The Qwasmeh Family Story
CPTnet | June 17, 2014
The public so far knows very little outside of the alleged time that Gilad Shaar, Naftali Frenkel, and Eyal Yifrach were kidnapped. But what we do know is the absolute mayhem the Israeli military has spread throughout the Hebron district among innocent families. Additionally, routine night raids, day patrols, confiscation of public property for military outposts, and the blockades on all but two access points into Hebron have suffocated the livelihood of Hebronites.
Soldiers raided the home and took possession of the Al Awewe family home in Aqbet Taffuh for six hours on Sunday. Over fifty troops had occupied the home while three adults, four young girls, and a young boy were in the home. The Israeli military would not allow a one-year-old baby to leave the house and her mother had to sit outside helplessly wondering about the safety of her daughter, who was still nursing. The soldiers found no suspects connected to the kidnapping in the home.
In that same area on Monday morning, the IDF confiscated the security camera equipment the al-Natshe family had installed around their house for their protection, along with video footage the cameras had recorded.
Further down the road in the Aqbet Taffuh area, approximately fifty-five Israeli soldiers left the hilltop area of the Palestinian municipality, occupied several homes, questioned families, tore down a private Palestinian fence and occupied the neighborhood for several hours.
Throughout the afternoon, northeast of Bab i-Zaweyah, just outside of the H1/H2 intersection, a brigade of more than forty soldiers stationed themselves in four different homes and a supermarket within a two hour period, leaving families frightened and unsure of their intentions.
On 15 June at around 9:30 p.m., an Israeli raid on a Palestinian home ended with a seven-year-old Palestinian boy hospitalized after the Israeli military used an explosive device to blow open the front door of the Akram Al Qawasmeh home. The subsequent powerful blast shattered the tempered reinforced glass, shearing off the decorative steel and sending pieces of shrapnel into all corners of the home, which severely injured Akram Al Qawasmeh’s son.
After the explosion, Israeli soldiers did not allow Akram Al Qawasmeh to see his son, and according to reports, the military initially stopped medical personal from treating the victim. CPT arrived the following day and found a home turned upside down. (See video below.) Children’s belongings were spread and broken around the house. Israeli soldiers demolished the kitchen, smashing fruits, vegetables, and other food items on the floor, and left feces on a rug in the basement.
These are just a few of the incidents that CPTers were able to report on directly. Other human rights organizations have also reported an increase in settler violence against Palestinians who live near the Hebron area settlements.
Historically, Palestinian violence has been the justification for settlement expansion in Hebron. Currently, the Hebron Rehabilitation Committee has identified over twenty-two locations of pending settlement expansion and settler activity. The behavior of the Israeli military and settlers in Hebron suggests the government may use the case of the three young kidnapped boys as an excuse to expand these settlements in the Hebron area or elsewhere in the West Bank while the international community is distracted.
See previous release, AL-KHALIL (HEBRON): Hijacking a kidnapping, Part I
Colombia Peace Talks Survive Elections, May Have Lasting Implications for Regional Integration and US-Led “War on Drugs”
By Peter Hayakawa | CEPR Americas Blog | June 19, 2014
Ending a very close race, incumbent Juan Manuel Santos won a decisive five-point victory Sunday in Colombia’s second round of presidential elections, beating challenger Óscar Iván Zuluaga, who had won the first round in an upset. The campaign had centered on two related issues: first, the future of the Santos-led peace process under way in Havana between the Colombian government and the rebel group FARC that may have the potential to end a half century of civil war, and second, a referendum on Santos’ shift away from the militaristic policies of his predecessor, Álvaro Uribe.
Zuluaga, who had been hand-chosen by Uribe and ran in opposition to the peace talks (though he had softened his position slightly after the first round), quickly conceded defeat this Sunday. Uribe, however, wasted no time in claiming that the elections had been marred by “massive fraud.” Santos ran on not only defending the peace talks which he had played a primary role in instigating, but also on repairing ties with regional neighbors (ties that he himself, as a defense minister under Uribe, had played a key role in breaking).
Santos’ victory has certainly dealt a major blow to ‘Uribismo.’ Colombians largely seem to support the peace process as well as recent moves toward regional integration, and it looks as though few were convinced by Uribe’s wild charges during the campaign that the peace process would open the path to “Castrochavismo,” allowing the “FARC to run this country from Havana.” Uribe has long loomed over Colombian politics, but Zuluaga’s defeat signals that his influence may be waning, even on the political right. Meanwhile, Santos’ support of the peace talks won him the backing of some of Colombia’s most prominent business people, in addition to endorsements from indigenous groups and left-wing coalitions.
Uribe might have thought twice about investing so much political capital in opposing the negotiations. While it is true that the peace talks had the support of Venezuela and Cuba, they also had the support of virtually every other country in the region, as well as the United Nations, in addition to broad domestic support. More to the point, the peace talks have throughout had the quiet endorsement of the United States. Just a month ago, on May 18th, U.S. Secretary of State John Kerry reaffirmed U.S. support for the peace process, which, given that they were the central subject of the elections, arguably amounted to an endorsement of Santos.
One might be able to forgive Uribe for being confused. While he was president, Uribe was the U.S.’s closest regional ally. At the time, his antagonistic posture toward neighbors Venezuela and Ecuador, including his repeated accusations of their support for the FARC, were highly appreciated by the U.S. (and not just by the Bush administration). More recently, his accusations tying Santos to Cuba, with their anti-Castro fervor, seem to come right out of the U.S.’s Cold War-era playbook. There is no evidence that Cuba is influential enough to be able to “run” Colombia, and the language betrays a loyalty to the U.S. perspective. Thus, it might have shocked him to learn that Secretary Kerry had basically endorsed Santos.
Indeed, U.S. support for Santos is a little puzzling, given the extent to which Santos has started to move away from U.S. policy on several important fronts; for example, emerging as a champion of regional cooperation and as a key participant in a regional effort to change course in the U.S.-led “War on Drugs.” But despite what might be a natural preference for a more pro-U.S. candidate (as any Uribe-endorsed candidate surely would have been), the U.S. simply might be unable to publicly oppose the almost universally-supported peace talks without risking serious and coordinated push-back. This development can be seen as another sign of Latin America’s growing independence from the U.S., though it’s important to remember that Santos also continues to cooperate with the U.S. militarily, and is one of the last remaining champions of U.S.-promoted “free trade’” agreements in the region.
The Peace Talks, Paramilitaries, and the “War on Drugs”
The negotiations have taken on momentum over the past year. Before the election, a framework emerged that will include the vital input of the civil war’s victims as well as mutual acknowledgement of responsibility for crimes committed during the course of the war. Perhaps most importantly, the talks have now widened to include negotiations between the government and Colombia’s second-largest guerrilla group, the ELN, increasing the reach of any potential deal. Since the talks began, the Colombian government claims that violence committed against civilians has significantly decreased.
There are plenty of reasons to be skeptical about these peace talks, particularly about the chances they will lead to real justice for the victims. While the FARC have committed many human rights abuses, the Colombian military and paramilitary groups with which the military has closely worked have been responsible for most of the violence. During the course of the war, paramilitaries alone have been responsible for up to 80 percent of all of the killings in the country, according to the United Nations. The fact that there is strong collusion between these paramilitary groups and the Colombian government is not a point of serious debate. In a move that bodes ill for the prospects for justice, in March, the government announced that it would release hundreds of paramilitary soldiers who had served lenient sentences for extremely serious crimes.
It is also almost guaranteed that U.S. policy makers and multinational companies, like DynCorp and Chiquita Banana, which have played a large role in fueling this conflict over the decades (primarily through the “War on Drugs” and the U.S.’s obsession with counterinsurgency), will also not be held to account. The U.S. has used the pretext of anti-narcotics campaigns to justify funding the Colombian military and Colombian political allies despite longstanding evidence of their ties to paramilitary groups. Paramilitaries, who are major players in the drug trade themselves, have among a litany of other abuses, declared war on unions, aiding the Colombian military in efforts that have nothing to do with counter-narcotics. In 2006, the “parapolitics” scandal story broke in Colombia, and 45 Colombian congressmen and seven governors were eventually convicted of ties to some of the country’s most notorious paramilitary groups. But even after these ties were brought out in the open, the U.S. government still defended the military aid it gave to Colombia. At the height of the scandals, a partial, temporary freeze was enacted by a handful of Senate Democrats against the wishes of the Bush administration. After the even more shocking “false positives” scandal emerged in 2008, when it was discovered that the Colombian army had hired paramilitaries to kill civilians and dress the bodies up as rebel fighters, declassified documents released by the National Security Archive show that the U.S. knew as early as 1994 that U.S.-backed Colombian security forces had ties to groups engaging in “death squad tactics” similar to those brought to light in the false positives scandal. There is evidence that the U.S. was still providing resources directly to some of these military units as recently as 2010. If the U.S. role is left out of the discussion and paramilitary groups are not held to account, this will greatly diminish the credibility of the peace process.
But despite these obvious shortcomings, the peace talks may eventually lead to a huge change in the “War on Drugs.” An under-discussed aspect of the negotiations is the fact that both the government and the FARC have already agreed on key issues, including commitments to seriously limit the U.S.-led aerial eradication program (where tens of millions of U.S. taxpayer dollars are spent annually to spray powerful herbicides on coca plants in rural Colombia), and also on a commitment to implement badly-needed land reforms for rural Colombians as well as programs to create economic incentives for Colombian farmers to grow crops other than coca. If these reforms are implemented, many Colombian subsistence farmers may one day be able to lead normal lives, instead of being terrorized by aerial eradication that makes no distinction between coca plants and the food that farmers grow to feed themselves. Aerial eradication has entailed huge human and environmental costs, while being shockingly ineffective [PDF] in limiting cocaine production, despite U.S. claims to the contrary.
At the same time, other countries are taking a stand against harmful anti-drug policies. In Peru, which in 2012 overtook Colombia as the world’s largest producer of cocaine, the government recently began a program to provide assistance to farmers to grow alternative crops. Since then, the reduction in the production of coca has been so significant that the government recently decided to postpone forced eradication efforts (Peru and Bolivia had both already banned aerial eradication in the past). The government of Peru also recognized that popular opposition to forced eradication has been a primary reason why the remnants of Peru’s Shining Path guerrillas have any popular support. If the Colombian peace talks succeed, there is a chance that the decades-long struggles of Colombian farmers against aerial eradication might eventually take a decisive positive turn in the place where the policy has caused the most harm—where for a time, an astounding 8 percent of the arable land in Colombia was subject to the program.
In the coming months, it will be important to see how the U.S. reacts to developments in the peace talks, which may have big implications for U.S. policy in Latin America. Despite U.S. support for the talks, the U.S. government has been clear that it wants aerial eradication and other “Drug War” policies to continue. But if the talks are successful, there is a chance that the U.S. may be forced to accept real change—not just a curtailment of destructive counter-drug policies, but perhaps also a process of demilitarization that might loosen the U.S.’s grip on a key regional foothold of military power.
Venezuelan President and High Ranking Officials to Declare Wealth, Ex-Minister Investigated for Corruption
By Z.C. DUTKA | Venezuelanalysis | June 18, 2014
San Francisco – Venezuelan comptroller Adelina Gonzalez announced yesterday that all senior officials in public office must update their sworn declaration of wealth (DJP) between the 1st and 31st of July.
The DJP has been required for select offices since the ratification of the Law Against Corruption in 2003. A government website for the task was set in place in 2009. The last DJP summons was for all police bodies, though the current injunction – detailed in the Official Gazette published just days after president Nicolas Maduro’s election to office – is much broader in scale.
The mandate extends to all state, federal, and municipal employs of superior rank, as well as any functionary working within the realm of public accounting. This includes President Nicolas Maduro, as well as magistrates of the Supreme Court, military generals and high ranking army personnel, the National Electoral Council, the Attorney General’s Office, governors, ministers and vice ministers, ambassadors, consuls, notaries, the Central Bank directors’ office and university rectors.
Those who do not comply with this requirement will be fined or, as articles 38 and 39 of the corruption law indicate, may be removed from their post and banished from all public office for up to 12 months.
Maduro’s firm stance against corruption has defined his presidency from the beginning, though critics believe his policies have been largely unsuccessful. Since he took office in April of 2013, there have been arrests and investigations within the tax and customs office, Seniat, the goods and services monitor, Indepabis, and state owned iron ore company, Ferrominera.
While addressing the National Assembly last October, the head of state implored deputies to reject the notion of corruption as “normal in political life.”
“I call on the people to not tolerate corruption,” he said, “neither of those with a yellow collar [opposition supporters] nor the corruption of those with a red collar [supporters of the Bolivarian revolution]. It’s the same thuggery, no matter how you dress; it’s the same anti-people and anti-country behavior.”
In an interview last September, Interior Minister Miguel Rodriguez Torres went into detail, “This problem of corruption neither started with the revolution, nor did it increase during the revolution. Rather, it began when the republic began. I believe that we should see corruption as part of an effort to dominate sectors of the public administration… In all public institutions there used to be parallel institutions. There always was someone who you would pay [on the side], to take care of the procedures. This created a culture.”
He explained how increasing government efficiency and eliminating bureaucracy are two key methods of destroying the normalized institution of corruption. He reminded reporters that in the pre-Chavez era, there was only one moment when politicians were publicly accused of corruption. That moment involved a scheme which left the country with “literally zero dollars in foreign currency reserves.
“Some experts who have studied this say that this was the greatest fraud in the history of the world,” Rodriguez stated.
Though the conspiracy was of vast proportions and markedly reliant on government insiders, only one man was accused and convicted for the renowned “RICADI fraud,” Rodriguez said.
Ex-minister accused
The Attorney General’s Office, presided over by Luisa Ortega Diaz, is currently conducting an investigation on Eugenia Sader, Health Minister from 2010 to 2013. Sader, a known supporter of Hugo Chavez, was replaced in her position shortly after Maduro took office.
An alleged Justice Department informant leaked information to local newspapers that Sader’s trial will begin on Thursday, at which time she will be questioned regarding numerous “irregularities in management” during her time as Health Minister. The informant took this to mean corruption and embezzlement, but others interpreted the term differently.
On Tuesday a house deputy for the opposition Justice First party and physician, Dinorah Figuera, asked attorney general Diaz to clarify what the charges against Sader are to be. Figuera told reporters she believes the case corresponds with a number of grave complaints her office made in regards to public hospital management under Sader’s administration, including emergency rooms closed for improvements that were never reopened.
An auditing commission of the national assembly last year questioned Merida city mayor and member of the opposition Lestor Rodriguez, in response to a dozen accusations of embezzlement gathered by a city councilor. At the time, the mayoralty had not collected trash in Merida since the previous year, though Rodriguez had claimed it was for lack of funds.
Rodriguez was later indicted for corruption.
Rough and Polished: South Africa Shortchanged on Diamond Trade
By Khadija Sharife | 100Reporters |May 16, 2014
JOHANNESBURG – At every step, from mine to ring finger, South Africa’s diamond industry is benefitting from royalty and export tax structures riddled with loopholes, shortchanging citizens of one of the world’s premier sources of diamonds of tens of millions of dollars a year in revenue.
In 2011, South Africa produced diamonds whose uncut, or rough, value was $1.73 billion, or 12 percent of global production, according to the most recent government data available. Yet from 2010 to 2011, diamond-producing companies paid South Africa’s government just $11 million in mining royalties, according to the latest Tax Statistics report, produced by the South African Treasury and the South African Revenue Service.
A 100Reporters investigation of the diamond trade in South Africa has found that companies here pay a royalty rate far lower than that of other African states. Companies can also reduce or cancel out export taxes if they offer locally-mined diamonds to the state for purchase—even if the South African government never buys the gems, often due to formidably high prices.
In an apparent conflict of interest, De Beers Consolidated Mines Ltd., the dominant player until 2010, ‘donates’ paid staff to the State Diamond Trader, charged with assessing diamonds offered by De Beers and other companies to the State for purchase. Provided 10 percent of domestic diamonds are offered, these companies may then receive export tax exemptions.
The main beneficiary of a system tilted in industry’s favor is De Beers, the sprawling multinational cartel that accounts for 35 percent of global rough diamond production, mainly from Africa. Until recently, De Beers dominated the South African diamond industry.
In 2011, De Beers accounted for $1.34 billion of South Africa’s production, and it remains the country’s primary diamond importer and exporter. The only other significant player, Petra Diamonds, with whom De Beers controls 97 percent of the local diamond industry, neither imports nor exports.
From 2005 to 2012, diamond exporters, primarily De Beers, appear to have downplayed the market value of their rough diamond exports by $3 billion, according to an analysis* of declarations in corporate filings under the Kimberley Process Certification Scheme, the rough diamond tracking system used to keep conflict gems off the world market. The same undervalued gems were then sold at market prices around the world.
Lynette Gould, head of media relations for De Beers, declined to comment on the findings, or to address questions about the valuation, sales and import and export volumes of diamonds from South Africa. In an email, Gould wrote that the “values and volumes of De Beers production is . . . proprietary.”
A Broken System
To ensure that the government gets its share of revenues from the extraction of the country’s diamonds, the South African government relies on a national agency, the Government Diamond Valuator (G.D.V.), charged with determining the quality, and thus worth, of diamonds. But highly-placed sources in the diamond industry said that the G.D.V. seldom issues independent assessments of the country’s diamonds, opting instead to echo the valuations that De Beers puts forth in the company’s price lists.
“The gap between the industry’s presence in South Africa and its contributions to the country’s coffers has its roots in how diamonds are valued in South Africa and who controls the process,” said Claude Nobels, a former government diamond valuator.
“We had a plan to create a system, under the Nelson Mandela government, that would generate fair revenues for all parties involved,” Nobels told 100Reporters. But to date, “the diamond mining and trading industry has not truly benefitted South Africans. The loss to the state is billions of dollars,” he said.
Calculating diamond revenue losses to the South African budget is complicated by a dearth of data, particularly concerning how diamonds are valued. Valuation, in turn, drives royalties and export taxes, as well various forms of tax exemptions. For example, companies can receive credits for importing diamonds to be cut and polished in South Africa, which in turn may reduce or even cancel export taxes.
Until 2012, government reports on diamonds generally showed blank spaces rather than reveal value and volume of local and export sales. Reports for other commodities such as gold and platinum, however, teemed with data. Martin Kohler, Deputy Director of Statistics for the Department of Mineral Resources (D.M.R.), said the government withholds diamond data to protect big producers, the largest among them De Beers, unless the companies authorize the release of the information.
“De Beers, who had a predominant share of the diamond market in the past, authorised us to publish the aggregated production data only (but not sales data),” Kohler said in an email. According to Kohler, the recent sale of De Beers’s mines to other owners meant that, “the predominant position of De Beers has been diluted, and we are able to publish sales data with effect from January 2013 (but not before that date).”
Kohler said such information was strictly confidential “where one company has more than 75 percent market share, or where there are less than three producers of a mineral, unless all such producers have granted permission to publish the data.”
In November 2013, the company moved its sorting, valuing, and selling center to Gaborone, Botswana from London. According to a knowledgeable source, the South African government pressured De Beers to shift sales activities to Africa, specifically South Africa. De Beers caved in to the pressure but preferred Botswana as a partner. The company signed a ten-year agreement relocating global production sales to Gabarone. South Africa, wary of being seen as a domineering neighbor, acquiesced, the source said.
“Bricks in the Wall”
To understand South Africa’s diamond industry and the system of taxation that now governs it, it helps to look to the industry’s origins, which are synonymous with De Beers. Historically, the apartheid regime cultivated close relations with South Africa’s diamond industry. John Vorster, an apartheid-era prime minister, once described corporate support from De Beers and other large companies as “bricks in the walls of the regime’s continued existence.”
De Beers was formed in 1888 by colonialist Cecil Rhodes and acquired by Ernest Oppenheimer’s Anglo-American in the 1920s. By 1987, Anglo-American PLC controlled over 60 percent of the wealth listed on the Johannesburg Stock Exchange, through an estimated 80 listed entities.
Despite its dominant role in the global diamond trade, De Beers has a history of running afoul of the law in important markets. In 2008, the European Union forced De Beers to end decades of price fixing with Russia’s Alrosa, another dominant diamond producer. At the time, De Beers controlled 50 percent of global rough diamond production.
Meanwhile, for more than 60 years, De Beers was banned from directly trading in the United States because of price fixing, despite the fact that the U.S. accounts for half the world’s diamond jewelry sales. In 2012, a settlement of $295 million was reached between the U.S. government and Anglo-American, which currently owns 85 percent of De Beers.
In South Africa, De Beers functioned in a protected niche even after the end of apartheid. For instance, it paid no export taxes on diamonds until 2007. According to Parliamentary documents, De Beers extracted the advantage in a twist worthy of a B-movie: for years, it held the government at bay by citing a smudged, unsigned document generated under the apartheid regime, just prior to the first democratic elections, that allegedly provided the company with an export tax exemption for 13 years.
Further, extractive industries in South Africa, including diamonds, did not pay royalties until 2010, with the adoption of the Mineral and Petroleum Resource Royalty Act.
Royalties
According to the African Development Bank, South Africa was the “only major mining country on the continent without a royalty on mining” until the act’s passage. To address the gaps in the system, the act mandated that companies pay royalties at rates ranging from 0.5 to 7 percent. Royalties, calculated against criteria such as gross sales and the company’s net operating mining profits, are compensation to the nation for the permanent loss of non-renewable resources.Yet in crafting and applying the royalty rate, the diamond industry, rather than the South African government, has had the upper hand.
Take the rate itself, for example. Botswana and Namibia, major diamond-producing states, have royalty rates fixed at 10 percent. Yet because of its sliding royalty scale, South Africa averages an annual royalty rate of about 2 percent, which netted the government a total of $57.5 million from 2010 to 2012.
“The revenues from diamond royalties are very low – just 1.1 percent of sales for 2011,” said Mark Curtis, a U.K.-based development finance consultant for global non-governmental organizations. “If diamond companies paid the mid-royalty range of 3.5 percent, royalties would have amounted to $24.8 million more than the state actually received,” he said.
The explanatory draft of the act originally pegged royalties at 10 percent of the value of diamonds at the ‘mine-gate’ and at 8 percent after processing. But the government reduced the rate following pressure from the diamond industry. Created around a complex profit-based system, royalties are considered a “cost” by business, and depend on the value of minerals sold.
Clarity Lacking
Though diamonds are valued by their clarity, the same cannot be said of South Africa’s diamond industry or its largest player, De Beers.
Unlike other South Africa diamond companies, De Beers does not allow the government to publish key information about the value of the diamonds it extracts. As a result, the state and the public cannot verify the fairness of the royalty De Beers ultimately pays.
In addition, to determine the value of a diamond, DeBeers and other companies use complex and closely-held pricing formulas, that they do not permit the government to review. De Beers’s pricing formula counts 12,000 categories.
According to one European valuator who worked closely with De Beers, the company’s price book was not a single listing, but rather an “elaborate system used to value diamonds for different purposes. By manipulating various categories with price points, they can increase or decrease the value of diamonds . . . These figures have nothing to do with fair market prices.”
Speaking on behalf of De Beers, Gould said, “I’m afraid the information on pricing is proprietary and therefore confidential.”
Other companies also maintain proprietary pricing systems. In an email, the Government Diamond Valuator confirmed that it did not “have access to the pricing policies of other diamond companies,” but asserted that the Government Diamond Valuator assessed “each parcel imported or exported to determine a value deemed to be fair market value.”
However, highly placed sources in the diamond industry, including a former government valuator, said the G.D.V.’s relies on random spot checks, and verifies only the size of diamonds, not their quality. One official close to the Department of Minerals and Resources confirmed that mispricing of diamonds was easily possible due to what was considered the “very subjective nature of pricing.”
Export Taxes
In 2007, the South African government established an export tax of 5 percent on diamonds. But from 2009 to 2013, according to the latest Tax Statistics report, it yielded only $21.9 million to the national purse.
The state has pulled in little revenue due to exemptions built into the 2007 Diamond Export Levy Act. The exemptions were created ostensibly to encourage mining companies to make quality diamonds available to domestic industry, before shipping abroad. Companies that offer rough diamonds to local buyers for cutting and polishing, or beneficiation, through a government mechanism called the State Diamond Trader system can obtain breaks on export taxes.
Large companies like De Beers can get the exemption if they sell 40 percent of their South African rough diamonds to buyers in South Africa, and offer 10 percent to the State Diamond Trader.
The State Diamond Trader, however, often cannot afford to purchase rough diamonds because the price is too high. The trader’s annual reports disclose that purchasing diamonds for the local beneficiation industry was difficult due to, “unsustainable rises in prices at producer level” and “limited rough supply.”
De Beers further provides fully-paid staff to the trader to conduct diamond valuation, according to reports of the State Diamond Trader, which describe the presence of De Beers staff at the government agency as a “donation.”
In an email, De Beers said, “the arrangement between De Beers and the S.D.T. is subject to confidentiality and information relating to this arrangement cannot be provided without the S.D.T.’s consent.”
Futhi Zikalala, C.E.O. of the State Diamond Trader, told 100Reporters that each parcel was individually valued. “The process is legislated. We do valuations for the 10 percent offered to the S.D.T. It takes four or five days at a time, with 10 cycles a year.”
Asked whether she would comment on the apparent conflict of interest in the State Diamond Trader’s long-standing use of De Beers’s donated staff, she responded, “Actually, no. I do not understand why you are asking that question.”
A source close to the Department of Mineral Resources said that use of De Beers’s staff was for practical reasons: the S.D.T. was under-resourced and in need of diamond experts.
In October 2013, the Minister of Minerals Resources, Susan Shabangu, said that the State Diamond Trader system had failed and would require an overhaul.
Transfer Pricing
Companies can also win export tax exemption if they import rough diamonds for local beneficiation. The higher the value of the imported gems, the greater the import credits a company can generate to ultimately offset their export taxes, creating a system vulnerable to price manipulation.
But the arrangement appears to have done little to nurture domestic cutting and polishing industry. According to figures cited in a South African parliamentary report (2013), South Africa currently hosts just 300 polishers, down from 3,000 in 2008, when 140,000 carats, maximum, were locally beneficiated (see sidebar).
The report cited diamond industry officials who stated that the local cutting and polishing industry was “in distress.” While the 2008 recession had impacted the global diamond industry everywhere, beneficiation industries elsewhere–including India, China and neighboring Botswana–bounced back, even expanding training facilities as well as cutting and polishing labor. In 2013, African Romance, a medium-sized state-backed beneficiation diamond company, was liquidated. Reasons cited included the absence of consistent quality diamond supplies.
Until 2013, De Beers exported gems from its mines in Namibia, Botswana and South Africa to London for valuation and then imported them into South Africa for sale to select buyers called sightholders. The sales values declared to sightholders are confidential, the company said.
South Africa boasts curiously high import prices for diamonds. While higher import values are said to correspond to the quality of select rough diamonds, South Africa’s import price appears significantly more than the price of diamonds imported to other countries such as Israel, arguably one of the world’s leading gem quality cutting and polishing centers.
For example, South Africa’s average import prices, at $544 in 2009 and $773 in 2010, were significantly higher than Israel’s at $165 and $156, respectively, according to certificates filed under the Kimberley Process.
In 2007, South Africa’s import price hit a staggering $1,706 per carat with a total import value of $2.1 billion. Yet only $670 million would be sold to De Beers’s pre-approved South Africa-based purchasers, known as Diamond Trading Company (D.T.C.) sightholders. Though these figures were published in a De Beers report, when asked for annual D.T.C. local sales, Gould responded that the information was proprietary.
According to a diamond specialist previously employed by the South African government, who spoke on condition of anonymity, import and exported diamonds were often “mispriced” by an average of 20 percent or more.
The other countries with similarly high import averages were those where De Beers also held a large presence, such as Namibia.
“South Africa’s import figures are improbable,” said a European Government Diamond Valuator. “These prices are exceptionally high as an average price.”
Most imported diamonds appear to be re-exported uncut and unpolished. While imports make up relatively small volume, or carats, they drastically increase the value of rough diamond exports. Subtracting the values and volume of imported diamonds shown on South Africa’s K.P. certificates from corresponding exports, the actual price per carat of rough diamonds being exported for the first time falls dramatically.
When asked about the anomalies in reported trade figures for diamonds under the Kimberley Process (K.P.) in South Africa, where De Beers is a dominant player, Gould responded, “The primary purpose of the K.P. process (or the issuing of the certificates at least) is for Governments to certify the origin of diamonds, not to keep track of the volume and value of diamonds imported or exported; that is the function of the relevant Regulator and G.D.V.”
The Government Diamond Valuator
While the Government Diamond Valuator is responsible for independently appraising gems and for monitoring the trade in diamonds, it remains questionable whether the South African valuator is able to provide an independent assessment. Such assessments are critical for the South African government, and public, to secure royalties and export taxes that reflect the true worth of the country’s diamond trade.
Former De Beers director Bertie Lincoln, in a rare quote under oath to a South African court 17 years ago, described the Government Diamond Valuator as “an auditor. The value is the price which is in the [De Beers] Price Book. So the government valuator has got no input into the value of a diamond.”
The Government Diamond Valuator did not respond to follow-up questions about the source of information informing the G.D.V.’s Price Book, the size of the agency or office, the amount of time available for valuation of imported and exported diamonds, and other questions.
“The significant differences between the dollar-per-carat for South African rough diamond imports and exports suggest possible price manipulation for the purposes of aggressive tax avoidance,” said public finance specialist, Len Verwey. Companies like De Beers, he stated, may indeed have a plausible explanation, in which case, “diamond companies as well as the Government Diamond Valuator should provide more transparent reporting to society on the factors that determine such valuations.”
Verwey stated that the Government Diamond Valuator’s credibility “in ensuring fair market value for diamond transactions is essential to its success.”
But critics of South Africa’s current royalty and taxation system are skeptical that the government will impose greater transparency on De Beers and other major producers.
“Inevitably,” stated one former De Beers employee, “the company will stonewall and the G.D.V. will run a mile” from transparency and accountability in the diamond valuation system.
He added, “No one will want this brought into the open.”
*The information on transfer pricing manipulation of diamonds comes from a report by Sharife and Sarah Bracking, published by the Leverhulme Center for the Study of Value, University of Manchester, and supported by a grant from Oxfam Great Britain.
Khadija Sharife is the lead Africa forensics researcher for Investigative Dashboard (ID) and a senior investigator for African Network of Centers for Investigative Reporting (ANCIR). She is the author of Tax Us If You Can: Africa.
Netanyahu should look at his own record
By Ibrahim Hewitt | MEMO | June 18, 2014
Standing in front of a map of what both no doubt hope will one day be Greater Israel, Benjamin Netanyahu and Tony Blair have today given a practical demonstration of chutzpah. Translated roughly as “audacity” (but could also mean “insolence”), the two men with blood on their hands tried to convince the world that the lives of three illegal Jewish settlers – “children,” said the Israeli PM – are worth more than the lives of over 1,300 Palestinian children killed by the Israelis since September 2000 at an average rate of 3 murders per day. This is entirely consistent with the view expressed by at least one extremist Rabbi, Yaacov Perrin, at the funeral of Baruch Goldstein, the terrorist settler who murdered 29 Palestinians while they prayed in Hebron’s Ibrahimi Mosque in 1984: “Even one million Arabs,” claimed Perrin, “are not worth a Jewish fingernail.”
To the best of my knowledge, Blair has never, even as arguably the most ineffective “peace envoy” the world has ever seen, expressed regrets at the loss of Palestinian lives with as much gravitas as he employed to condemn the kidnapping of the settlers. If, indeed, that is what has happened to them; with no credible claims of responsibility, there is already talk on social media that the three will surface unharmed after spending a few days in a military facility somewhere in Israel having served their purpose of giving Netanyahu an excuse to try to break Palestinian will and the unity government in one brutal step. Israel has carried out false flag operations before, so why might this be any different?
According to statistics supplied by Israeli human rights group B’Tselem, Israel is holding 196 Palestinian children in its jails. Although it regards Israeli citizens as adults from the age of 18, as far as sentencing is concerned, Palestinians aged 12 and over are “adults” in Israeli eyes. The Palestine Solidarity Campaign (PSC) reports, “Every year between 500-700 Palestinian children, some as young as 12, are detained and prosecuted in the Israeli military court system.”
There are almost two hundred men held by Israel under so-called “administrative detention”. They have never been charged with or found guilty of any crime and their detention can be extended indefinitely. To all intents and purposes, they have been “kidnapped” by Israel’s occupation authorities.
All of this doesn’t matter, of course. With a compliant media at its disposal, Israel has once again been able to control the narrative so that Palestinian fatalities over the past few days are ignored and the missing settlers grab the headlines. This pattern is repeated in the lack of coverage of the almost daily Israeli military incursions into Gaza and attacks on farmers and fishermen, which go unreported. It is as if they have become so commonplace that they are not newsworthy. The PSC has monitored the BBC for its coverage of the conflict in Palestine: “[The Corporation] has a unique responsibility, enshrined in the BBC Charter, to provide news that is balanced, fair and accurate. In the case of its coverage of Palestine and Israel, this is not the case. Audiences are constantly presented with the Israeli perspective on events, while being kept in the dark about Israel’s atrocities committed against the Palestinians.” It is within that sort of context that we must view displays of solidarity by the likes of Netanyahu and Blair on any issue, not just missing settlers.
So when the Israeli prime minister declares that the Palestinian Authority should dissolve the newly-created unity government because “they cannot build a government that is backed by the kidnappers of children and the murderers of innocents” he should take a long, hard look at his own record, for that is exactly what his government, and those before it, are guilty of. Never mind the chutzpah, Netanyahu is being a “tsvuak” (hypocrite) of the highest order. Come to think of it, though, I think I prefer plain old schmuck; that suits him down to the ground.