AMN - CAR’s diamond restart an earnings opportunity – comment by Yolanda Torrisi

The Central African Republic (CAR) has stepped up efforts to reformalise its diamond mining sector and reduce the prominence of its alluvial mining channels. The encouraging sector-wide reform was made to return diamond production to the formal market and was announced ahead of future refinements to the international Kimberley Process that ensures mining proceeds aren’t used to fund conflicts.

Precious diamond-funded conflict is a controversial topic worldwide, with 81 countries being members of the Kimberley Process diamond regulation organisation designed to starve fighters of funds sourced from mine production.

CAR was previously limited by a Kimberley Process-related export ban imposed in May 2013 that has severely reduced the size of the country’s formal diamond mining sector.

Despite a 2016 lifting of the ban brokered by parties in the United Arab Emirates, revenue from the formal diamond mining sector declined US$59.7 million, or 97%, to $2.3 million in the six years to 2018.

The country’s 2016 efforts to reformalise diamond sector production had followed at least two years of inter-religious conflict funded by the illicit trafficking of diamonds.

Head-of-state President Faustin Archange-Touadéra’s decree, made on September 30, 2019, ahead of the December 2-3 World Diamond Council (WDC) annual meeting, requires all buying houses to export at least US$3 million of output each financial quarter.

Presidential Decree No 19.282 involves a qualification period applying for buying houses for the remainder of the year.

A release championed the reform, arguing “Going forward, the CAR’s Government will stand for a bold new and drastic approach where full transparency and proper due diligence protocols, traceability of individual parcel and OECD Due Diligence Guidance will be crucial.”

Houses are expected to follow sourcing protocols and withdraw from the so-called informal circuit as part of the reform that will also ensure no blood diamonds become part of the supply chain.

Any houses not meeting pre-conditions by December 31, 2019, will not be given a contract by CAR’s Government. Foreign buyers that don’t comply with the new approach are to have their licences revoked.

Reformalisation of the country’s diamond sector will hopefully rejuvenate job opportunities and investment and open the market to foreign investment or investment from other parts of Africa.

To help encourage the reform, only a small 4% exportation tax will apply to diamond exports.

Back before the original ban, diamond output in 2012 made up 40% of total exports for the country and was a source of employment for one in four people in a population of 4 million. In 2012, CAR was the world’s 10th-biggest diamond producer by value, exporting $62 million of diamonds that year and in 2011.

Jobs and funding could return to the marketplace with the latest reform, and project opportunities be widened to financiers outside of the country and the continent.

Assuming the country’s mines can still produce and supply a similar capacity, the reform could dramatically affect the amount of export dollars going through government coffers.

It will be encouraging to see this reform play out as CAR moves forward in the wake of continued refinements to the Kimberley Process.

Compliance with the Kimberley Process Certification Scheme is an important end goal for countries in Africa. Participation in the scheme is vital for economic success and for reducing the kinds of conflict that can hamper mining projects and real progress on the continent.

- Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact: yolanda@yolandatorrisi.com