FREE DAILY EMAIL

Date : 31/10/2003
Source: Ministry of Minerals and Energy
Title: Mlambo-Ngcuka: Kimberley Process Plenary Session


PRESENTATION BY MINISTER OF MINERALS AND ENERGY, MS PHUMZILE MLAMBO-NGCUKA AT THE KIMBERLEY PROCESS HANDING OVER CEREMONY, Sun City, 31 October 2003

Chairperson, Distinguished Guests, Ladies and Gentlemen, it is my great pleasure to be invited to officially open this plenary session which will culminate in the handing over of the Chair.

INTRODUCTION

What is now known as the Kimberley Process had its origins in a technical forum, involving some of the main role players in the global diamond industry, which was held in Kimberley, the capital of the Northern Cape Province, in May 2000.

This meeting was convened for the purpose of finding a way to redress the apparently intractable situation surrounding conflict diamonds, whereby diamonds were being used to fund internecine wars in some African countries. The grim horror of this conflict had captured worldwide attention, especially in industrialized countries, and the bad publicity it had gained was threatening to destroy the very livelihood of diamond mining in the effected countries, and this meant putting many countries in Africa at risk.

I think it was very suitable that the meeting was held in Kimberley, which was the birthplace of the modern international diamond industry, and which gave its name to the rock from which most diamonds have so far been recovered - kimberlite.

The Kimberley Technical Forum began its deliberations at a very inauspicious venue in suburban Kimberley. Convening the discussions, I am pleased to say, were a particular cast of participants whose flair and expertise directed the proceedings along the path that eventually ensured its successful conclusion.

With this in mind, I would like to take the opportunity to thank some of the contributors to that original meeting, namely:
* Global Witness for bringing the plight of African war torn countries to the fore;
* Sean Cohen of the International Diamond Manufacturers Association who was the first person to bring the conflict diamond issue to the attention of the Department of Minerals and Energy thus enabling the foundations of the Kimberley Process to be laid
* Martin Rapaport and Mark van Bockstael for their formidable technical inputs during the Forum;
* Delegates representing countries such as - the United kingdom, Belgium, USA, Canada, Botswana and Namibia must be congratulated for their unstinting efforts to ensure the success of the Forum, and last but certainly not least;
* Ted Sorensen, the chairperson of that inaugural meeting, who did such an excellent job in controlling the meeting and directing it along the most appropriate path.

PROGRESS OF THE KIMBERLEY PROCESS

The Kimberley Technical Forum was an unprecedented step in the global Diamond Industry in the sense that, for the first time, it brought together industry, governments and civil society in a classic tri-partite arrangement, a system, which had been promoted by government in South Africa to such good effect. Despite this, it should be pointed out that much anxiety emanated from industry and some governments at the start when a decision was made to invite the NGOs; but I am glad to say this concern rapidly evaporated and a tremendous sense of relief prevailed once it was realised how much common ground existed among all participants by the end of the Forum. This common accord boded well for the constructive engagement that was to follow.

Soon after the Kimberley Technical Forum, the International Diamond Manufacturers Association, spearheaded by Sean Cohen and the World Federation of Diamond Bourses met at the 2000 Word Diamond Congress and formed the World Diamond Council. In retrospect, maybe the World Diamond Council would probably not have been formed had the stakeholders at that original forum not discovered that they all had a mutual interest in resolving the conflict diamond problem.

The progress we have made over the past three years since the Kimberley Technical Forum has indeed been quite remarkable. Its main product - the Kimberley Process has consistently snowballed, growing in stature and size, by taking many steps further down the road towards a successful resolution of the conflict diamond problem. Its culminating achievement was the implementation of the Kimberley Process Certification Scheme earlier this year.

This scheme has been described as ground breaking, and perhaps the best way to gauge Kimberley Process and its subsequent achievements is by quoting some of the comments made on the subject by some observers who have closely monitored its progress:
* The adoption of the certification scheme has made a tangible contribution to Nepad's proposal of a programme of action to initiate peace and security in Africa;
* The process is an example of many governments, the global industry and civil society co-operating to define and develop a coherent foreign policy objective;
* The Kimberley Process was a success because sufficient consensus was reached between these main players (governments, the diamond industry and civil society) on the unacceptability of diamonds being used to fund civil wars, and on the necessity of taking suitable concerted action to redress the problem;
* The fact that South Africa had committed itself to act within multilateral forums wherever possible, and the strong stance adopted by the UN has provided the appropriate multilateral framework for encouraging South Africa's engagement in the process;
* Co-operation was also facilitated by the existence of modern advanced technology in the diamond-mining industry, which enabled such expertise to be co-opted to pinpoint with reasonable accuracy the areas where "stones" originated, thus enabling them to be tagged. This co-operation between business and governments has been vital to the success of the process and essential to agreements reached on questions of warranties and certification;
* This brings us to the crucial role played by De Beers in galvanising the diamond industry into action. Without the personal intervention and leadership of chairperson Nicky Oppenheimer and CEO Gary Ralfe, the Kimberley Process would arguably not have happened. Both UN Secretary-General Kofi Annan and former President Nelson Mandela have also noted this role.

This brings me to another crucial point, monitoring. The Kimberley Process Certification Scheme will, in the final analysis, be judged on its success or failure in eradicating conflict diamonds from legitimate international diamond markets.

Certain quarters have voiced their scepticism over whether the process will manage to succeed in its objectives. There appears to be some doubt that the levels of dedicated commitment, credible monitoring and the ongoing ability needed to enforce the requirements of the agreement will be sustained. However, these concerns tend to obscure the key reasons for having an agreement and a follow-up process at all.

Ladies and Gentlemen, it is in the interests of all involved in licit diamond trading to ensure that conflict diamonds are removed from the market. As I have already stressed, this achievement is the essential condition that will guarantee the future viability and sustainability of the diamond industry, and I believe that continuing close business-government and intergovernmental co-operation in the way we have set it up could make this a reality, the technical challenges notwithstanding.

Setting aside these ongoing problems for future attention, I would like to concentrate on a few of the achievements already attained since implementing the Kimberley Process, these are:
* Many governments of diamond producing and trading countries, not doing so formerly, have begun to install procedures for collecting official production and trade statistics;
* The breadth of the scheme is a great achievement - more than 60 countries are now participating even though some are not fully compliant. We just need to encourage them. Whereas in the past there were only 7 countries having diamond-specific legislation;
* The review missions recently established will bring the much-needed credibility to the process;
* This intergovernmental network, apart from authenticating commercial transactions involving diamonds, is also restoring the precious stone's integrity to the market place, which was in the process of being lost due to so-called "blood diamond" issues. This achievement has also led to resurging consumer confidence.

I would also like to urge all concerned not only to maintain the current high standards reached in running the Kimberley Process Certification Scheme, but also to spread the news that we have such a system in place to every possible quarter. A recent survey conducted by a diamond consultancy group found that less than 30 percent of consumers in the USA were aware of the conflict diamond issue. We must use every opportunity to raise the profile of the scheme among the retail trade and demonstrate the importance of retailers taking strong measures to keep conflict diamonds out of the market. Never again should diamond buyers purchase diamonds of uncertain origin. The diamond industry must strengthen its system of self-regulation continuously, in order to seal off entirely the possibility of conflict diamonds entering the legitimate diamond trade. This is a process that should never let up.

Ladies and Gentlemen, the intergovernmental network we have set up to monitor worldwide diamond production should ensure the protection of the legitimate diamond industry from adverse publicity for the foreseeable future. Perhaps most importantly, however, it should ensure the retention of consumer confidence over the medium term, which is the final link in the value chain that we cannot do without.

Moreover, there is one consequence of the network that we as governments can now be sure of: with the obligatory disclosure of production and trade statistics, the diamond industry has become more open to scrutiny. It has also increased revenue to governments, as diamonds that previously traded outside the formal channels, have now been brought within the domain of the public sector, thus attracting taxes.

ROLE OF DIAMONDS IN DEVELOPMENT

Those of you who were with us when this initiative was started will recall that we said the first leg of the initiative would be the establishment of a certification scheme. We also agreed that social upliftment of indigenous people in the producing countries is key to ensuring that such wars are not started in the first place.

Indications are that, at last, diamonds are being used for the upliftment of producing countries and the much needed poverty eradication. I still remember the words of my colleague, the Minister of Mines in Botswana who said " when my country gained its independence we only had 3 kilometres of tarred road, today because of the revenue from diamonds, most of our roads are tarred.

Those of you who attended the African Mining Minister's Forum in Cape Town in February 2003, will remember that the Ministers agreed to establish the African Mining Partnership (AMP) whose main mandate would be to champion the NEPAD mining and mineral-related initiatives. The AMP would be supported by various commissions, which would attend to issues of governance and administration, human resources and skills development and mineral development. Critical factors that would ensure long term development of the strategy to maximise African mineral resources include promotion of semi finished product development, local production of mineral inputs, access to markets and relocation of existing first world's manufacturing capacity. It was also decided to identify four minerals projects in which Africa has sizable dispersed resources that have local beneficiation potential. Key elements of such project's beneficiation potential should be identified in order to develop an economically viable value-addition strategy for each. I would dare say that diamond is one of those resources. In the SADC alone five states, viz. Angola, Botswana, Namibia, South Africa and DRC, are significant diamond producers. Surely the region could then come up with a strategy for maximising revenue from this commodity.

THE DIAMOND VALUE CHAIN - OPPORTUNITIES FOR INVOLVEMENT OF INDIGENOUS PEOPLE (EMPOWERMENT)

I would like to share with you developments in South Africa that are designed to encourage the involvement of indigenous people in the value chain. An analysis of the diamond value chain shows that the greatest profit is created at the mining and retail levels. Profit, however, is not the same as value added. For South Africa, the concept of value added is going to receive greater emphasis, as it is the focus of a FRIDGE diamond study that is due to be started in January 2004. The study will quantify the value added in each component of the diamond pipeline, namely mining, rough diamond trading, diamond manufacturing, polished diamond marketing, jewellery manufacture and finally retail of diamond jewellery.

Qualitative analysis thus far shows that there is still significant opportunity for Empowerment in small-scale diamond mining in many parts of Africa. What is needed for success, however, is the following:

At present there are literally thousands of small operations, most of which are dis-organised and have a "hit-and-miss" character attached to them. The answer is the consolidation of these individual operations into larger, more organised mining operations with a significant involvement of indigenous people. Leading to a listing on an Alternative Junior Exchange.

The next component of the value chain, rough diamond trading, is not without opportunities. For 20 years people have been saying that there should be a city that could become the centre for a Pan-African Metals and Minerals Exchange, trading diamonds, gold, platinum, cobalt, aluminium, ferro-alloys, gemstones, titanium oxide and copper, but no concerted effort has been made yet to study the feasibility of this exciting concept. However, the New Partnership for African Development (NEPAD) now gives us the conviction to put this opportunity on the table, because for the first time we as Africans can begin to believe that we can make this work.

Mining companies operating in Africa have chosen thus far to trade diamonds, gold, platinum and other metals through the major centres such as London and Zurich. The main reason for this was exchange control. With the relaxation of exchange control being phased in, the time to consider a change of mindset is right now.

Diamond manufacturing development has received much attention recently. NEPAD encourages us not to accept the status quo and diversify our diamond industry. We believe that South Africa, and in particular Johannesburg could become a trading centre for rough and polished diamonds. For this reason, expanding diamond cutting and polishing in South Africa will be an unwavering objective. This growth in diamond manufacturing will be matched with a growth in BEE in diamond manufacturing. Once again, the FRIDGE diamond study has as its main outcome a strategy to achieve this.

SKILLS DEVELOPMENT AND HR REQUIREMENTS

In order for Africans to exploit the clear opportunities in the value chain outlined above, there are various skills development and HR requirements. These are the following:
* Mineral Resource management expertise,
* Diamond sorting and valuation expertise,
* Rough diamond marketing,
* Diamond cutting and polishing skills,
* Diamond financing and banking,
* Polished diamond marketing including branding skills,
* Computer Aided Design (CAD) skills, and
* Jewellery design skills.

One very important issue that seems to have been overlooked is the crucial role-played by banks and other financial institutions in financing diamond mining, trading, polishing and marketing. This expertise is seriously lacking in Africa, but it is vital, because it is what makes the diamond industry work.

Also important are the following:
* Providing assistance for access to training facilities; and
* Providing assistance for access to technological developments and the appropriate technology.

In closing I would like to thank the contributions made by the World Diamond Council in also representing the interests of many smaller players in the global diamond and jewellery industries.

I would also like to convey our thanks and congratulations, firstly, to our first Chairperson Nchakha Moloi for leading this process during turbulent times and for bringing together the stakeholders. Secondly, to Abbey Chikane for his outstanding achievement in chairing the Process since its official inauguration in 2001 and for successful implementation of the scheme.

And finally, we must thank Canada for offering to chair the Kimberley Process, for the next term. As it was appropriate for South Africa, a country synonymous with gold, platinum and diamonds, to have chaired the Process in its first term, it is also appropriate that Canada, the new player with a sparkling future in the diamond industry, should be able to take over from South Africa for the ensuing term. Canada's North West Territories is being regarded as the new Kimberley, and, Canada of course, has also played a major role throughout the Kimberley Process - and so one can be sure that the Process will remain in good hands.

Undoubtedly, there are many more that deserve recognition, too many to mention in this short space of time, and I can therefore only add - to those others who have contributed significantly to the ongoing success of this project, many of whom may also be sitting here today, thank you very much for your unstinting efforts.

Ladies and Gentlemen, thank you for your attention.

Issued by Department of Minerals and Energy, 31 October 2003

SPONSORED BY

Advanced