Marange diamond fields in Zimbabwe: Zanu-PF's enrichment project?
Written by Bernard Chiketo January 13, 2013
Zimbabwe's Marange diamond mining fields are being governed by a predatory Zanu - PF elite using its access to state power to enrich itself, against the interests of the people as a whole, acting in collusion with the mining companies.
President Robert Mugabe
At least this is South Africa's former President, Thabo Mbeki confessed fear during Zimbabwe's Diamond Conference in Victoria Falls early last November.
'The country's political leadership, including all parties which serve in the current inclusive Government established because of the GPA (Global Political Agreement), must absolutely ensure that the diamond mining industry is not governed by a predatory elite which uses its access to state power to enrich itself, against the interests of the people as a whole, acting in collusion with the mining companies,' Mbeki advised.
For Finance Minister, Tendai Biti, who is Movement for Democratic Change (MDC - T) Secretary General the reality could even be worse! Revenue accruing from Marange fields is essentially unknown amid fears that it could as well be evading treasury to fund a ‘parallel government' under President Robert Mugabe's Zanu - PF party.
'There are challenges of opaqueness. As Ministry of Finance, we fear that there might be a parallel government in respect of where the revenue is going and not coming to Treasury. This economy needs every resource it can get including diamond revenue,' Biti had said earlier in the year.
Tafadzwa Musarara, Resources Exploitation Watch Director, a pro-Zanu - PF civic organisation told a Centre for Natural Resource Governance (CNRG) convened diamond conference held in Harare late in November that mining firms were protected by law not make public their balance sheets as they were registered as private limited companies hence the nation had no reason to complain of any ‘opaqueness'.
Musarara further noted that Treasury ought to be more realistic in its expectations of revenue flow from Marange saying the firms were still recuperating their infrastructural investments adding that the firms must even be commended for their current contributions.
Presenting his Mid-Term Fiscal policy in July, Biti again blamed poor revenue inflows from diamonds from the Marange fields noting that of US$600 million he had expected from diamond sales this year, only US$41, 6 million had been received during the first half of the year, forcing him to cut his 2012 national budget from US$4 billion to US$3, 4 billion.
Biti even protests that due process was not followed in awarding the concession prejudicing the country of millions of dollars and has been pushing for the cancellation of all existing claims through a Diamond Control Revenue Bill of 2011 which seeks to place the fields under the joint supervision of the finance and mining ministries.
Section 4 (1) (a) of the draft Bill states: 'Any mineral right, which was in force under the Mines Act immediately before the fixed date (date of commencement of Act) and which authorised the grantee or holder to prospect for additionally, or alternatively, to mine or work any alluvial deposit of diamonds, shall, to the extent of such authorisation, be void.' Section 6 (4) (b) of the Bill adds that 'The minister, with the approval of the minister responsible for mines, may, by written notice to the (claim) holder, fix appropriate terms and conditions subject to which mining operations may continue on the holder's mining location.'
Zimbabwe Mining Development Corporation (ZMDC) owns the 80,000 hectares diamond fields which geologists estimate to contain two to seven billion carats of raw diamonds and currently contributing up to 25 per cent of the global diamond output.
While ZMDC wholly owns Marange Resources Ltd it has 50 - 50 joint ventures foreigners in the other three companies - Diamond Mining Corporation (DMC), Mbada Diamonds and Anjin Investments. According to human rights group, Global Witness, Mbada Diamonds' board is chaired by Zimbabwe's former Air Vice Marshall Robert Mhlanga while Anjin Investments, is a joint venture between a little-known Zimbabwean company, Matt Bronze, and a Chinese construction company. Anjin's board also Zimbabwe's Ministry of Defence permanent secretary, two commissioners of the Zimbabwe Republic Police, and current and former officers of the Zimbabwe Defence Forces.
Of all the companies Biti is particularly critical of Anjin which he accuses of not remitting anything to Treasury despite being the largest diamond producer on the Marange diamond fields.
However, the Chinese- owned diamond producer -which has ventured into the hospitality and aviation industries - says it has discharged its statutory obligations and had remitted US$30 million to Treasury adding that the finance minister was scapegoating them for over-estimating possible diamond revenue by basing his US$600 million projection on the assumption that a carat of diamond was worth US$1,300 when, in fact, its average value is US$60.
'It is either he is untruthful, incompetent or illiterate. He made the blunder and miscalculated. He must be man enough and admit that he made a mistake,' Anjin board member Munyaradzi Machacha said.
Mines Minister Obert Mpofu also maintains that the mining industry was contributing enough and was the biggest contributor to Zimbabwe's economy. 'Biti is a liar. The mining industry is the largest contributor to the country's economy,' Mpofu a Mining, Engineering and Transport (Mine Entra) conference in Bulawayo following Biti's mid-Term Fiscal Policy Review.
Mpofu is also accused of directly benefiting from the Marange diamond fields and is famed to own half of Zimbabwe resort town of Victoria Falls.
Zanu - PF politburo member, former Minister of Mines and current Parliamentary Committee on Mines and Energy chairperson, Edward Chininga, in a government local daily the Chronicle, blamed the current sanctions regime for the limited revenue flow from Marange as they are ‘creating loopholes for illegal trade and fiscal leakages,' a muted confirmation of shadowy diamond deals in the sector. All four firms were slapped with US sanctions as they are under ZMDC a primary target of the financial restrictions.
In Chininga's call for the removal of the US sanctions recently he said since the four companies are now fully compliant with the Kimberly Process Certification Scheme (KPCS) which the US itself chaired until recently should lift the restrictions.
'Therefore,' Chininga said of the US, 'it should not at the same time create an environment that promotes illegal sale of diamonds through financial sanctions that force companies to circumvent normal export channels. These financial restrictions and sanctions create loopholes for illegal, fiscal leakages and loss of revenues to Zimbabwe.'
This explains why perhaps the balance sheets of the firms operating in Marange remain so opaque.
Eddie Cross a Bulawayo South Movement for Democratic Change (MDC) Member of Parliament speaking at the CNRG conference also claimed the Minister of Mines was covering up Zanu - PF's illicit diamond deals in the past five years.
Cross said Mpofu misrepresented to Parliament that Zimbabwe had realised only $200 million from the sale of raw diamonds over five years in which time total payments to Treasury had been over $174 million imputing that the miners had paid out most of the money earned from the sale of diamonds something he said was patently false.
Cross even argues that Zanu - PF strategically positioned the current mining firms to secure the Marange fields to assure the party of funding on the eve of its entry into a government of national unity (GNU) in which they were to lose control of Treasury and the social welfare ministry which has the National Social Security Authority (NSSA) - a cash cow, to his party.
He said there was no hope that there could even be transparency in Marange for as long as the current actors retained their licences which forms his party's support for the nationalisation of the fields which Biti has been pushing for. 'In 2011, the Parliament of Zimbabwe adopted a motion without dissent, that the Marange diamond fields be nationalised. It is pleasing to see that the Minister of Finance has announced that that is exactly what is intended under the new Diamond Act and that we can expect action shortly,' he said.
While Partnership Africa Canada (PAC) a key civic organisation in the KPCS in a report published last month claim that Zimbabwe may have lost up to US$2 billion over the past three years Cross claims that this year alone more than 37 million carats of diamonds worth over $4billion have been extracted from Marange.
Cross, an economist said while his estimates appeared outrageous they were in fact conservative arguing that they were based on actual figures he obtained during his own private investigations. However his colleague in MDC and Mpofu's deputy in the ministry of mines, Gift Chimanikire told Voice of America that while he was unsure of the source of Cross's figures they seemed 'too exaggerated.'
Cross said in 2011 he got copies of actual daily production figures for Marange Resources (Pvt.) limited which showed that in 2009, the company processed 25000 tonnes of ore/sand producing an average of 19.86 carats per tonne which he then used to generate his estimates.
Evidence of income that is not being accounted for strongly indicating it is emanating from Marange includes a deficit on imports of an excess of US$4 billion; 2012 motor vehicle imports of US$1,4 billion; significant expenditure by individuals and firms linked to Marange including luxury apartments and houses, even high rise buildings in South Africa; expenditure of perhaps $300 million via the Presidents Fund on free crop inputs, scholarships and bursaries (64 per cent of students at Fort Hare University in South Africa is paid for by this scholarship); purchase of two new long range Airbus Aircrafts (to be hired out to Air Zimbabwe); and expenditures on military equipment and facilities that are not provided for in the national budget, among other things.
CNRG Executive Director Farai Maguwu expressed fears at that the diamond revenue Treasury is failing to account for could be used by Zanu - PF to subvert the country's democratic processes.
Speaking at the same conference Deputy Minister for Justice and Legal Affairs, Obert Gutu, an MDC -T senior official, called on civic organisations to gather forensic evidence on any irregularities in the sector for his ministry to act on. Gutu cast doubt on the effectiveness of the recently unveiled diamond policy because of rampant corruption.
Cross, Maguwu and Gutu however made it clear that Zimbabweans could not possible expect KPCS to help address the national quest for greater transparency in the sector due to its limited definition of ‘conflict diamonds' which does not cover the current scenario unfolding in Zimbabwe.
In June 2009, Ian Smillie, the research coordinator for PAC who helped draft the KPCS, quit his post, saying, '[The Kimberley Process] is in danger of becoming irrelevant and it's letting all manner of crooks off the hook.'
The debate surrounding the capacity of the KPCS to clean the market of blood diamonds while it hung on to a limited definition of 'conflict diamonds' led to the withdrawal of founding member Global Witness from the process in December 2011.
'The Kimberly Process does not take into account human and legal rights abuse in the exploitation of diamonds, it only adopts a stance if it can be demonstrated that diamond production is being used to promote and fund armed attacks on civilians. It does not take into account the use of such funds to destabilise countries or political systems. It therefore cannot be taken as a suitable measure to define what has and is happening in Zimbabwe,' Cross said.
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