted for a polar bear mark signaling,
not so subtly, that diamonds from Canada cannot possibly be tarnished
by the blood of African conflicts. An industry insider said that
Tiffany & Co., the New York jewelers, would like to source
its diamonds only from Canada.
In Kimberley, the side road running past
Harry Oppenheimer House, situated so that its angled windows give
sorters the best possible light in which to work, is called Tiffany
Street. If De Beers does not master the conflict diamond issue,
one day that street could be the closest it gets to enjoying the
cachet of that particularly famed name.