How Do You Solve a Problem Like Marange?

Some further thoughts stemming from last week’s post on Antwerp and Zimbabwe:

Whatever you feel about Antwerp World Diamond Centre CEO Ari Epstein’s remarks last week to the Zimbabwe Parliament, he did have a point. His organization was able to get the European Union to remove its sanctions against Marange diamonds, and when Antwerp auctioned those gems, they fetched nice prices. It’s also pledged to help with value addition and improving technical skills. And yet Zimbabwe seems to be favoring Antwerp’s rival Dubai. “Why, when the sanctions are lifted,” Epstein beseeched the country’s legislators, “are you imposing sanctions on yourselves?” 

That may be because the Marange diamond business is controlled by people like Robert Mhlanga, the chairman of Mbada Diamonds, the largest miner in the region. Earlier this month, he told Parliament he has “reservations” about selling to Antwerp. “We have actually reeled under sanctions, thanks to Brussels,” he said. “Now, because they have claimed to have lifted sanctions, we run to them.”

At around the same time he made these comments, it was announced that Mhlanga—who is also Zimbabwe president Robert Mugabe’s former pilot, and reportedly has “close ties” with the country’s leader—had joined the board of the Dubai Diamond Exchange. Given that press accounts suggest his company may soon control all of Marange’s diamonds, that is quite a coup for Dubai. And yet, not all the attention Mhlanga has received lately has been positive: 

Government and ruling party officials used an intricate offshore syndicate to divert diamond revenue to buy themselves property and amass wealth, according to a leaked document send to the IMF by a group of whistleblowers.

The document names former Mines and Mineral Development Minister, Obert Mpofu, and the Chairman of Mbada Diamonds, Robert Mhlanga, as some of the players in the diamond revenue scam.

Now, if the above allegations are true (Mpofu has denied them), it’s another sign that the Zimbabwe diamond sector is riddled with corruption, as even some in the country now acknowledge. (The fact that this is being discussed openly—even in a government newspaper—does make one a little hopeful.)

But let’s look at the bigger issue. It seems to me three are three ways to deal with a problematic source like Marange.

Option 1: You take the money and run. You figure that Zimbabwe has diamonds to sell, and you do what you have to do to buy them. This may hurt the industry’s image long term, but in the short term, you are making money. You are also arguably helping the country’s economy by providing some employment, even if it’s not clear all the money is going where it should.

Option 2: You stay away. (For U.S. citizens, this is mandatory, due to OFAC sanctions.) Now, many, including me (most days), consider this the best option. It is by no means a good option. It hurts people who don’t deserve it, and helps drive Zimbabwe into the arms of less-than-legitimate players. And, a local NGO recently charged, sanctions have become an excuse to hide all sorts of shady doings.

Option 3 is what might be called “constructive engagement,” a term popularized by the Reagan administration in the 1980s to defend maintaining relations with apartheid-era South Africa (as an alternative to sanctions). Ideally, this would mean well-meaning actors in the industry sell Zimbabwe diamonds, but try to help reform the industry. What happened with the Kimberley Process and Marange—even though many have issues with its eventual resolution—is a good example of this. If the KP hadn’t blocked Marange diamonds for two years, it’s quite possible the kind of widespread violence that happened in 2008 or 2009 would still be occuring. And if Zimbabwe felt it had no chance to get the ban lifted, it would have had no incentive to change.

Theoretically, this option could help the most. Yet since it represents a middle ground between two clearly defined poles of behavior, it is also fuzzy and problematic. Selling Zimbabwe goods will always be in someone’s self-interest—this is a business, after all. So unless you are open about what you are doing—and perhaps a good reference point would be the reporting requirements now imposed on U.S. companies doing business in Burma—the outside world may perceive you only care about money (i.e., option 1).

Moreover, the terms and goals of engagement need to be clearly defined. Is the organization or company willing to walk away if things don’t smell right? Should you work with people who have been accused of serious crimes? How much are you willing to compromise? At some point, “playing a constructive role” can turn into enabling. Again, take the KP. While its actions may have literally saved lives, by approving unlimited exports from Marange, many think it just gave an official okay to a flawed system.   

These aren’t easy issues. But they need to be on the industry’s radar. It appears the AWDC has already bumped into the limits of constructive engagement. It had sanctions removed. It held a successful auction. It’s not clear what it got—or what’s improved—as a result.

And that might be the problem: There might only be a fixed amount you can do to get certain actors to raise their standards. At some point, you may just have to conclude that the game is rigged.

JCK News Director