The Kimberley Controls: How Effective?

The Kimberley Process Certification Scheme (KPCS) may be the biggest thing that has happened to the diamond industry in a hundred years. Ironically and perhaps fittingly, the Kimberley Process began in Kimberley, the town where South African diamonds were discovered in the 1860s. In May 2000, the government of South Africa called together industry, NGOs and governments to see if there might be a way to deal with the problem of conflict diamonds, a problem that NGOs and the United Nations had brought to public attention over the previous 18 months.

Specimen Kimberley Process Certificate
Specimen Kimberley Process Certificate from Togo

The KPCS: A Snapshot

The Kimberley Process Certification Scheme (KPCS) for rough diamonds came into effect on January 1, 2003. Over 45 countries, plus all those represented by the European Community, participate. Under the terms of the KPCS, each participating government agrees to issue a certificate to accompany any rough diamonds being exported from its territory, certifying that the diamonds are conflict-free. Each country must therefore be able to track the diamonds being offered for export back to the place where they were mined, or to the point of import, and it must meet a set of standards for these internal controls. All importing countries agree not to allow any rough diamonds into their territory without an approved KPCS certificate.

Given the large volume of diamonds being traded across borders, it was deemed necessary to produce trade and production statistics which can be compared from time to time in order to ensure that the diamonds leaving one country match those entering another, by volume and by value. Working groups comprising representatives of governments, industry and NGOs deal with statistics, monitoring, technical issues and membership in the KP. A peer review mechanism has also been created, and more than 30 country reviews had been undertaken by October 2006. During 2006, a “Three Year Review” of the overall KPCS was carried out, examining its impact and the effectiveness of its various systems and processes.

Although it would take more than two years to create what became known as the KPCS, the very fact of the negotiations began to have an impact on conflict diamonds and the diamond industry at large. Conflict diamonds were the central topic at the July 2000 World Diamond Congress, which created a representative World Diamond Council (WDC) to take part in the KP negotiations. As negotiations continued, further NGO research and the reports of more UN expert panels corroborated early findings, and in places where diamond controls had been lax – notably Belgium – the rules began to tighten. Angolan and Liberian warlords found it more difficult to sell diamonds, and Sierra Leone’s diamond-smuggling rebel army, starved of ammunition, suffered its first-ever military defeat in the summer of 2000.

Some in the diamond industry like to say that conflict diamonds never represented more than four percent of the world’s total, and that today they represent a fraction of one percent. In fact the reality is more dramatic. In the mid to late 1990s, conflict diamonds represented as much as 15 percent of the world’s total. The hemorrhage of diamonds out of Angola, the DRC and Sierra Leone was enormous and has been well documented. By 2000 when the Kimberley negotiations began, it had been reduced to about four per cent, and today it is certainly less than one percent. The Kimberley Process can take some credit, therefore, for a story significantly more successful than some admit.


It has done more than that, however.  It has helped to raise huge volumes of illicit diamonds to the surface, making honest men out of a variety of criminals. It is estimated that during the 1990s, as much as 20% of the world’s diamonds were in some way illicit – used for money laundering, to evade taxes, to buy drugs, weapons and other clandestine goods, or they were simply stolen. Some participants in the KP say that the system was designed only to halt conflict diamonds and not the wider problem of illicit diamonds. But if you hunt for big wolves you are bound to smaller wolves as well.

The best demonstrations of this can be seen in the DRC and Sierra Leone, where official diamond exports had declined precipitously during the 1990s.  In 1995 the DRC exported $331 million worth of diamonds, but since the advent of the KPCS, much has changed. Official exports from the DRC in 2005 totalled $895 million, more than in any year since the discovery of diamonds in 1907. In Sierra Leone, the turnaround was even more dramatic. From almost nothing five years earlier, Sierra Leone exported $142 million worth of diamonds in 2005. That represents more than just a 50 fold increase; it represents a huge increase in export taxes, income taxes, exploration, mining, trading and export license fees, and a significant decrease in smuggling. And through its statistical data base, the KPCS can verify, for example, that the amount shipped from Sierra Leone to the European Community in 2005 ($133.4 million) is the same as what the EC reports as having been imported from Sierra Leone. The carats, the dollar value and the shipment numbers submitted by the two parties every quarter can be verified.

The significance of these achievements in the diamond world and in the history of the diamond industry cannot be underestimated. They are worth celebrating. And they are worth protecting.

Signs of Stress


By mid 2006, however, the KPCS was showing signs of stress. The peer review system was highly dependent upon the regular participation of a few countries. The two NGO KP members, Partnership Africa Canada and Global Witness, bore the disproportionate expense of financing a civil society team member on each review. Not all reviews were of the same calibre, and the final reports on some of the most important, were delayed for months. The Statistics Working Group was likewise strained by its dependence on voluntary labour from group members, and by lengthy delays in data production. The voluntary chairmanship of each working group suggests a concept of rotation, but the amount of work involved and the cost associated with the chairmanship of the three most important working groups had resulted in stasis, with no change in three years, and none on the horizon.

Worse, when confronted with overt examples of obvious and serious non-compliance in Brazil, Guyana, Ghana and elsewhere, the Kimberley Process seemed to have become paralyzed.

A Three Year Review carried out during 2006 was the first real opportunity to deal with the growing challenges and complexities of the KPCS in a comprehensive manner, but before the November 2006 KP plenary meeting in Botswana, an ad hoc committee dealing with the review had become deadlocked on critical issues relating to funding, professionalization and the transparency of the statistical data base, and the toughening of internal controls in participating countries where these were demonstrably weak.

The Botswana KP Plenary

In a speech on the opening day of the November 2006 KP Plenary, PAC Research Coordinator, Ian Smillie, said, “we meet at a moment of great importance for the Kimberley Process, the diamond industry, and the people whose lives depend not just on a prosperous diamond industry, but one that cannot be used the threaten peace. In the past 18 months, we have seen more and more examples of how criminals and diamond dealers and smugglers and even governments have been able to bypass, subvert and ignore the KPCS with almost complete impunity.”

He spoke of the PAC investigations in Brazil and Guyana, and the about the UN report on conflict diamonds from Côte d’Ivoire. He reported on what PAC had found recently in Venezuela, where all of the country’s diamonds are being illegally exported without any reference to the Kimberley Process.

He said that “When the subject of internal controls came up during the three year review discussions, the best we could produce was a new compendium of ‘guidance’. There is not a single new requirement, not a recommendation as far as I know, that would make the slightest difference to the way things have been managed over the past three years.

"In fact we have spent six months in the ad hoc review committee bickering over this recommendation and that. Six months during which we have had ample proof that while the system can work, it is not working; six months during which we could have exercised authority, but did not; six months during which we could have demonstrated to the industry, governments, consumers and Hollywood that the KPCS is seriously concerned about rampant and obvious smuggling, criminality and conflict diamonds. But we did not.”

And, he added, “A body which represent more than 70 governments, which represents the interests of a $60 billion industry, and which aims to halt and prevent the scourge of conflict diamonds, finds contemplation of any sort of common pool for cost sharing so odious, so ‘unrealistic’, that it brings discussions where the idea arises almost to the breaking point.”Smillie said that the Kimberley Process was at a turning point. “There is a fork in the road ahead,” he said. “In one direction lies the Kimberley Process we have talked about, the ‘remarkably successful’ mechanism that has brought more than 70 countries, civil society and industry together in a combined effort to protect lives and livelihoods. In the other direction lies a talk shop, an increasingly bureaucratic and self-deluding operation that masks the reality of what is actually happening, and which will – if it does not collapse in on itself – do nothing to prevent the recurrence of conflict diamonds.”

What Happened Next

PAC was not alone in its criticism and concerns. Smillie’s comments were endorsed by World Diamond Council Chairman Eli Izhakoff, who agreed that “a cross roads in the evolution of the Kimberley Process” had been reached.  “If we are to build on its success, we must redouble our efforts, here in Gaborone, to ensure that we have a system that will not yield under the scrutiny of a public that rightly demands not just our best efforts but progress and success.” Izhakoff added that “for the international diamond industry and all its dependents around the world, failure is not an option.”

The Botswana Kimberley meeting dealt quickly and appropriately with the issue of Ivorian conflict diamonds leaking out through Ghana. Ghana agree to hold shipments until an independent KP-approved valuator was available to certify that any diamonds offered for sale are Ghanaian and not Ivorian. Ghana agreed to tighten up its internal controls, registering all diggers and all dealers, and the KP will send a review team to Ghana in February to ascertain whether it has done enough. Its continued membership in the Kimberley Process remains in the balance.

A high-level review mission will also be sent to Venezuela to ascertain Venezuela’s willingness and ability to meet KPCS standards and, concomitantly, whether Venezuela should remain in the scheme.

All objections to statistical transparency were removed, and selected KP data, hitherto secret, will now be available to the public. All 43 recommendations in the Three Year Review were accepted, and those that gave the ad hoc committee such problems were resuscitated as priority items for resolution within six months. Among them are issues relating to the financing of the KPCS, penalties for member countries in non-compliance, and a proposal to require governments to demonstrate effective and credible industry oversight, including the establishment of spot checks and requirements for companies to include KPCS compliance as part of their financial auditing process.

Given the pessimism that surrounded the run-up to this meeting, it was a remarkable set of outcomes. Everything NGOs had asked for – some items dating back more than two years – was agreed. From that point of view, it was probably the most successful Kimberley Process plenary in two or three years. It demonstrated that governments and industry recognized the problems that had developed over the first three years of KPCS implementation, and were willing to deal with them.

And Now?

Partnership Africa Canada believes that the changes agreed in Botswana were adopted in good faith, and that all of them will receive attention within the next six months, unless the plan was for earlier implementation. Many of them will be difficult and some will cost money, but we will be there to work with participating governments and industry, and to remind them why the KPCS was established in the first place – to put an end to conflict diamonds now, and forever.

A description of how the Kimberley Process evolved and why its systems are as they are can be found at http://www.verifor.org/case_studies/KimberleyProcess.pdf

More information on the Kimberley Process can be found on the KP Web Site at http://www.kimberleyprocess.com:8080/