US Jewelers Hostile Toward Zimbabwe Diamond Industry

Mbada Diamonds chairman Dr. Robert Mhlanga of the Republic of Zimbabwe. The southern African country is rich in diamonds., a photo by Pan-African News Wire File Photos on Flickr.

US jewellers wield Zidera on Zim gems

Saturday, 23 June 2012 18:31

Surat is the largest diamond manufacturing hub in the world.

Business Editor

Jewellers in the United States are now invoking the Zimbabwe Democracy and Economic Recovery Act (Zidera) to try and shut the door on diamonds from Marange, a move that will cut off access to the world’s biggest jewellery market and ultimately affect the local mainstream economy.

Zidera was passed by the US Congress in December 2001 to prevent companies in America from dealing with Zimbabwean firms directly or through third parties as part of a raft of illegal sanctions imposed by Washington on Harare.

Already, there have been disruptions to the fiscus as inflows from diamond proceeds have been less than forecasted.

Recent statistics from the Ministry of Finance indicate that diamond dividend remittances to Treasury in the first quarter of the year only amounted to $30 million against a projected target of $122 million.

In addition, the Minister of Finance, Mr Tendai Biti, has since indicated that the budget targets are now set to be reviewed downwards in the forthcoming Mid-year Fiscal Policy Review.

Though there were spirited attempts by various advocacy groups to broaden the definition of conflict diamonds to include “human rights” issues at a Kimberly Process meeting held in Washington DC this month, African and Asian members of the Working Group on Reform rejected the proposal.

However, jewellery organisations in the United States have resorted to conveniently using Zidera to stymie the flow of Marange diamonds on the global market.

The United States, with a gross domestic product per-capita of more than $48 000, is the world’s biggest market for diamonds at 50 percent followed by Japan at 15 percent and India at 5 percent.

It is believed that the move by the jewellers is meant to frustrate Indian diamantaires (those who cut and polish diamonds) to dump Zimbabwean goods and in the process strangle supply from Marange.

India is the biggest supplier of cut and polished diamonds and diamond jewellery to the US.

Jewellers of America communications manager Mr Lauren Thompson told The Sunday Mail Business last week that it had advised its members not to trade in Marange diamonds because of the “legal sanctions” enforced by OFAC.

“At this time, Jewellers of America has advised members not to trade in diamonds from the Marange region of Zimbabwe. While the Kimberley Process Certification Scheme (KPCS) has agreed to allow the export of diamonds from the Marange region, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) enforces legal sanctions that prohibit all dealings, both directly and through third parties, with the Zimbabwean entities that own or control the Marange region diamond mines and the diamonds exported by these entities.

“As a result, we have advised Jewellers of America members to exercise the appropriate due diligence with business partners, including taking additional precautionary measures for inventory protection in order to ensure compliance with US law and maintain consumer confidence in diamonds.

“Specifically, Jewellers of America members should continue to require their suppliers to provide additional written reassurances, beyond the World Diamond Council’s (WDC)

System of Warranties statement, that the diamonds they supply have not been obtained in violation of applicable national laws and/or sanctions and have not originated from Marange, Zimbabwe,” explained Mr Thompson.

Usually, the World Diamond System of Warranties is used as a declaration on the invoice for each transaction of polished diamonds to ensure industry purchasers and consumers that their diamonds are from conflict-free sources, but the definition is now being tweaked to include gems from countries such as Zimbabwe.

India is the largest diamond manufacturing hub in the world and there have been previous attempts to frustrate traders from trading in Zimbabwe gems.

In August last year, 14 parcels of rough diamonds worth more than $160 million that were bought at a local auction by Indian customers were seized by the United Arab Emirates authorities at the request of the Kimberly Process Working Group despite the fact that the diamonds had legitimately issued KP certificates.

It had to take the intervention of India’s Gem and Jewellery Export Promotion Council (GJEPC), which interceded with the Indian government, for the goods to be released.

The Times of India reported a fortnight ago that heightened sanctions from America “may force diamantaires to look for other markets, which many of them have already started”.

“Many are seeing Dubai and Hong Kong as potential markets for their products,” the paper said.

Policymakers fear that underperformance of the diamond sector might put a huge dent on successes that have been registered in resuscitating the local economy, which is gradually emerging from more than a decade of decline.

Said Minister Biti recently: “Stakeholders would recall that of the 2012 $4 billion budget, $600 million of some of the projects under this budget are ring-fenced for funding directly from the realisation of what is due to the State from the proceeds of our diamond sales at the four mining houses in Marange.

“In this regard, our failure to reverse the underperformance of diamond dividends as I alluded to will ultimately affect implementation of planned projects and programmes.”