Diamonds are dug from mines or culled from riverbed gravel in 20 countries. In Africa, significant producers – in descending order by quantity – are Botswana, South Africa, Angola, Namibia, Democratic Republic of Congo, and Sierra Leone.
The vast majority of rough diamonds extracted in Africa are monitored in legitimate fashion by government agencies. The trade contributes significantly to the private sector economies of these nations and is a source of needed tax revenue. This is particularly relevant in Botswana, South Africa and Namibia. As a new control mechanism takes hold in Sierra Leone, that society is also beginning to benefit from legitimate diamond exports.
However, some rough diamonds – a very small percentage of the total supply – originate in areas controlled by rebels and evade proper monitoring. These are the “conflict diamonds” that help finance violent activities of outlaws. They enter the legitimate supply chain in clandestine ways at an early stage – between the time of extraction and the point at which they are processed.
A $50 Billion-plus Market
The international market is large. After cutting, polishing, and being set as jewelry, gem-quality diamonds worldwide had a retail value last year of more than $50 billion. American consumers accounted for about half of that retail market.
There are two sources of gem-quality stones. “Primary” source diamonds are mined from hard rock (kimberlite), often found deep below the earth’s surface. Because of the effort required to extract them, “primary” stones are more easily counted, tracked, and controlled by authorities. “Secondary” source stones, found along river beds, have been thrust to the surface by geological events, loosened from kimberlite, and distributed over wide areas by river systems.
Laundering Is a Threat
These alluvial stones are often of the highest quality. They are commonly found in three of the countries that have seen violent competition for control of minerals: Sierra Leone, Angola, and Congo. Because obtaining them does not require expensive equipment or supervised work forces, alluvial
stones are more difficult to track. They can be smuggled into neighboring countries, their origin “laundered,” and exported with spurious documentation to mask their illicit status.
Regardless of the source, rough, uncut diamonds begin their transformation to jewelry when acquired by trading companies and sent to processing centers. The biggest of these are in Belgium, Israel, Thailand, the U.S., India, and South Africa. There the rough stones typically are refined and sorted according to their type and quality. During this stage, diamonds from several sources are mixed and prepared for distribution to wholesalers and retailers around the world.
Diamonds arriving in the U.S. typically come in shipments that have already been cut and mixed. Therefore, it is impossible to determine by any means – scientific or documentary – the place and time that a specific diamond was extracted. That fact explains why proposals to certify the origin of each individual diamond are unfeasible. In the foreseeable future, the only practical way to eliminate conflict diamonds from the legitimate supply chain is to impose a “certificate of origin” regime that takes effect soon after diamonds are extracted.
Regulatory System Being Tested
The World Diamond Council has cooperated with several African countries, Belgian authorities, and United Nations officials in devising such a system. It requires that authorities in the producing countries closely monitor legitimate output. Rough diamonds are to be sealed in tamper-proof containers, with each parcel assigned a counterfeit-proof document and a unique registration number. The carat weight of each shipment is recorded, and each shipment is registered in an electronic database.
The several countries that are host to processing centers would admit only sealed parcels with appropriate documentation. Processing enterprises would be bound to observe the same rules. Consuming countries, in turn, would accept imports only from countries that have met the certificate-of-origin standards. Shipments from countries that decline to cooperate with the system would be denied entry.
This is the system now being tested on a pilot basis for exports of rough diamonds extracted in government-controlled areas of Sierra Leone to Belgium. It is also the system envisioned in the Conflict Diamonds Act of 2001 being offered by the World Diamond Council.