G7 jets in but diamonds remain in jeopardy
Mbongeni Mguni | Monday January 22, 2024 17:08
If the local industry was looking for assurances from the Group of Seven (G7) technical team that was in the country week, then many were sorely disappointed. After wide-ranging consultations in the country this week, including visits to the world-famous mines and the state-of-the art facilities in Gaborone, the technical team was non-committal on what feedback they would give their principals in the G7.
The G7, which comprises the United States, the United Kingdom, the European Union and other industrialised states, is set to adopt tough new rules to stop Russian stones from entering the global diamond industry. Russia is the world’s largest producer of rough diamonds by volume and while the US long imposed sanctions due to the invasion of Ukraine, Moscow’s diamonds continue to freely trade in the market and into the US.
Amongst its various elements, the G7’s plans involve all polished diamonds being sent to a single node for certification that the stones are not of Russian origin. The G7 have selected Antwerp to be that node, and the technical team was in Gaborone to kickstart consultations towards developing a traceability system that will have the certification running by September.
The G7’s move represents a swing back to Europe for global diamonds at a time when Africa and Botswana specifically is positioning itself as the centre of the global diamond industry.
Government has said the move will involve back and forths to Antwerp, higher costs and logistical nightmares at a time when the industry is reeling from a downturn in demand that has depressed prices and rocked producers, polishers, jewellers and diamond-dependent economies such as Botswana.
Speaking last November, Minerals and Energy minister, Lefoko Moagi, described the G7’s as “market swallowing” and ignored the multi-layered efforts ethical producers such as Botswana have made over the decades in diamond traceability and verification.
“We know where our diamonds come from and we know how they have developed our countries and therefore we protect them with the integrity that they deserve,” Moagi told Mmegi at the briefing.
At a media engagement between the technical team and senior government officials on Wednesday evening, Permanent Secretary to the President, Emma Peloetletse, struck an upbeat but resigned tone.
“We have been discussing over the past three days, this is the third day, starting with them going to the mines, meeting different stakeholders and generally, I think they are satisfied with what they have seen.
“Inconclusive as it may be in terms of what we are going to be doing from here, I think the general understanding is that they have seen, they have heard and they will go back and we will continue to dialogue,” she said.
The challenge for Botswana and other producers is one of power. Outside of Russia, rough diamond production is concentrated in Africa. However, the G7 represents the market for these diamonds, and is thus the mechanism through which value is assigned to the stones.
Unlike a commodity like oil, diamonds are not essential to consumers in the G7. Negotiations over how consumers in those markets access the stones are thus delicate and have traditionally revolved around long-standing relationships between countries.
The technical team’s tour was designed to not only showcase Botswana’s tried and tested traceability and verification system, but also the good that diamonds have done and are doing both in the broader economy as well as the lives of ordinary citizens.
Critics have however said in its single node plan, the G7 runs the risk of not only inadvertently harming economies such as Botswana, but also unnecessarily re-inventing the wheel. De Beers and the World Diamond Council (WDC), a grouping of diamond industry players, have produced a counter-proposal to the G7’s plans which would involve adding onto the WDC’s system of warranties a declaration that the diamonds being imported are not from Russia. The system would complement De Beers’ blockchain traceability system, Tracr, which it made available to the broader industry earlier this year.
Brad Brooks-Rubin, from the US State Department’s Sanctions Office, is a diamond sector veteran, having worked for several years as the department’s senior adviser for conflict diamonds. According to industry publication, JCK, Brooks-Rubin also worked with the Responsible Jewellery Council in September 2021 and “soon became an outspoken critic of the group’s reluctance to suspend Russian diamond miner Alrosa following its invasion of Ukraine”.
Having also worked in the civil society, specifically for an organisation fighting against human rights abuses and illicit financial flows, Brooks-Rubin knows the importance of cutting Russia off from the global diamond industry. He also knows what good faith actors such as Botswana look like.
However, on Wednesday, the G7 technical team’s head was noticeably restrained in his comments on the consultations and preferred to revert to a boilerplate response around how the G7 will keep consulting and staying in “close communication” as it develops its own certification system.
“We will continue to work with Botswana, the industry and the government on what we’re developing and how we are developing it and how the way the system works here can be integrated again so that the decision that has been taken results in the continued success and the continued development here in Botswana,” he said.
He added: “We will be taking everything we have learnt and integrating it into the system that we need to develop with respect to Russian sanctions over the coming months.
“We have been given some specific timelines and it’s an important part of the process that we are in consultation and working together with the government of Botswana and stakeholders here as part of the effort.”
Brooks-Rubin side-stepped questions on where the G7 felt gaps existed in the measures Botswana and its industry partners have in place for traceability. He also declined direct responses to media questions on why the G7 would press ahead with a system that would put diamonds and by extension, the economy, in jeopardy.
Critics within African producers have also questioned the choice of Antwerp for the G7’s single node. IPIS researchers in a research note late last year, wrote that Belgium was initially hesitant to sanction Russian stones as Antwerp is a major diamond centre and Moscow’s production accounted for a quarter of imports in 2021. The researchers said it is still difficult to estimate how many Russian diamonds still pass through Belgium indirectly, via other centres such as Dubai or Mumbai.
Botswana, meanwhile, says it has not wavered on ethics in diamonds.
In a separate response to Mmegi, however, Antwerp World Diamond Centre spokesperson, Karen Rentmeesters, said the single node mechanism would have no additional costs to producers such as Botswana.
“The G7 has said that beneficiation diamonds, or diamonds that will be polished in the country of mining origin, are exempt from passing through G7 rough certification in Belgium, but they will need to be traceable and the country will need to make sure no Russian diamonds are smuggled into the country,” she said in an email.
“Also, rough diamonds will only pass G7 certification after the usual sales process (sights or tenders/auctions if these take place in the country of mining origin) on their route to a market hub, which typically is routed to either Antwerp or Dubai.”
She added: “Rough diamonds are brought first to one of this two places, often going to both, as the mined parcels are sorted and re-assorted before being polished.
“So there is nothing out of the ordinary about the route they are taking in the G7 plan, and no additional cost.”
The coming weeks and months are expected to determine the specifics of the G7’s plans and with it, the impact on both producer nations such as Botswana and industry players such as De Beers.