Skip to content

Conflict diamonds are forever

Poor controls in the international diamond industry - even in South Africa - are undercutting attempts to clamp down on conflict diamonds that fuel wars in Africa and, possibly, fund terrorists.

Until the Kimberley Diamond Exchange opened in 1999 – with tight security, surveillance cameras and two double sets of iron gates – the birthplace of the South African diamond industry had all but disappeared from the radar of most serious diamond buyers. What had been the epicenter of the country’s diamond rush had since become best known for the world’s largest manmade pit, the “Big Hole” as it is simply called, created by diamond diggings in the diamond rush of the late 19th century.

The history of the place is entwined with that of De Beers Consolidated Mines Ltd., better known simply as De Beers, which was founded by British imperialist Cecil Rhodes in 1888, when the fabulous wealth of the newly discovered Kimberley diamond fields gave rise to the company that would become the world’s diamond monopoly. At the height of its powers, De Beers controlled about 80 percent of the world’s diamond supplies, striking joint venture deals with most producing countries that enabled the company to control the release of diamonds onto the world market and thus maintain its prices. De Beers, now a privately held company with offices in Kimberley, Johannesburg and London, today controls about 60 percent of the world’s diamonds.

De Beers gradually offloaded its Kimberley diggings during the 1990s because of a supposed dearth in diamonds, leaving the city as little more than a nostalgic base for the company’s board meetings and Harry Oppenheimer House, its main diamond sorting center for southern Africa, named after the man behind the modern De Beers diamond cartel. But in the last two years, there’s been a boom in diamond sales in the small town.

Twice a month, the exchange offers its diamonds for sale, putting this little town back on the world diamond map. Foreign dealers, packed into small prop planes, make the 70-minute flight from Johannesburg International Airport to Kimberley’s own small airport. From there, they drive to the single story building with opaque windows on the outskirts of the town’s dilapidated business district that serves as the Kimberley Diamond Exchange. After submitting their tenders, or bids, the diamond traders usually fly out the same day.

The sudden renaissance of Kimberley has been attributed to new diamond discoveries in what De Beers regarded for years as worthless land – at least for mining. And that has fed rumors in the close-knit international diamond community that Kimberley has become a major laundering center for Africa’s “conflict diamonds” – diamonds from areas of Africa wracked by civil war, where combatants use their control of the mines to fund arms purchases for their fight.

Officials from the South African government diamond valuator – an independent company appointed by the government to value and monitor diamond exports – say they suspect that diamonds from countries to the north are being laundered through the diamond “diggings,” or small mining operations, around Kimberley. Local diggers who have habitually mined only a few carats a month have been turning up in Kimberley with the equivalent of a small mine’s production. Their explanations range from “I hit a good pocket” to “I put these away for a rainy day,” according to the officials, who spoke only on condition they not be named.

Derek Corns, who together with his brother has spent time on diamond diggings in Angola, runs the Kimberley Diamond Exchange, and is popular with international diamond traders. Corns does not believe his exchange deals in conflict diamonds, but he is pragmatic. As long as dealers supplying him with diamonds provide invoices, he said, “It’s legal, in my book,” even though the invoices provide no proof of the diamonds’ origin. Corns says his buyers include some of the biggest names in the diamond business – including top clients of De Beers – and they would be able to pick out suspect stones with ease. “If it’s that illegal, why be here?” he asked.

The word in the industry, which Corns acknowledged is making the rounds, is that easily identifiable diamonds from other African countries, such as the Democratic Republic of the Congo, have been identified by people familiar with such stones. One dealer recently brought in a parcel of Russian diamonds, Corns said, and police were alerted.

While there have been several investigations into conflict diamonds in Kimberley, no charges have ever been filed and, in fact, South African authorities have never convicted anyone for dealing in conflict diamonds, in part because of the difficulty in proving the origin of the stones.

Yet intelligence sources have named some players in the Kimberley Diamond Exchange as traders in conflict diamonds. One prominent diamond trader who is a De Beers “sightholder” – the term used to denote the elite cadre of about 120 dealers selected to buy and market the company’s rough stones – was alleged in a 1999 classified European intelligence report to have continued buying diamonds from Angola – a hub of conflict diamond trading – after the United Nations banned purchases from African nations known to deal in conflict diamonds. He is also known in the diamond industry for having ties to Hezbollah, the Islamic terrorist organization.

Corns explains the increase in the exchange’s business this way. Local diggers have made up to 30 percent more money selling through him – as opposed to selling their stones themselves – and so they have been able to invest in more equipment and find more diamonds. His main contributor and shareholder in the exchange, Chris Potgieter, has a large digging operation near Kimberley and is now reputed to be the biggest diamond miner in South Africa after Trans Hex, a South African diamond company, and De Beers. Potgieter bought the main area he mines from De Beers in 1997 for about $200,000. Between January 2000 and October 2001, sources told ICIJ, Potgieter recorded $40 million in diamonds sales – up to $2.6 million in some months alone – with the South African Diamond Board, which is supposed to monitor and regulate the country’s diamond mining industry and diamond exports.

Diamond experts are divided as to whether he could produce such amounts from his mine. One expert, speaking privately, said he thinks Potgieter’s operation is legitimate and essentially a mining miracle and does not believe that Kimberley is being used for large amounts of “hot diamonds.” Potgieter simply employs old-fashioned diggers who have proved themselves extraordinarily adept at handling their sorting pans, the expert said. He also has one of the biggest fleets of mechanical digging machines in the country and runs a lean, efficient operation. In comments to ICIJ, Potgieter said his operation had expanded considerably, and that his original De Beers’ plot was now “one of 10 [mining] operations.”

De Beers’ original prospecting notes regarding some of these same diamond sites suggest that no such bounty was in the offing. In August 1965, the company’s geologist recorded that “No diamonds were discovered during the month” at Koppiesfontein, a mining area near Kimberley. The same was reported for that September. In October, the notes said, “Three diamonds were recovered from Paddock 20 during the month with weights of 1.47, .32 and .17 carats.” One year later, De Beers’ geology department again reported to the mining commissioner that no diamonds had been found. The report concluded “Diamonds recovered nil. Labour used 16 Africans (26-day month). Loads excavated 648. Loads washed 52.”

Yet more than 35 years later, those same mines are supposed to be the source of Kimberley’s sudden flood of diamonds.

The gem squad

Not far down the road from the Kimberley Diamond Exchange are the offices of South Africa’s gold and diamond police squad. From their musty, forlorn two-story building on a residential street just outside the town center, the officers are tasked with policing illegal diamond buying – the acquisition of unregistered stones or by people without diamond licenses – as well as any trade in conflict diamonds. South Africa and Namibia, which it ruled until 1990, are the only countries in the world where it is illegal to possess an unlicensed uncut diamond. Laws prohibiting “IDB,” as illegal diamond buying is known, were an important mechanism engineered by De Beers to entrench its monopoly.

With only a few cars to patrol the province of the Northern Cape – which comprises about 30 percent of South Africa – the gold and diamond police are no match for wealthy smugglers on the Atlantic coast who have helicopters at their disposal. In addition, more than half the squad’s 27 offices across the country have closed, as the South African police turn already scarce resources to fighting the country’s notorious violent crime.

Superintendent Danie Bruwer of the Kimberley gold and diamond squad and members of his team say they have never found any conflict diamonds in their area. These policemen, who are wary of discussing the problem without hard evidence, say they get occasional tips about local traders possessing conflict diamonds, but have never managed to obtain enough proof to make a prosecution possible. They are dismissive of stories about large amounts of conflict diamonds being laundered in Kimberley. “Why bring them all the way down here, instead of straight to Europe?” Bruwer asked in an interview with ICIJ.

But back in Pretoria and Johannesburg, senior South African authorities are convinced that Kimberley has become a center for conflict diamond laundering, though no one will say so on the record without hard evidence. Despite its stringent diamond-policing laws, South Africa is a relatively amenable place for smuggling because of lax law enforcement. Additionally, the “export” of illicit diamonds from South Africa is an effective way of laundering their origin because of South Africa’s first-world infrastructure, respectable reputation in the diamond industry, and indigenous source of stones.

For years, De Beers has created the impression that most of South Africa’s diamond fields have been fully excavated and that there is little left of interest. As one source close to the company told ICIJ, De Beers’ modus operandi for many years was to be tentative about what diamond fields it developed anywhere. It is, therefore, possible that areas believed to be bereft of diamonds are now worth developing. And improvements in digging equipment means prospectors like Potgieter can get to diamonds his predecessors could not. Nonetheless, the fact that the biggest diamond company in the world sold off areas around Kimberley that are now producing substantial amounts of diamonds has fueled suspicion that something is wrong.

The problem for the small, poorly resourced band of South African officials charged with monitoring the Kimberley diamond trade is that even if a digger turns up regularly with strikingly large parcels of diamonds that do not appear to be local, successful prosecution is difficult. That’s because diamonds cannot be reliably traced with sufficient, court-proof accuracy. A collection of diamonds from the same area can, in many instances, be pinpointed, but if the stones are mixed it’s nearly impossible.

Blood diamonds

Conflict diamonds got their start in 1992 in the bush war of Angola, where UNITA leader Jonas Savimbi, seeking new ways to finance his army, looked to the country’s vast diamond fields to extend the smuggling business that his rebel movement had pioneered in the 1970s and 1980s. By 1993, Savimbi had in place the world’s largest diamond smuggling network, netting hundreds of million dollars a year with which he bought arms. Among those companies dealing with Savimbi’s diamonds was the South African company, De Decker Diamonds, which admitted selling the diamonds directly to De Beers. De Beers has acknowledged doing business with De Decker, but has said it never knowingly bought diamonds from UNITA.

A UNITA soldier stands over diamonds January 23, 1990 near Jamba, Angola. Image: Photo by Scott Peterson/Liaison

The United Nations ultimately created a “monitoring mechanism” to investigate conflict diamond peddling in Angola, and the Security Council imposed sanctions on diamond dealing with UNITA in 1998 – a ban later expanded to Liberia and the rebel-held areas of Sierra Leone. But only a handful of countries enacted laws to implement the sanctions, and the only known prosecution for trading in blood diamonds is expected to begin in the coming months in Belgium.This pattern – in which diamonds were used as war currency – was replicated in other African conflicts, particularly in Sierra Leone, Liberia and the Democratic Republic of the Congo. But it was not until 1998, when the United Nations first began investigating conflict diamonds, that the issue grabbed the attention of the industry and diamond buyers and the public worldwide. Canada’s ambassador to the world body, Robert Fowler, oversaw in-depth conflict diamond reports, which named some of the individual culprits and highlighted the lack of oversight at key diamond centers worldwide, such as Antwerp and Tel Aviv. Subsequent reports in 2000 by Global Witness, a London-based, non-governmental organization, further highlighted the trade in what came to be known as “blood diamonds.”The conflict diamond issue took on greater significance, however, after the Sept. 11, 2001, terrorist attacks on the United States, when media reports cited evidence that diamonds were used by terrorist organizations, including al Qaeda, as a means of transferring their wealth globally.

But, as the ICIJ investigation found, the ties to terrorist organizations go back even further. The diamond dealer identified in the European intelligence report is known in the industry for his association with Hezbollah, according to two diamond dealers who have worked closely with him but who would not speak on the record. The intelligence report also says that the dealer’s company has done business with the terrorist organization, and that the dealer is connected to a web of influential Lebanese families working in the Congo and West Africa that includes Imad Bakri. Bakri was identified in a 2000 U.N. report (under the name Imad Kebir) as a major supplier of weapons for UNITA.

Responding to the heightened attention on conflict diamonds and seeking to protect their industry, southern African officials launched the Kimberley Process – a name recalling not only the birthplace of the country’s diamond industry but, ironically, the home of its latest controversy. Set to begin in January 2003, the process provides for an international framework in which to identify and record the origin of the world’s diamonds under the auspices of the diamond industry’s World Diamond Council, which includes senior De Beers’ executives. But even that process has been criticized. The General Accounting Office, the investigative arm of the U.S. Congress, said in a February 2002 report that the Kimberley Process was inherently flawed. “[T]he period after rough diamonds enter the first foreign port until the final point of sale is covered by a system of voluntary industry participation and self-regulated monitoring and enforcement. These and other shortcomings provide significant challenges in creating an effective scheme to deter trade in conflict diamonds.”

De Beers – creator of the “a diamond is forever” marketing campaign – knows better than anyone that its industry depends heavily on perception. After initially being defensive about the issue of conflict diamonds, De Beers came to see the advantage of it. With its monopolistic hold on the world supply of rough diamonds slipping by about 20 percent in recent years, here was a way of regaining control and decreasing the supply of diamonds, or at least socially acceptable ones. De Beers stopped buying diamonds on the open market – in Africa and in Antwerp, the world’s diamond trading capital – relying instead on its own mines and other countries where it has marketing joint ventures with local producers. It also created the concept of “branded diamonds” – stones engraved with the De Beers’ brand on special machinery developed in the United Kingdom guaranteeing, among other things, that the stones are conflict free.

“Conflict diamonds were one of the greatest marketing tools ever invented,” one South African trader said on condition he not be named. De Beers has dismissed any suggestion that it is actively promoting the campaign against conflict diamonds. But, asked in December 2000 whether the conflict diamonds issue had turned out to be a blessing in disguise, De Beers chief executive Gary Ralfe replied, “Absolutely,” adding that the company hoped to eliminate conflict diamonds.

De Beers has taken several steps to reduce, if not eliminate, its exposure to conflict diamonds. Apart from halting its open market buying operations in Africa and in Antwerp, De Beers has stopped buying stones from official government mines in African countries, such as the Congo. Unless such operations can guarantee that no diamonds from rebel areas leak into the system – a guarantee that is impossible to give in most cases – De Beers says it cannot take the risk.

But given its dominance in the diamond field, some question whether De Beers has been as untouched by conflict diamonds as it has claimed or whether there aren’t blood diamonds in its vast vault of stones. De Beers’ tentacles stretch into most corners of the diamond industry, and it bought diamonds from rebels in Angola until the 1998 U.N. sanctions took effect.

De Beers executives Nicky Oppenheimer (left) and Gary Ralfe (middle) with Tony Trahar of Anglo American Plc. Image: Reuters

De Beers has long given the perception that it exercises considerable control in the African countries in which it operates. The government of Botswana is often jokingly referred to as a division of De Beers, and in both South Africa and Namibia, De Beers has had close relationships with the government. Since the conflict diamonds debacle began, this reputation for control has ironically obliged De Beers to seek to underplay the company’s strength or ability to peddle influence.In addition, De Beers’ opaque operating procedures make it impossible to trace the origin of its diamonds. For example, the company mixes its collection of stones, making it nearly impossible to determine their origin. All the stones De Beers purchases are combined at the company’s offices in central London before being sorted into 16,000 categories for its sightholders to examine. “De Beers’ system is based on the mixing of all supplies into one production for sale. The origin of the diamonds is deliberately obscured for commercial and logistical reasons,” Emma Muller, a journalist specializing in the diamond industry, wrote in South Africa’s Business Day in March 2002.

“We certainly don’t have the powers people vested in us. We are influential, ‘not omnipotent,'” Andrew Bone, the company’s public affairs chief in London, said in an April 2002 interview. When asked about the situation in Angola, Bone said that since the company moved out of the open market there, it has had little intelligence on what is happening in the country. Shortly after Bone’s assertion, however, De Beers hosted a conference at its game reserve in the Richtersveld, in South Africa’s Northern Cape province. Attending the “Governance Development and the Logic of African Stability” conference were diplomats, academics, journalists – and Angolans. The Angolan contingent included Abel Chivukuvuku, listed on the program as a civil society leader and parliamentarian. He is, in fact, being tipped as a future star of UNITA.

De Beers’ position on conflict diamonds is further complicated by the company’s intimate relationship with its sightholders, who receive their allotments of diamonds from De Beers in London. The system allows De Beers to reward favored sightholders with what are called “special stones” – windfalls that can dramatically affect a sightholder’s fortunes.

The De Beers monopoly hinges on influence, knowledge and trust, and the sightholder network is a crucial part of this axis. Favoritism also plays a role. Benny Steinmetz, an Israeli diamond dealer, is now widely seen as De Beers’ king among sightholders, according to industry insiders. He has historically been an important presence for the company in Angola and is believed to be involved in the company’s plans to return there now that war has ended. He is also influential in South African politics, with close ties to African National Congress luminary-turned-businessman Tokyo Sexwale, whose Mvelaphanda Resources is now partnered with De Beers in South Africa. Sightholders of Steinmetz’s caliber get to be part of the club, in part, because they use their political influence to look after the interests of the company.

All of which means that De Beers is exposed to any indiscretions on the part of its sightholders, such as the European dealer with alleged ties to Hezbollah and conflict diamonds, named in the intelligence report. One of De Beers’ problems is that its methods of control have bound it to so many players in the diamond industry that it has to keep an eye on what all these players are up to where suspect diamonds are concerned. If, for example, there was any action taken against the sightholder trading at Kimberley, De Beers would be exposed and have to take action itself. The company has tied its sightholders to an ethical pledge, which precludes trading in conflict diamonds. Bone, the De Beers spokesman, says that as far as sightholders are concerned, “we speak to them time and time again on the issue. They are acutely aware of the issue and what it means even if they inadvertently [receive a suspect stone]. But our powers are limited.”

International efforts such as the Kimberley Process and the United Nations monitoring mechanism on conflict diamonds have spotlighted the helplessness and ineptitude of the South African authorities – whose monitoring efforts are, by comparison, among the best on the continent.

There are, for example, no officials from the South African Diamond Board in Kimberley to monitor what kinds of stones go through the exchange. The only regularly monitored stones in Kimberley are those in De Beers’ Harry Oppenheimer House, the company’s sorting center for southern Africa, which are examined by the government diamond valuator.

In Johannesburg, the situation is not much better. The diamond bourse, on the fifth floor of downtown Johannesburg’s Jewel City, has dealt with between U.S. $360 million and $490 million worth of diamonds a year for the past three years. Diamond buyers are required to be licensed by the government – a license which foreigners cannot obtain – but licensees are allowed to be accompanied by foreign associates, who generally provide the financial backing for most serious South African diamond dealers. Although South African law requires diamond producers to offer their stones to local cutters first before exporting them, no more than 10 percent of the diamonds passing through the bourse stay in South Africa.

Diamonds coming into the bourse are also supposed to be checked by Diamond Board representatives to be valued and identified. But they rarely are, and when checked, not by anyone with sufficient experience to identify the origin of the stones, officials at the government diamond valuator concede.

In November 1999, the South African government diamond valuator filed a report on the bourse stating that inspectors weighed incoming diamonds, but did not “examine or check them as prescribed under the [1986 Diamond] Act.”

The report continued: “The Bourse personnel say this has been the practice for sometime, and were not aware of this requirement. No one seems to know the rationale behind this legislation, but this process could help particularly small diamantaires against being duped into buying fake diamonds. In the present situation Angolan diamonds supply would be minimized.” The clear implication being that Angolan diamonds were being laundered through the bourse.

The report encapsulates the irony of the diamond business in South Africa. There is an extensive armory of legislation to monitor the progress of diamonds from the moment they are mined to when they are sold. These rules were established in the late 19th century following the discovery of diamonds and the creation of the De Beers monopoly in South Africa and later also implemented in neighboring Namibia to protect De Beers. They were so tightly written that they obliged diamond dealers to register with the police even the transfer of diamonds between different magisterial districts. Such rules could now make South Africa a relatively easy country in which to monitor the flow of illicit diamonds. But the rules are seldom observed.

In fact, diamond dealers in Johannesburg’s Jewel City quip that the porous bourse means smugglers no longer have to bother with the “anal express” – a reference to the smugglers’ practice of taking uncut diamonds out the country in condoms secreted in their rectums.

The Kimberley Process, which includes representatives of the industry and non-governmental organizations, is headed by the chair of the South African Diamond Board, Abbey Chikane. Appearing out of touch with the diamond situation in his country, Chikane incorrectly told The Mail & Guardiannewspaper in December 2001 that there was a satellite office of the South African Diamond Board monitoring the trade in conflict diamonds in Kimberley. Meanwhile, the South African Diamond Board, which should be at the forefront of monitoring illicit diamond activities, is wracked by internal squabbles and denuded of resources and staff, according to industry insiders. It did not send inspectors to investigate the allegations of conflict diamond laundering in Kimberley and does not have enough staff to check the detailed documentation diamond traders are supposed to submit on all diamond transactions.

Amid this chaos, De Beers still exercises considerable influence over the government organizations handling the diamond industry, including the South African Diamond Board, by dominating its main board and various committees with directors and sightholders close to the company. The board, in theory, has massive powers. The preamble to the country’s 1986 Diamond Act says the board should exercise “control over the possession, purchase and sale, the processing and the export of diamonds; and for matters connected therewith.”

In reality, the board does little of this, and its senior office holders appear to have little grasp of their duties. Five weeks after being asked in early 2002 for statistics on the operations of the Johannesburg Diamond Bourse, Chikane said he could not obtain the information. Days later, he said the bourse president, Ernie Blom, a De Beers sightholder, could and would provide them, but was under no obligation to divulge them to either the board or the public. The Diamond Act mandates that Chikane’s board should not only have an up-to-date record of all the bourse’s figures, but it should also monitor closely the source of all incoming diamonds. Further regulations require that “the management of the said diamond exchange shall examine and check the physical particulars of the diamond before putting the diamond out to tender.”

The politics of the board have grown increasingly turbulent since the appointment in 1999 of a new, independent government diamond valuator. The chosen company, a Belgium-based operation called DVIC headed by Claude Nobels, soon crossed swords with De Beers. The new valuator, which compiled the critical bourse analysis, has questioned the 1993 transfer to London of De Beers’ South African stockpile of diamonds, ahead of South Africa’s first democratic elections in 1994. Nobels also alleged that De Beers has consistently undervalued its diamonds through transfer pricing – a process by which international companies transfer the value of goods and services within the corporation and its subsidiaries from various country bases, finally declaring it where the tax is lowest. Nobels has also focused attention on the opaque relationship between De Beers’ South African operations and its London office and exposed the cozy relationship between De Beers and the South African Diamond Board.

In December 2001, the Diamond Board’s assets were attached by a South African court and its phone cut off after Nobels sued for nonpayment of fees. Since paid, Nobels and his team cost the South Africans about $1 million a year, the bulk of the Diamond Board’s budget. De Beers, having initially favored Nobels, now considers the Belgian intensely irritating, according to sources in the diamond industry.

Nobels’ revelations have raised questions about De Beers’ commitment to combating conflict diamonds. On many fronts, the company has helped to raise awareness and to combat the flow of conflict diamonds, through public statements and through helping international bodies such as the United Nations with information and advice. But De Beers – which virtually since its inception has been intimately involved in the South African government’s management of the diamond industry – has done little to help prevent the collapse of the institutions that could check the flow of Africa’s blood diamonds, which have fueled so many of the continent’s conflicts.

If anything, dealers and sightholders close to De Beers have sought to undermine Nobels and the former chief executive of the diamond board, Victor Sibiya, who often stopped consignments of diamonds scheduled for export. Sibiya was suspended in May 2002 and replaced by Louis Selekane, the former head of the Kimberley branch of South Africa’s Department of Minerals and Energy, which was raided in May 2002 for improperly distributing licenses. It subsequently emerged that Selekane had commercial interests in at least one mining company that benefited from mining licenses given out by his department. Sibiya later told ICIJ that the diamond board needed “considerable strengthening if it is to help enforce the Kimberley Process.”

Selekane told the Mail & Guardian that he was unaware of the charges against him, and said he did not believe he had a conflict of interest, adding that he had declared all his personal interests to the government before his appointment. Tom Tweedy, De Beers’ spokesman, said suggestions that the company controlled South African diamond monitoring institutions were “ludicrous.”

In addition to doing little to help improve the Diamond Board, De Beers’ employees privately express the opinion that South Africa’s existing diamond institutions serve little purpose. In the days when the company needed illegal diamond buying legislation to neutralize competition to its South African mining operations, the system it influenced heavily worked smoothly. But with De Beers’ delisting from the Johannesburg Stock Exchange in 2000, the South African mining giant, Anglo American, the Oppenheimer family and the Botswana government are the only shareholders in the now-private company. The move, ostensibly taken to avoid the complicated cross-holdings between Anglo and De Beers, has taken De Beers outside the public spotlight.

Many believe the conflict diamonds saga will continue, if for no other reason, because the diamond industry’s operations are complex and opaque. “The international diamond system is monopolistic, in many instances corrupt, and bogged down by issues such as transfer pricing, smuggling, drugs and tax evasion,” Charles Wyndham, an independent diamond consultant and the Canadian government’s diamond valuator, told ICIJ. “I would argue that the opaqueness of the industry actually attracts scrutiny from the likes of those pushing the conflict diamond debate.”

Despite the attention, no one has ever been convicted in South Africa for selling conflict diamonds. But change may be on the horizon. De Beers’ new “supplier of choice” strategy, where only those sightholders with the best retail prospects will be honored with De Beers stones, is set to launch as soon as the company addresses satisfactorily the European Commission’s concerns about the scheme’s monopolistic implications. The strategy will have the effect of making the relationship between De Beers and its sightholders less personal and more commercial. It will also allow De Beers to edit its sightholder list, erasing those who are not presentable enough for the new, more open system. And, for the first time, there will be contractual obligations for sightholders regarding their conduct. Those in the company charged with monitoring the conflict diamonds situation indicate that this new system will make it far easier to deal with errant sightholders.

The demands of certification processes like the Kimberley Process also will force out some suppliers. Only those with reasonable resources will be able to comply with the restrictions, and De Beers’ “supplier of choice” initiative is likely to concentrate on the upper end of the market, leaving the lower end exposed to market forces without the protection of cartel. As one person close to the company said, “There will be De Beers diamonds, then there will be diamonds that are deemed OK with the ‘forever’ mark [a De Beers brand], and then there will be the rest.”

But others, outside the De Beers’ family, are also catching on to the idea of branding diamonds, especially Canadian companies, which have opted for a polar bear mark signaling, not so subtly, that diamonds from Canada cannot possibly be tarnished by the blood of African conflicts. An industry insider said that Tiffany & Co., the New York jewelers, would like to source its diamonds only from Canada.

In Kimberley, the side road running past Harry Oppenheimer House, situated so that its angled windows give sorters the best possible light in which to work, is called Tiffany Street. If De Beers does not master the conflict diamond issue, one day that street could be the closest it gets to enjoying the cachet of that particularly famed name.

ICIJ is dedicated to ensuring all reports we publish are accurate. If you believe you have found an inaccuracy let us know.