Central African Republic Unveils Sweeping Reforms for Transparent and Formal Diamond Sector

In a pivotal move signaling a new era for its vital extractive industry, the Government of the Central African Republic (CAR) has initiated a comprehensive overhaul of the nation’s alluvial diamond mining sector. This ambitious reform, launched strategically ahead of the World Diamond Council’s (WDC) Annual General Membership (AGM) meeting in Antwerp, underscores CAR’s unwavering commitment to re-establishing itself as a responsible and transparent player in the global diamond market. The reforms are not merely administrative changes; they represent a fundamental shift towards a robust, ethical, and fully formalized diamond trade, crucial for the country’s economic recovery and stability.

At the heart of this transformative initiative is a bold and drastic new approach predicated on absolute transparency, stringent due diligence protocols, and the meticulous traceability of individual diamond parcels. The government has explicitly stated that adherence to the internationally recognized OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas will be non-negotiable. This commitment to best practices aims to instill confidence across the entire supply chain, from artisanal miners to international buyers, ensuring that diamonds from CAR contribute positively to national development rather than fueling conflict or illicit activities.

The Imperative for Formalization: Addressing a Steep Decline

The urgency for these reforms is starkly evident when examining the historical trajectory of CAR’s diamond production. For years, the sector has been plagued by informality, conflict, and embargoes, severely impeding its potential. A sobering comparison illustrates this precipitous decline: in 2012, before the onset of widespread conflict and subsequent restrictions, the country’s total diamond production reached approximately USD 62 million. Fast forward to 2018, and this figure plummeted to a mere USD 2.3 million – a staggering drop of over 96%. This drastic reduction has had devastating consequences for state revenue, local livelihoods, and overall economic stability.

Following a partial lifting of the Kimberley Process embargo in 2016, there was a brief period of optimism. In 2017, the country managed to export 113,000 carats, hinting at a potential recovery. However, this momentum was short-lived, and by 2018, exports again dwindled to an alarming 12,000 carats. This figure represents a mere 3% of the 2012 export volume, highlighting the profound challenges that CAR’s diamond sector has faced. The government’s renewed focus is therefore not just about increasing production, but about ensuring that every carat extracted and exported contributes legally and transparently to the nation’s coffers and its citizens’ well-being.

New Regulatory Framework: Strict Conditions for Buying Houses and Foreign Buyers

To spearhead the formalization effort, President and Head of State Faustin Archange-Touadéra signed Presidential Decree No. 19.282 on September 30, 2019. This landmark decree introduces stringent new regulations designed to compel all existing buying houses to actively participate in the formal export circuit and definitively disengage from any involvement in informal or illicit trade networks. The message is unequivocal: commitment to transparency and legality is paramount.

A cornerstone of this new regulatory framework is the imposition of a mandatory minimum export quota. Each licensed buying house will now be obligated to export at least USD 3 million worth of diamonds per quarter. Failure to meet this minimum threshold will result in the immediate withdrawal of their operating license. This decisive measure is intended to weed out speculative or non-compliant entities and ensure that only serious, well-capitalized, and ethically committed players remain in the market. The aim is to create a vibrant, legitimate export environment that maximizes revenue generation and minimizes opportunities for illicit trade.

The decree also outlines a crucial trial period, set to conclude on December 31, 2019. During this interim phase, buying houses must demonstrate their capability and commitment to formalizing exports under the new regulations. Only those entities that successfully pass these stringent conditions will be eligible to enter into a formal contract with the CAR Government. These contracts will explicitly stipulate the due diligence sourcing protocols, ensuring a standardized and accountable approach to diamond procurement and export across the sector. This structured approach provides a clear pathway for legitimate businesses while establishing robust safeguards against non-compliance.

Furthermore, the Presidential Decree extends its strict conditions to foreign buyers operating within the Central African Republic. Their licenses will also be subject to withdrawal in cases of non-compliance with the new regulations. This equitable application of rigorous standards to both domestic and international actors underscores the government’s comprehensive approach to ensuring accountability across the entire value chain and preventing any circumvention of the new rules.

Economic Incentives and Enhanced Oversight for Sustainable Growth

Revitalizing state tax revenues is another critical objective of this reform package. Recognizing that a competitive tax environment is essential to attract and retain legitimate investment, a new finance law was enacted on July 23, 2019. This legislation dramatically reduced the total diamond exportation tax rate to 4%. This reduction is designed to align CAR’s tax structure with that of neighboring countries, thereby making its formal diamond sector more attractive and economically viable for traders and investors. By lowering the tax burden, the government hopes to incentivize formal exports, discourage smuggling, and ultimately increase the volume of declared diamonds, leading to a net gain in legitimate state revenue.

Beyond fiscal policy, the reform efforts are bolstered by a significant reinforcement of oversight and enforcement mechanisms. This includes strengthening the capabilities and presence of the Mining Police, a vital force in curbing illicit mining and trade activities. Concurrently, local Kimberley Process (KP) structures are being reinforced. These local bodies play a crucial role in monitoring compliance with KPCS requirements on the ground, ensuring that diamonds originating from CAR are conflict-free and ethically sourced. This two-pronged approach of economic incentive coupled with rigorous enforcement aims to create an environment where formal, responsible diamond trade can flourish without fear of undue competition from illegal operators.

International Collaboration and the Kimberley Process: A Partnership for Progress

The Central African Republic extends its profound gratitude to the international community for the invaluable assistance and steadfast support it has received throughout its reform journey. In particular, the nation acknowledges the critical role played by the Kimberley Process Certification Scheme (KPCS). The work of the CAR Monitoring Team within the KPCS has been particularly lauded for its dedication and effectiveness in guiding the country through challenging periods and ensuring compliance with international standards.

A significant positive development arising from this collaborative effort has been the crucial decision to shorten the Kimberley Process (KP) approval procedures to a mere seven days. This expedited approval process is pivotal in the context of the ongoing reforms, streamlining the formal export process and reducing bureaucratic bottlenecks that previously hampered legitimate trade. By facilitating quicker processing, the KP helps ensure that CAR diamonds can efficiently reach the international market, reinforcing the viability of the formal sector and providing timely revenue for the state and livelihoods for its people.

A Vision for Normalization: Peace, Prosperity, and Responsible Sourcing

The CAR Government harbors strong hopes that this comprehensive reform process, significantly bolstered by the peace agreement signed in Khartoum on February 6, 2019, will yield tangible positive results as early as 2019. The upcoming KP Plenary in New Delhi is viewed as a crucial platform where these initial successes can be showcased and further international support solidified. The ultimate aspiration is to establish a new Operational Framework for the CAR diamond sector, one that facilitates a complete normalization of the country’s diamond exports.

This normalization is not merely an economic goal; it is inextricably linked to the broader objectives of achieving lasting peace and fostering sustainable development across the Central African Republic. By ensuring that its diamond industry operates with the highest standards of transparency, due diligence, and traceability, CAR aims to reclaim its rightful place as a reliable and responsible source of ethical diamonds. This endeavor promises to bring much-needed economic stability, attract ethical investment, and ultimately contribute to a more prosperous and peaceful future for all Central Africans, demonstrating how a nation can transform its natural resources into a catalyst for positive change and sustainable growth.