Some thoughts from last week’s Rapaport Diamond Conference … 

One of the best presentations was from Aagam Sanghavi, whose company, Sanghavi Exports, is part of Surat Diamond Sourcing, which has gathered a group of Indian manufacturers together to buy diamonds direct from rough producers. This initiative has the potential to change the diamond industry. It also recently signed a deal to buy diamonds from the Marange fields in Zimbabwe.

After an afternoon of speakers expressing reservations about those stones, given reports of human rights abuses in Marange, Rapaport asked Sanghavi why he didn’t segregate the Marange goods out. The reply: “It would be impossible.”

That discussion flashed me back to ten years ago. Then, everyone said it would be impossible to bar “conflict diamonds” from the main supply chain. But eventually the industry and NGOs developed a system to keep the “bad” stones  out of circulation – it’s called the Kimberley Process.  

However, three months ago, in Russia, the KP made what diamond grading labs would deem a “borderline call.” As most of my readers know, in negotiations conducted during the World Diamond Council meeting in St. Petersburg, the KP agreed to let Zimbabwe resume limited shipments from the Marange diamond fields.

Now, there has been a lot of talk about whether the KP should have done this. Suffice it to say, most participants in St. Petersburg felt they had no choice. That includes NGOs, who signed on to the deal (with reservations.) It is too soon to determine if this agreement was the right move, but I think it’s safe to say things are better in Marange now that the KP has engaged with Zimbabwe.

In any case, with some Marange diamonds okayed for KP certificates (and let’s be clear, only two shipments have been cleared so far), there is another question: Is it ethical to buy and/or sell them?

First off, we know that Marange diamonds don’t meet the conventional definition of conflict diamonds (“sold by a rebel group to use against a legitimate government”).  Secondly, there likely aren’t any current human rights violations in the two mines producing KP-approved stones, at least according to reports from some members of the KP review mission that visited the area.

Now, the NGOs claim their access during the mission was hampered, and there apparently was a little fuss about a guard dog at one mine. But, as even Rapaport acknowledged at the conference, in all likelihood there aren’t any atrocities right now associated with the mines producing these stones.  And if there are found to be any, we all should fully except that exports will be halted again, this time for good.

And yet, even assuming that these diamonds are “clean” (meaning free of human rights violations and/or conflict), there is still a reason not to buy them: what is happening to the proceeds. As one of Rapaport’s speakers, Princeton professor of bioethics, Peter Singer, said, “If the money made from these diamonds just goes into the pocket of the military elite, that is a theft of a natural resource, and I don’t believe it is ethical to be complicit in such actions.”

Well, far be it from me to argue with a world-renowned ethicist. And he does have a point. The question of how the money is divided is well outside the KP’s mandate.  But it’s attracting considerable attention in Zimbabwe, with opposition leaders calling for greater accountability. Unfortunately, the second auction was held in secret – the very definition of non-transparency. 

More troubling, at least one of the institutions involved in these mines is linked directly to Mugabe’s party. The first lady of Zimbabwe, Grace Mugabe, is a shareholder in Mbada Diamonds, one of the miners there. It is for this reason that U.S. and E.U. sanctions prevent American citizens and institutions from participating in those tenders, but not from buying from Zimbabwe’s other mines (Murowa and River Ranch.)

Now, the diamond industry has long sourced gems from not-so-nice places – including Mobuto’s Zaire, and apartheid-era South Africa. But companies can no longer avoid scrutiny for such actions. And a case could be made that, by buying these particular stones, you are supporting the Zimbabwe ruler and his cronies.  Which should give us all pause.

It certainly troubled Susan Jacques, president of Warren Buffett-owned retailer Borsheim’s in Omaha, and an attendee at last week’s conference. Jacques was born in Zimbabwe, grew up there, and hopes to one day return. And needless to say, she is horrified by what’s become of that country. 

Jacques told the conference that, after the first auction from Marange, she wrote her suppliers asking them not to sell Marange stones.  She felt so strongly about this that she even notified her suppliers of diamond watches.  Naturally, most told her that they weren’t able to segregate goods by origin; she even got “pushback” from a sightholder, who presumably would be capable of it more than most.  

As Rapaport noted, just as it’s now accepted that bigger stones get GIA reports, if there was a business reason to divide stones by source, companies would do it, particularly those that buy direct from producers. But at this point, most don’t feel a compelling economic reason to do so. There aren’t that many Susan Jacques out there.

Which brings me to my final point: We all hate articles and NGO campaigns that bash our industry. Some of them are indeed nasty, unfair and inaccurate. But they do serve a purpose. At the recent WDC meeting, only the U.S., Canada and Australia wanted any restrictions on Marange exports. Every other country favored immediate resumption.  

Now, if there was a major consumer campaign highlighting the association between Mugabe and those diamonds, does anyone think there would be such lopsided sentiment? 

And that’s the problem. We as an industry can’t just react to campaigns. We need to get ahead of them. We need more debates about the ethics of where we buy diamonds, and procedures to deal with the situations that arise.  Because Marange is not the last of these questions we’ll face. 

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