GHANA: PRECIOUS MINERALS MARKETING COMPANY OUTLINES

UNCLAS SECTION 01 OF 04 ACCRA 002954 SIPDIS SENSITIVE SIPDIS EB for Sue Saarnia, AF for Carol Trimble E.O. 12958: N/A TAGS: EMIN ECON EFIN AO GH SUBJECT: GHANA: PRECIOUS MINERALS MARKETING COMPANY OUTLINES KIMBERLEY PROCESS COMPLIANCE MEASURES REFS: A) STATE 176544 B) STATE 176793 C) ACCRA 02616 ¶1. (U) SUMMARY: EconChief and EconOff met with Acting Managing Director Aristotle Kotey and Deputy Managing Director (Operations) George Asante of the Precious Minerals Marketing Company Ltd. (PMMC) on December 6, 2006, to discuss the actions Ghana has taken to ensure compliance with the minimum requirements of the Kimberley Process. Triggered by concerns about conflict diamonds transshipped from Cote D'Ivoire alleged by the United Nations in an October 2006 report, as well as weak internal controls noted by a Kimberley Process (KP) delegation in Ghana in late 2005, Ghana is following an Action Plan agreed upon in November 2006 by the KP Plenary in Botswana (see paragraph 9). PMMC representatives reported on the following activities to that end: digitally photographing all diamond exports, conducting training sessions on the new reporting system to track sales, licensing 350 previously unregulated middlemen diamond buyers and sellers, defining a system to collect independent production figures, and forming a Joint Task Force to oversee implementation of the Action Plan. END SUMMARY. ¶2. (U) During Ghana's three month grace period, which ends February 14, 2007, three one-week-long visits are scheduled by World Diamond Council (WDC) experts to examine, and photograph, the contents of outbound diamond shipments. The first visit began December 4. Exports are only permitted from Ghana during these one-week monitored periods. If Ghana fails to bring itself into compliance with KP standards, it risks being prohibited from exporting diamonds to KP countries. A European Commission expert will arrive in Ghana around December 11 to provide high-level policy advice about internal controls and KP standards. ¶3. (SBU) EconOff met with Andrew Coxon and Frank Govic, the two World Diamond Council Expert Ghana representatives, on December 8. During the first of three reporting visits, they photographed Ghanaian diamonds for export, focusing on the qualities of typical Ghanaian diamonds. The experts suggested to the PMMC that it begin to accumulate a pictoral library of Ghanaian diamonds. They noted two industry practices that make Ghanaian (or any country's diamonds) diamonds difficult to identify once exported. First, the boiling diamonds in hydrofluoric acid to remove residue, which is now occurring at PMMC. This is a regular industry practice that creates a shinier, more uniform appearance, with the illusion of higher value, but also makes it more difficult to discern the point of origin. Second, if the diamonds have been grouped into categories according to use (e.g. separated into round versus broken stones),the point of origin is difficult to decipher as the typical mix of size and quality that an expert would expect to see from a particular area can no longer be used as a clue. ¶4. (SBU) On the positive side, the WDC experts indicated clear distinctions that help identify Ivorian diamonds. Ivorian diamonds come from one of two regions: Seguela, which typically produces higher carat size, rounded diamonds with a green skin due to radiation exposure, making them easily distinguishable from Ghanaian diamonds; and Tortiya, which produces brown rough diamonds, more similar to Ghanaian goods, but generally of a higher carat size and price. While the average price of a Ghanaian diamond is $30-40, Ivorian diamonds are $150-200 because of their higher average size. Both experts told EconOff they were impressed with the organization of Ghana's efforts to meet KP standards, especially compared with other African countries and two recently visited South American countries. ¶5. (SBU) In addition to providing technical assistance on photography, the experts suggested to PMMC that if duty taxes on diamond exports are raised (from 2 percent to up to 3 percent, the generally accepted worldwide figure),one-half percent be invested into the Ghanaian diamond industry, for example, for prospecting. -------------- New Reporting Methods -------------- ¶6. (U) Between November 28 and 30, PMMC representatives visited Akwatia, the region where approximately 90% of Ghana's diamonds are mined. On November 28, an educational program was conducted for diamond buyers and sellers. It was also attended by members of the police force and Bureau of National Investigation. The program introduced a new licensing and record-keeping system for middlemen who buy and sell diamonds in Akwatia, including new forms to record diamond purchases and sales, and emphasized that law enforcement officials would monitor the industry closely for illegal trading. On November 29, PMMC representatives traveled to surrounding villages to further discuss these topics. -------------- Licensing Buyers and Sellers -------------- ACCRA 00002954 002 OF 004 ¶7. (U) On November 30, 150 diamond buyers and sellers were registered in Akwatia for the first time, thereby creating a middleman market within the industry. Each received an ID card and no-fee license, valid through December 31, 2006. On December 5, an additional 200 were processed. Beginning in January 2007, diamond buyers and sellers will need to re-register, and pay, for a 2007 license. Three categories of licenses will be available: A) To buy and sell diamonds in Akwatia, 150,000 cedis (approximately $15USD). Some of this money will go toward paying the individual's income tax for the year. B) To buy and sell in Akwatia, and to sell in Accra, 500,000 cedis (approximately $50USD). C) To buy and sell in Accra, 2,000,000 cedis (approximately $200USD),or 1,000,000 cedis (approximately $100USD) to renew. These buyers are the only category permitted to register outside of Akwatia; they can register in Accra. There are currently 19 'top buyers' in this category, which in the future will be determined by specific high trade volume figures but PMMC did not specify any additional privileges or authorities beyond those buyers in category B. ¶8. (U) The WDC experts clarified that category C, the 'top buyers', are also the diamond exporters -- and pay a large fee for the privilege. The export license is not a new development. The fee is currently approximately $30,000. They also noted that category B buyers and sellers, the middlemen, are crucial to Ghana's diamond trade and the current effort to license and regularize their activities is a particularly important reform. -------------- Miners and Tributers -------------- ¶9. (U) While the PMMC focuses on marketing and export figures, the Minerals Commission at Ghana's Ministry of Lands, Forestry and Mines, and Ghana Consolidated Diamonds (GCD),a state-owned organization, provide licenses to small miners and tributers, who are permitted to sell in Accra to the PMMC or top buyers (see category C above). The Minerals Commission and GCD are working together to develop a system to collect independent production figures, which will be provided to the Mines Inspectorate and, in turn, compared with PMMC's export figures in an effort to monitor and ensure that Ghana's market does not include illegally transferred diamonds. Embassy Accra is planning a meeting with the Ministry in mid December. ¶10. (U) All records are hand written. Documents will be collected monthly for review. PMMC noted the potential for a central deposit point for all records in Akwatia. All licenses/ID cards are on colored, patterned paper and will be laminated; PMMC noted the paper color will change annually in an attempt to prevent counterfeiting. -------------- Joint Task Force -------------- ¶11. (U) As determined in the Action Plan, a Joint Task Force of senior Ghanaian officials, including representatives from the Ministry of Lands, Mines and Energy, the Minerals Inspectorate, the Minerals Commission, the Geological Survey, the Customs, Excise and Preventative Services, the PMMC, and the Ministry of Interior, was formed. It met December 6 for the first time. PMMC representatives speculated that the Deputy Minister of Lands, Mines and Energy would Head the committee. ¶12. (SBU) COMMENT: The actions being taken by PMMC appear to be a good faith effort to comply with each element of the Action Plan. This opinion was further reinforced by the positive outlook of the WDC Experts. However, as the new licensing, recording, and tracking data will only exist in paper form, with no database records, tracking the diamonds from mine to export will be difficult, and credible auditing a major challenge. In Post's view, PMMC, in cooperation with the Task Force, should outline a specific process for collecting or compiling the information into a usable form and develop enforcement measures. Post also thinks PMMC should consider building upon the WDC experts' work by continuing to monitor exports through photographic records. END COMMENT. ¶13. Text of Action Plan, Adopted November 2006 Administrative Decision Plenary has reviewed the reports of the Chair's Special Envoy to the Republic of Ghana (November 2006),the UN Group of Experts on Ctte d'Ivoire (UN document S/2006/735) and the Kimberley Process review visit to Ghana in December 2005, and concludes that these could constitute crdible indications of significant non-compliance wih the minimum requirements of the Kimberley Process Certification Scheme (KPCS). ACCRA 00002954 003 OF 004 Plenary takes note of the recommendation of the Chair's Special Envoy that Ghana should implement the recommendations of the UN Group of Experts on Ctte d'Ivoire and the Kimberley Process review visit to Ghana, in particular, the recommendations on strengthening Ghana's internal controls. Plenary welcomes Ghana's commitment to address urgently the issues identified in the above-referenced reports, and Ghana's willingness to receive a review mission. Plenary decides that Ghana's compliance with the minimum requirements of the KPCS should be verified by a review mission within three months. In accordance with Section VI, paragraphs 13 to 15 of the KPCS, and Section III, Paragraph (a) of the Administrative Decision on Implementation of Peer Review in the KPCS (ADPR),Plenary therefore decides to send a review mission to the Republic of Ghana which should take place by 28 February 2007. As set out in Section VI, Article 14 of the KPCS, "Review missions are to be conducted in an analytical, expert and impartial manner with the consent of the Participant concerned". The terms of reference for review missions are set out in Annex II of the ADPR. Consistent with the provisions outlined in Section 1 of the ADPR, the mandate for the review mission to the Republic of Ghana should also include an assessment of Ghana's implementation of the measures in the Annex hereto, and recommendations on such further action as may be required. As recommended by the Special Envoy, Ghana should report to the Chair on its implementation of measures, as detailed in the Annex, by 14 February 2007. Plenary welcomes Ghana's efforts to prepare a draft Action Plan and recommends that Ghana enter into a dialogue with the Working Group on Monitoring on a finalised Action Plan with a view towards strengthening its internal controls, based on the recommendations in the review visit report. Plenary requests the Working Group on Monitoring to monitor on an ongoing basis Ghana's compliance with the minimum requirements of the KPCS and its implementation of these measures, and to inform Participants and Observers, through the Chair. Plenary requests the WGDE to review Ghana's estimate of actual production capacity. This review should draw on existing sources of production data to be provided by Ghana, together with such other sources as may be available. The WGDE is further requested to make recommendations to the Chair through the Working Group on Monitoring on any further information requirements. Plenary welcomes the offers of technical assistance by the World Diamond Council, the United States, the UAE, South Africa and other Participants. Gaborone 9 November 2006 Annex Measures to be included by Ghana in its Action Plan From 24 November 2006, Ghana will only export rough diamonds once the following measures are in place: the contents of all shipments to be photographed digitally by Ghanaian authorities, and examined prior to export by an independent expert (as made available through the technical assistance offered by WDC) to advise on their origin. To assist in the provision of this exceptional technical assistance, WDC experts will be available to examine the contents of shipments for one week every four weeks on a schedule to be notified to Ghana (ie three visits prior to 14 February 2007). With immediate effect, any shipments containing diamonds of suspected non-Ghanaian origin should be: seized; reported to the Working Group on Monitoring; and confiscated and subject to follow-up investigation and prosecution, in accordance with national legislation. a) By 31 December 2006, Ghana is requested to: Identify existing sources of information on the production capacity of Ghana and provide these to the Working Group of Diamond Experts (WGDE). b) By 14 February 2007, Ghana is requested to: Provide an estimate of current actual production capacity of each diamond producing area broken down by sector (industrial (ie GCD), ACCRA 00002954 004 OF 004 licensed artisanal, illegal ghalamsey activity) to the WGDE, which will review the estimate. By 14 December 2007, Ghana is requested to: develop a detailed plan to improve internal controls (specifying who, when, how and benchmarks) which should draw on the Moscow Declaration on Improving Internal Controls in Alluvial Producers and at a minimum, should include the following components: registration and licensing of all actors involved at each stage in the diamond business (including concession-holders, tributers and local diamond buyers) to include ID cards with unique ID numbers; all internal trade to be between registered parties only; exports permitted only by licensed exporters (LBCs). So-called 'test exports' by any other party must be stopped immediately. recording of all transactions from mine to PMMC involving rough diamonds by the issuance of receipts by the seller. Receipts should include: registration details of each party (buyer and seller) including ID number, and for miners, also, the allocated claim or production area; and the origin of the diamonds. buyers in each transaction must keep all receipts of purchases in their books. monitoring and oversight of each stage, including spot checks and regular audits, and in particular, oversight of the activities at the diamond market in Akwatia; regular audit of PMMC records and procedures by an independent auditor or an authority such as the Ghanaian Auditor General; effective enforcement of existing legislation relating to the KPCS. Ghana already has implemented, or has legislation allowing for implementation of certain aspects of 4 above, including registration of certain actors in the diamond industry with identification cards with unique identification numbers; issuance of mining licences by the Minerals Commission and audit of PMMC records. In its report due by 14 February 2007, Ghana should therefore: provide copies of the 2005 audit report on PMMC to the Working Group on Monitoring; report on activities, and improvements, during the next three months concerning: enforcement of the requirement for all transactions to be documented, in particular from mine to licensed diamond buyer; and monitoring and oversight of production and internal trade from mine to point of export; report on progress made on a strategy to address the remaining issues identified in paragraph 4 above. As soon as possible, Ghana is requested to: Convene a meeting of the Ministry of Land, Mines and Energy, the Minerals Inspectorate, the Minerals Commission, the Geological Survey, the Customs, Excise and Preventive Services, the PMMC, the Ministry of Interior and other relevant government authorities to establish a Joint Task Force of senior officials of all government authorities referred to above, to be headed by a senior official from an appropriate authority. Provide the KP Chair with contact details for the Head of the Joint Task Force to enable information exchange. This Task Force should meet regularly (at least monthly) with the first meeting to be held by 14 December 2006 to oversee implementation of the Action Plan, in particular, improvements to internal controls and the measures herein, and should ensure effective information sharing and co-ordination. To help the WGDE in determining an objective "footprint" of the Ghanaian diamond production, the Ghanaian authorities have agreed to collect and disseminate to the WGDE detailed packing lists of rough diamond exports going back as far as possible, for instance from 1990 onwards. End text of Action Plan BROWN