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Diamonds, The Kimberley Process And Bullshit From The Stage

A consumer’s belief that a product is indeed delivering on the values it promises for the price paid, rests on the confidence that the industry that manufactures the product is able to generate.

Industries do this by building or supporting robust institutions that can monitor, audit and verify the claims the industry makes about the product, its raw material sourcing and processes by which it reaches the consumer in its final form.

For a product that is not essential to everyday life and depends solely on disposable income, not only is this assurance necessary to get the consumer to notice the product in world full of discretionary-spend products, it determines how much value it can generate.

The Kimberley Process (KP) is one of the key institutions that the diamond industry depends on to deliver the assurance that not only are rough diamonds responsibly sourced, but that they deliver fair value to artisanal miners and the local communities in the sourcing area.

With all its cumbersome procedures and the sometimes near impossibility of getting a consensus among all the participating governments, the diamond industry should be proud of the KP. It really stopped conflict diamonds and is now grappling with the issue of delivering fair value to artisanal communities. Without the KP, the consumer will see the diamond industry as just another exploitative undertaking that is driven by greed and is uncaring about what happens to local mining communities.

And despite the fact that it is run by various governments, the diamond industry and its organisations like the World Federation of Diamond Bourses (WFDB) and the World Diamond Council (WDC) are key components of the KP. The KP is the diamond industry’s very own institution. It is essential for the diamond industry’s credibility.

Which is why I was horrified when Martin Rapaport called the KP “bullshit” while taking questions on his presentation at the diamond industry Mines to Market conference organised by the Gem & Jewellery Export Promotion Council (GJEPC) in Mumbai over March 19 and 20.

I frantically signalled conference moderator Chaim Even-Zohar to be given a chance to take issue with this. I was even acknowledged, but I never got to be heard because the confrontation between Rapaport and angry leaders of the GJEPC and the Bharat Diamond Bourse (BDB) — Rapaport had claimed that the Indian industry was responsible for generating billions of dollars of slush money in Dubai — threatened to escalate to unmanageable levels and Even-Zohar quickly shut the whole thing down.

If the diamond industry stands mutely by while someone says the rough production data generated by the KP is worthless, it is telling the world that one of the pillars on which it rests its consumer assurance process is itself worthless. It is asking the world to rely only on mining company data. We all know what the global consumer thinks of that.

Rapaport offered no reason for his summary dismissal of the KP as a credible institution. But he had a public platform and was able to air his opinion for all to hear. Nobody else challenged him.

I do. I challenge Martin Rapaport to substantiate his terming of the KP as “bullshit”. I challenge him to support that dismissive term with data, facts and proof. I challenge him to prove that the data he drew his conclusions on was totally accurate.

And I want to ask the diamond industry why it did not rise to the KP’s defence. I want to ask it whether it knows how little credibility it has when it bases its own inter-dealer polished diamond pricing benchmarks on Rapaport’s price list — which is based on one man’s opinion and not any sort of established, verifiable pricing mechanism? Does it think the consumer will have confidence in its workings and its assurances?

The diamond industry has just told the world that it really doesn’t care about the mechanisms that deliver assurance and fair value. Creaky and slow it may be, but the Kimberley Process is not bullshit. By allowing Martin Rapaport to get away with calling it that, the diamond industry told the world that it was itself a “bullshit” industry.

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While no one can disagree that there is a need for a more stronger process to track the flow & sourcing of legitimate rough diamonds from around the world , but I am not sure if Kimberly Process is the only way to do it and how much KP has been successful in achieving it and how much it has delivered on its set goals . Coming to the end consumers not sure whether even 1% of consumers have ever heard of KP , forget understanding it . The end consumer while buying a diamond complete rely on the family jeweller who is at the last leg of supply chain and complete responsibility lies on the shoulders of this jeweller / retailer to deliver the legitimate diamonds to the consumer which are free of all conflicts and possess all parameters and qualities promised while making a sale . Disclosure - Rapaport holds statergic equity stake in AOJ ( Author of this post )
" I want to ask it whether it knows how little credibility it has when it bases its own inter-dealer polished diamond pricing benchmarks on Rapaport’s price list — which is based on one man’s opinion and not any sort of established, verifiable pricing mechanism? Does it think the consumer will have confidence in its workings and its assurances?- GEMKonnect 28/3/ 2017 Vinod you made quite interesting points on Rapaport's price sheet . If his price sheet is just one one man's opinion and has no verifiable pricing mechanism, then why is it for last 30 years this 80-90 billion$ size global diamond industry still following his price list ?? If it's so irrelevant then what is stopping the industry to simple discard this price sheet or ignore it . Would love to hear from you .
The Rapaport price is not derived from a verifiable source or established algorithm. So the publication of the price list itself is an opaque process. For the trade, it doesn't really matter, because it simply uses it as a benchmark and prices are defined in terms of either discounts or premiums (rarely) on the published price. But all of this is trade jargon as far as the consumer is concerned. If the person who publishes the list also states publicly that the Kimberley Process, by which the diamond industry assures consumers that its product is responsibly sourced, is "bullshit", there isn't going to be any confidence in the product or its value, is there? And though it is incumbent on the retailer to ensure that the product he or she is selling is responsibly sourced, the only means by which he or she can do this is by depending on the Kimberley Process. At the end of the day, the KP is vital component in the consumer assurance the diamond industry offers. It cannot be dismissed as "bullshit". And it must be defended.
Thank you Vinod for posting this challenge to the comments of Mr. Rapaport. However, when one dissects the points you raised I believe they confirm his analysis that the KP is indeed bullshit. From the outset you correctly point out that consumer belief in the product is dependent on the confidence the industry is able to generate. This discussion wouldn’t be necessary if the KP was able to give consumers the assurance they need. It’s clear to many people that a significant number of consumers lack confidence in the ethics of the diamond industry. No one should be surprised by this because, as you correctly point out, consumer confidence comes from having a robust system of checks and balances that can confirm the claims made by the industry about the products consumers buy. As consumers don’t buy rough diamonds it is the ethical credentials of that final product that is important for the consumer. The remit of the KP stops at the mine gate so it offers no assurance what so ever about the ethics of the cut and polished diamonds. As you are aware, the scope of KP is strictly limited to “conflict diamonds” – rough diamonds that fund rebel violence against legitimate governments. Consumers are concerned about all blood diamonds not just “conflict diamonds”. Other blood diamonds are given a free pass by the KP and even given legitimacy by the bogus System of Warranties introduced by the World Diamond Council which allows sellers to self-certify diamonds as conflict-free even when they are a significant source of funding for rogue regimes guilty of grievous human rights violations. You describe the KP as “one of the key institutions that the diamond industry depends on to deliver assurance that rough diamonds are responsibly sourced”. But the KP does no such thing. It certifies rough diamonds that fund the regimes in Zimbabwe and Angola regardless of the corruption and human rights violations associated with government forces linked to the diamond industry in these countries. The irony, that you apparently fail to see, is that the KP should be a key institution for consumers, not just for the diamond industry. If the KP is to be a pillar on which the diamond industry rests its consumer assurance process then it needs to significantly broaden its scope to include diamond-funded human rights violations by governments and that includes revenue from cut and polished diamonds. This of course would mean calling out the criminal actions of the Israeli government which is heavily reliant on revenue from the diamond industry to fund the apartheid system that prevails there, the illegal occupation and brutal subjugation of the Palestinian people. This is not a topic the diamond industry wants to grapple with but if it continues to bury its head in the sand while Israel uses revenue from the diamond industry to murder, maim and terrorise with impunity then we can expect to see the continued erosion of the natural diamond brand image and the eventual market domination by the synthetic diamond industry.
Thanks for responding Sean. Nobody has any illusions about all the things that are wrong with the KP. You should read Brad Brooks-Rubin's post on JCK here http://www.jckonline.com/editorial-article/is-the-kimberley-process-b-s/ The point is, we need to either fix the KP's shortcomings or completely reinvent. Simply dismissing it leaves the diamond industry with absolutely nothing to give the consumer in the way of assurance.