February 17, 2010 / 11:58 AM / 9 years ago

DR Congo to require "clean" diamond exports

KINSHASA (Reuters) - The Democratic Republic of Congo plans to make the cleaning of rough diamonds compulsory before export as part of a wider drive to raise minerals revenues, officials said.

The move could raise the value of stones exported by the vast central African country, the world’s No. 2 exporter by volume, by 25 percent, boosting government tax revenues, but may also exacerbate the country’s deeply rooted smuggling problems.

“A decree is being prepared, we are awaiting its signature ... during the coming week,” said Dona Kampata, head of the mines ministry’s technical committee for planning and coordination.

The process, known as acidizing, boiling or de-oxidizing, consists of plunging the diamonds in powerful acids to clear impurities.

The practice is common in leading exporters such as South Africa because it enhances the value of the diamonds, but officials said Congo, the second biggest exporter after Russia by volume, would be the first country to require it.

“You must remove all the impurities before the diamond can reveal all its glory,” said Jean-Pierre Amuri, chief valuer at the government’s precious minerals valuation body CEEC.

Antwerp diamantaires Bob Bonde and David Zollman established an acidization lab in Kinshasa last year.

REVENUES AT STAKE

Congo produced 33.4 million carats of diamonds in 2008 — a fifth of world production, according to data collected by the industry monitoring scheme, the Kimberly Process. Around 21 million were accounted for as having been exported, valued at about $600 million.

CEEC figures show the value of Congo diamond exports fell to $245 million in 2009, however, hard hit by the effects of the world financial crisis.

According to Amuri, washing diamonds could boost the value of Congo’s exports by 20 to 25 percent, yielding a similar rise in export duties. Congo’s tax rate on diamond exports is currently 3.75 percent.

De Beers, the world’s top producer of diamonds, said its exports of the gems from South Africa, Botswana and Namibia are always acidized before a government valuer determines their price for export.

“Before our diamonds in South Africa go to the valuer, that (acidization) has happened twice. You want to get a fair market value, you want to do that,” De Beers’ Johannesburg-based spokesman Tom Tweedy told Reuters.

In addition to official figures, many Congolese diamonds are known to be smuggled out, with revenues suspected of funding rebel operations in the restive eastern provinces.

Some observers believe compulsory acidizing may encourage additional smuggling.

“The downside is no one likes paying export taxes and therefore there is a possibility of exporters not wanting to acidize goods before export. Some may take another route - i.e. smuggling,” said Kimberley Process expert Ian Smillie.

“The requirement also provides corrupt authorities with an opportunity for extortion,” he added.

A Kinshasa-based exporter feared the buyers in Antwerp, Tel-Aviv, Dubai or Mumbai may also refuse to have their diamonds cleaned in Congo. “I am sure that if some buyers do not want boiling, they will go through parallel channels,” he said.

The strategy is part of a general effort to raise the value of Congo’s mineral exports.

Congolese mining minister Martin Kabwelulu was quoted as telling a recent business meeting in the mineral-rich province of Katanga that a 2007 decision to force mining companies to refine copper-cobalt ores before export would soon be strictly implemented.

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