The world's $7 billion rough-diamond industry thrives on secrecy. Victor Kasongo would like to change that. He heads the Democratic Republic of the Congo's Center for Evaluation, Expertise and Certification--a government agency that regulates the country's big and murky diamond industry. A former Ernst & Young consultant, Kasongo, 41, wants to shed some light on a back-room business that, he says, "has been dark for many years." As part of his transparency and security effort, he's outfitted the agency's offices, towering 17 floors above the decaying capital of Kinshasa, with dozens of video cameras. Inside the office, government experts scrutinize rough diamonds that have been mined in Congo, assigning each of them a precise value. Kasongo says he will soon add a modern touch to his regulatory effort: digital broadcasts of the stone appraisals for buyers in Antwerp, Tel Aviv or Dubai.
Kasongo's reformist ideas have been sparked by the so-called Kimberley Process--the two-year-old international accord that aims to slow the flow of "blood diamonds" out of Africa. They are smuggled stones whose sales have funded rebel armies in Angola, Sierra Leone and Congo. Fifty-four nations have signed the Kimberley accord, which mandates that all rough diamonds be certified by their country of origin before they're exported. Governments around the world ban the trade of gems that are not certified.
But for all the good intentions, diamond-industry experts say the Kimberley Process has not yet done much to slow the trade of illegal diamonds. For one thing, regulators can do little to halt the theft of diamonds that never reach the certification stage. Congo is on a pace to export $600 million worth of certified diamonds this year, said Kasongo. But according to Congo's mining minister, Eugene Diomi Ndongala, about $400 million worth of stones are smuggled out of the country each year, mostly through neighboring Brazzaville. Those are stones that Kasongo's appraisers never get a look at.
Worse, the Kimberley Process may even provide a veneer of respectability to potential misconduct. "Yes, at a superficial level, the Kimberley Process looks good," says Nigel Morgan, a British security expert with extensive experience in Africa. "But it risks being a fig leaf for the same old tricks." In 2000, Morgan was hired to beef up security at Societe Miniere de Bakwanga, or Miba, the state-owned diamond company that accounts for about one quarter of Congo's legitimate exports. But after he pointed out irregularities at the company--chief among them the alleged theft of diamonds by Miba officials--he began receiving death threats and was forced to leave the country.
Congo would test even the savviest reformers. Its diamond industry is highly decentralized, with thousands of miners sifting through alluvial soil for the gem that will make them rich. A vicious five-year-old civil war, which diamonds helped finance, is winding down. Rebels have joined a "unity" government that includes four vice presidents and 61 ministers. Such an unwieldy, broad-based government, say African experts, is likely to perpetuate the old culture of corruption.
In fact, a controversial new diamond deal in Congo has already raised eyebrows among those hoping for more openness in the industry. The contract was secretly signed by government officials last April. It came to light three months later, after a feud developed between Congo's minister of mines and his deputy. The deal gives a company called Emaxon Finance Corp. the right to market 88 percent of Miba's rough-diamond production, which hovers around 600,000 carats a month, for four years. What's more, Emaxon gets a 5 percent discount on its purchase of Miba stones, which previously were sold at auction to the highest bidder. In exchange for the discount, Emaxon will lend Miba $15 million to modernize its mining equipment. Few in the industry had ever heard of the Canada-based Emaxon. Then, in October, the firm identified its owner as the Israel-based DGI Group.
That revelation only fueled conspiracy theories. DGI's 33-year-old founder, Dan Gertler, already had a reputation for big coups in Congo. In 2000, Gertler paid $20 million to the government of President Laurent Kabila for a sales monopoly on all Congolese diamonds--not only Miba's. Under international pressure, Kinshasa revoked the deal in early 2001. But by then, Gertler had cemented a relationship with Joseph Kabila, 32, who was appointed president when his father was assassinated in January 2001. Asked about Gertler in an interview with NEWSWEEK, Kabila flashed a grin: "Here in Congo, the president has more enemies than friends," he responded.
Was the Emaxon deal in Congo's interest? Diomi, Congo's mining minister, calls it "a terrible contract for the republic." He says that since Emaxon began marketing Congo diamonds, the prices for Miba stones have fallen significantly--from a high of $16.75 per carat in July to $12.99 in October, costing the firm $2 million a month. Diomi insists that the Emaxon deal must be renegotiated.
Gertler says that he sees "no reason" to change the agreement. He says the purchasing discount Emaxon is getting is effectively a reward for the risk he's taking with the loan. He attributes the fall in prices for Miba stones to market forces. Gertler also raves about Kabila. "He's the most promising new president in the world--a new Mandela," says the businessman.
A Miba director, Mike Mutombo, told NEWSWEEK that Emaxon was chosen because "we needed financing--that's the only reason." But opponents of the deal say it's precisely the sort of arrangement reformers are wary of. "The notion that the contract is good for Miba is absurd," says an Antwerp-based diamond dealer. "It's good for Emaxon."
Before and unrelated to the Emaxon deal, Morgan and his team of investigators documented efforts by a "major criminal syndicate" to skim high-value stones from Miba. Morgan says he caught five Miba officials stealing. He also made recommendations to Miba that have not been heeded--among them, that the firm's stones be appraised as they come out of the mines, and that the diamonds be transported to Kinshasa under security seals. Last year, after he appealed directly to Kabila for support, Morgan claims he was poisoned and spent a week in a Johannesburg hospital. Gertler brushes off Morgan's complaints about the mining company, saying: "I don't know about corruption at Miba. I'm not into politics."
But what if politics is the problem? Miba security reports and Kinshasa political sources point to a Kabila intimate, Augustin Katumba Mwanke, as having pressured Miba to sign the contract with Emaxon. Kabila formally suspended Katumba from his administration last year after a U.N. report linked him to allegedly shady mining deals, but in July appointed him secretary general of the new government. (Katumba declined to comment.) Kabila, asked about his adviser and Miba, defended both, saying if there was any corruption, it should be left to the Congolese courts to prosecute. "If Miba signs a contract," says Kabila, "why should the politicians try to change it?"
To many in Congo, this smacks of the bad old days. After Congo's independence from Belgium in 1960, its leaders grew notorious for creaming off the country's vast mineral wealth at the expense of its desperately poor people. Kasongo, the Kimberley point man in Congo, is making strides, says Alex Yearsley, a diamond expert with Global Witness, a London-based human-rights group, but there's a limit to his power. "If you want long-term prosperity," says Yearsley, "you need transparency and real governance." In today's Congo, that's still at issue.