Improving the Environment for Investors
Since the commercialization of diamonds began in the early 1930s, Sierra Leone has produced over 500 million carats of diamonds to support the world's need for diamonds. The diamond fields of Sierra Leone are estimated to extend over an area of perhaps 3,000 square miles, bounded by the Sewa River covering stretches of towns including Bo, Kenema, Yengema, Koidu, Tongo Field, and Kono, and extending as far as Liberia. Diamonds are found in these extensive alluvial deposits, in underlying dykes and pipes, and also from source rocks on higher ground. These areas still hold millions of carats of diamonds.
A good number of major diamond mining corporations―notably the Sierra Leone Diamond Corporation, AmCam Minerals, African Diamonds, Rex Diamond Mining, Mano River Resources―have spent heavily to accrue their own alluvial deposits in Sierra Leone, and many are evaluating opportunities to invest. In his September 2007 first session parliament speech, President Ernest Koroma spoke about revising mining policies to generate more returns from diamond exports for the development of the country. With the need for rough diamonds likely to continue to rise in value, rough diamonds could continue to yield billions of dollars in decades to come. However, the diamond mining industry has been one of the most corrupt sectors with billions of dollars in lost revenues been recorded from smuggled diamonds, making the rough diamonds sector Sierra Leone's costliest corrupt sector.
There is a theory behind improving the environment for investors in the diamond industry. The theory is that a well-coordinated system of investments in the diamond industry can buffer the country against inflation shocks to the Sierra Leone economy. Strategic diamond exports allow the Sierra Leone government to generate more foreign exchange by millions of dollars of foreign investments in the industry.
The Packers Rodgers White Jersey more of foreign investments in the country can help the government as a diamond-exporting country to grow its economy. Strategic policing of the industry promotes the image of the country that in turn attracts more investments.? And it may reduce (to a great extent) the massive revenues that flow to corrupt scam hawks, helping to make them less formidable troublemakers. Thus, in theory, a properly regulated diamond industry is an important tool of both economic and foreign policy. In practice, it boosts foreign exchange earnings for the government that can support massive development projects when these earnings are handled properly. And on that front, the government really has to be firm in putting in place a system that effectively regulates the industry.
The country has had administrations with opaque and weak mining policies when public officials designates lined up their pockets with profits generated from under-reported production of rough diamonds. The Ministry of Mineral Resources makes decisions about mining policies. It also coordinates diamond exports. Sierra Leone diamonds are still appreciated as one of the best diamonds in the world, even when major diamond regulators in Antwerp controlled the reliability and pricing of rough diamond supplies because they hold most of the world's excess production capacity.
Today's market, by contrast, has little excess capacity, and supplies are priced in diamond markets dominated by massive volumes of private trading. Yet stocks of quality rough diamonds are rarely handled with an accurate view of these markets, even though effective management would mean offering reliable supplies. Bigger supplies of rough diamonds could help improve Sierra Leone's natural resource security, but until the Sierra Leone government better manages its strategic rough diamonds production, billions of dollars would continue to go away without growing the economy. Such an effort would be warranted only if the Koroma administration radically reformed its approach to the country's mineral deposits and coordinated it to meet international standards in order to create a better atmosphere for foreign investors to inject more capital resources to strengthen the Sierra Leone economy.
Most important, the Koroma administration should shift control over its mineral deposits from the president (and his political appointees in the Ministry of Mines) to an independent minerals deposits board. Presidential and ministerial discretion, once thought to lend flexibility to the system and make the rough diamonds production a powerful foreign policy tool, now has the opposite effect. Presidential and ministerial control has politicized decisions about the deposits, especially as most Sierra Leone presidents have proved unable to move nimbly and credibly with the diamond trade.
Furthermore, because diamonds are a splendid global commodity, the Koroma administration must also promote better domestic coordination of national alluvial deposits. The current system for domestic coordination has generally worked profitably for politicians who have politicized decisions on mining policies, and has proved to help scam hawks as well who have been given greater latitude to corrupt the industry and are evidently helping themselves first. The current metric for assessing whether the GGDO is doing its part to protect against insecure rough diamonds exports and scamming of foreign investors is how much taxes are reported from Kimberley Processing calculations. A better system would focus instead on how well they manage the proper documentation of diamond purchases and how well foreign investors are informed about
Scam Hawks
One lesson foreign investors have learned over the years of scammers misusing investors funds, is just how vulnerable they are to scam hawks: many foreign investors losing millions of dollars in the industry without making any returns. To help limit the scam hawks' motivations to mislead investors, Parliament should pass legislation that protects investors from predators in the country and with penalty of prison term for the scam hawks who deliberately and intently decide to scam investors of their money. Such a move empowers foreign investors and generates greater motivation for investors to get involved in the industry in Sierra Leone. A model of governance issues in the mining sector would reflect the structure of a viable mining framework, in which foreign investors are fully protected from predators as that would motivate more investors to inject more capital into the country.
The 2002 Kimberley Process international certification system for the trade in rough diamonds focused on how the gems are traded―their movement to the international market―and set out conditions for grappling with the problem of "conflict diamonds"―diamonds traded by "rebel" armies that were fueling wars in Sierra Leone, Angola and the Democratic Republic of the Congo. And "in the Interlaken Declaration of November 5, 2002, representatives of the United States and 47 other countries announced the launch of the Kimberley Process Certification Scheme for rough diamonds ("KPCS"). Countries participating in the KPCS ("Participants") are expected to prohibit the importation of rough diamonds from, and the exportation of rough diamonds to, non-Participants and to require that shipments of rough diamonds from or to a Participant be controlled through the KPCS" (US Department of the Treasury Office of Foreign Assets Control). Over the next several years since 2002, Sierra Leone steadily made improvements, through the GGDO, in revaluations of diamonds which build government-owned taxes through the competitive Kimbeley Certification system. The GGDO has also relied on Ministry of Mines officers to police the buying of rough and ensure that the rough purchased is properly documented.
The most serious interruption of diamonds to the system came in the heat of the war that started in 1991, after Foday Sankoh's rebels wreaked havoc on diamond exploits from the diamondiferous areas creating shortages on government earnings from rough diamond exports instead used to finance the war machine of the RUF and Charles Taylor's National Patriotic Front of Liberia (NPFL). Former President Tejan Kabbah's administration lost huge revenues from diamond exports because of rebel activities in these diamond rich areas. The rebels entirely controlled the production of rough diamonds then, and for many years rough diamonds exports were illegally used ("smuggled via complicit dealers (Lebanese, naturally) to Liberia, then onto world markets" (Global.Research.ca) to finance Foday Sankoh's rebellion.
To correct this, international intervention became inevitable with UN passing resolutions that gave the exiled government of President Kabbah more muscle to prosecute the war and eventually suppressing the rebel leader Foday Sankoh to submission and death in prison. And the government today should recognize that activities of scam hawks are domestic interruptions to the diamond industry which are as bad for an enabling investment climate as those caused by Foday Sankoh's illegal claims over the mines in mid 1990s through 2001.
Despite the efforts of strong international commitment to end the war, the prevalence of scams has continued to undermine the Kimberley Process Systems' purpose. Leading politicians' involvement in diamond production and not wanting to pay taxes on their harvests and exports and foreign investors' vulnerabilities in the industry continues to deal the diamond sector a blow. The damage to the credibility of the diamond investment environment is still being done, unless the government improves its practices and work to implement robust checks and balances in the trade that empowers foreign investors and improve diamonds declarations at the GGDO for more taxes to be collected by government for the common good.
Apparently, the diamond sector has been mismanaged in these times of relative calm. "In a speech in August, 2003, President Tejan Kabbah delineated the "common and well-known problems associated with the diamond industry in Sierra Leone" as follows:
・???????? ?illegal mining;
・???????? smuggling;
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・???????? poor working conditions, including child labor; and
・???????? misuse of official positions and power.
These corrupt practices, he noted, destroy the economy of this country and may endanger the…security and image of Sierra Leone". In President Koroma's first address to Parliament in October 2007, he recognizes the problem that the mining sector is plagued with a poor regulatory framework and rampant smuggling. Koroma's pledges to enforce existing mining legislation and to develop a robust environmental policy should include dealing with scam hawks to discourage their motivations to distress investors. In doing so, Koroma is creating the enabling conditions of what the situation requires that would attract more investments into the industry which is also consistent with the Core Mineral Policy (CMP) of the Government of Sierra Leone designed to create an internationally competitive and investor-friendly business environment in the mining sector (Ministry of Mineral Resources).
President Koroma's administration should redouble efforts to strengthen regulation of the diamond industry to arrest the squandering of diamond exports by various elements including scam hawks and high level politicians who support their illegal production of rough diamonds using covert marketing channels in collaboration with corrupt "Lebanese traders" (Global.Research.ca) in the country. Also setting up of diamond cutting and polishing stations in Sierra Leone, with enough regard for trends in world market prices for cut and polished diamonds, which the President himself made mention of in his first address to Parliament in 2007, would ensure an increase in exports as well as encourage secondary processing of minerals in the country in turn increase the tax revenue base and create more jobs.
Meanwhile, revenues from rough diamonds has still not benefited the country the way they should have like how oil revenues are benefitting most Middle Eastern Packers Rodgers White Jersey countries. The diamond industry is facing low inventories and volatile prices because foreign investments have dried up because of the vulnerabilities that have been so overwhelming for investors. Fake and falsified certificates of existence and ownership decorated with the Sierra Leone Coat of Arms are often traded in the Internet where telemarketing scam hawks try to lure unsuspecting investors into very costly scams.
There are also international scam hawks mostly in the Middle East, the United States, Europe and India who often claim to represent high volume buyers of rough diamonds and requesting artisanal miners and/or dealers of rough diamonds in the country to send formal manifests and FCOs (full-corporate-offers) and to courier the rough diamonds themselves by Brinks Security Company or UPS International to the buyers for evaluation. These investors' representatives would claim to have a LOI (letter-of-interest: a kind of like a pre-contract where the buyers agree to purchase the rough at certain basic terms, with the rest of the terms to be agreed in the final contract) and BCL (bank-comfort-letter). Such representatives would also ask suppliers for formal manifest for the diamonds and FCO (full-corporate-offer) on the seller's letterhead with name, signature and stamp. The point is, internal affiliated corporate procedures where internal laws are applied may be suitable for LOI or BCL type of deal, but not for international trade applications. Many experts maintain that deals that use the terms LOI or BCL have major problems. The person claiming to have the capacity to buy rough diamonds would try to get the rough diamonds with such documents then seek to sell such diamonds before paying the supplier. Therefore, paying the supplier would be very difficult and often times those few who enter such deals find it difficult to recover payment for the roughs supplied. The Internet has caused this explosion of ambiguous traders to exist like no other time. Suppliers of rough diamonds (artisanal miners and dealers) and investors alike must therefore act with prudence at all times.
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