A scandal over an exclusive contract for the sale of Democratic Republic of the Congo (DRC) diamonds has exposed a rift in that country’s unity government and cast a pall over the implementation of the Kimberley Process, designed to stem the trade in conflict diamonds.
The first public sign of serious strife in the state diamond sector came in late August, when it was reported in the Congolese media that a $10-million (about R70-million now) consignment of diamonds produced by Miba had mysteriously disappeared. Miba is the country’s main diamond producer, owned 80% by the state and 20% by Belgian interests.
It soon emerged that the ”missing” consignment had in fact been exported legally, but against the wishes of the Mining Minister, Eguene Diomi Ndongala. He went public with his objections to a monopoly contract that assigned the exclusive rights to most Miba diamonds until 2007 to a single company, Emaxon Finance International.
It was under this contract that the consignment had been exported.
Emaxon is a previously unknown entity that seems to be little more than a ”brass plaque” in the offshore haven of Panama — its true owners are undeclared.
The stakes are high. Miba is a forex cash cow for a country bankrupted by years of kleptocracy and war. Ndongala has said he wants Emaxon’s monopoly ”renegotiated” and Miba diamonds offered through open tender instead.
But this stance of Ndongala, a member of the so-called ”unarmed opposition” who was appointed to head the Mines Ministry at mid-year in the new unity government, brought him in direct conflict with Jean Kitshunku, his predecessor and now his deputy. The unity government was established as part of the peace process in which South Africa has played a prominent role.
After Ndongala’s complaint Kitshunku confirmed to Reuters that as deputy minister he had authorised the export of the ”missing” consignment. ”I took my responsibility … I signed the certification and the diamonds left by the official way.”
Kitshunku is reportedly close to President Joseph Kabila, and his ability to effectively override his boss in the ministry raises questions about the extent to which the unity government, or rather its new members, have any real say.
But if the intra-ministry spat has exposed the Congolese government to a credibility crisis, the same can be said of the Kimberley Process, in which South Africa has also played a leading role. The process, its provisions first implemented early this year, is designed to instil confidence in an industry that has suffered repeated implication in the business of fanning war for profit.
At the heart of the process is a certification scheme to guarantee diamonds are of legitimate origin and not smuggled from war zones, where their sale may help finance parties to a conflict.
An official close to the Kimberley Process confirmed to the Mail & Guardian that there had been concern that the credibility of Kimberley certificates had been undermined by ”mixed signals” from the Kinshasa government over whether Kitshungu, who had signed the certificates in this case, had had the authority to do so. The official claimed, however, that ”that is now all sorted out”.
Not all share this confidence. Commented the International Peace Information Service (IPIS), a Belgian research institute: ”The fact that the vice-minister of mines was able to act without the authority of his superior … questions the strength of the Kimberley Process, which relies upon the good intentions of national governments to implement systems of internal control. If … officials of varying rank are able to authorise the official export of diamonds to Kimberley member states, then one might wonder how else the international campaign against conflict diamonds could be subverted.”
Another factor that has arguably undermined Kimberley is the opaqueness of the deal, and alleged links between Emaxon and another company earlier implicated in an arms-for-diamonds scheme.
The M&G has a copy of the Miba-Emaxon contract, signed for Miba in April by Michel Haubert, its managing director, and Gustave Luabeya Tshitala, its chairperson. The Emaxon signatories are Chaim Leibovitz and Yaakov Neeman, apparently Israelis.
Emaxon’s address is given as Montreal, Canada, but that, according to IPIS, merely leads to another address in Panama, which is that of a law firm which refuses to state the real owners.
Industry sources, however, maintain there are links between Emaxon and Israeli Diamond Industries (IDI), a company which had a short-lived monopoly on DRC diamonds under former president Laurent Kabila, the father of the present president, in 2000/01.
IDI was accused by the United Nations panel of experts on the exploitation of the DRC’s natural resources in 2001 of having agreed, secretly as part of its contract, ”to arrange, through its connections with high-ranking Israeli military officers, the delivery of undisclosed quantities of arms as well as training for the Congolese armed forces.”
IDI has denied the allegation.
Evidence that Emaxon is a new guise for IDI, or at least related to it, includes a former consultant to Miba telling the M&G that Dan Gertler, one of the IDI principals, was seen in March in Kinshasa where he allegedly helped negotiate the Emaxon deal.
The M&G has also learned that IDI’s Gertler and Emaxon’s Leibovitz had been scheduled last week to make a joint presentation to Deutsche Bank to secure a credit line to finance the Emaxon deal.
Under the contract Emaxon will grant Miba loans totalling $5-million this year, and a further $10-million subsequently. In exchange Emaxon will have rights to 88% of Miba’s production at a discount, formally, of 5%, but potentially much greater if valuations are tweaked.
The economics of this agreement appears to be part of the reason for Ndongala’s objection. A Kinshasa press report last month cited a source close to Ndongala claiming it would lead to tens of millions of dollars in lost income for Miba and the public purse.