Diamond mine consolidation queried

AFTER commercialisation of diamond mining in the Marange fields in 2009, Zimbabweans hoped for a major increase in revenues from selling the precious stones.

Taurai Mangudhla

Alas, five years on, diamond revenues have seriously underperformed resulting in successive downward budget reviews.

Analysts argue that operations in the country’s diamond mining and marketing activities are shrouded in secrecy, leaving room for underreporting among other corrupt activities.

Former finance Minister Tendai Biti is on record saying there is lack of transparency and accountability in the diamond mining operations which he equated to the operations of the mafia.

Soon after assuming office, Finance Minister Patrick Chinamasa announced a number of economic growth and performance targets underpinned by projected robust diamond mining activities.

However, he has since publicly stated diamond revenues are not being declared as expected. As a result, government is looking at ways to improve diamond revenue collection including consolidation of the seven mines.

Apart from the revenue collection, sources in government say consolidation of the mines into two bigger entities with huge balance sheets is meant to facilitate investment into Kimberlite mining as the alluvial diamonds are being exhausted rapidly.

Business experts describe consolidation as the combining of assets, liabilities and other financial items of two or more entities into one.

They say consolidation also refers to the merger and acquisition of smaller companies into larger companies. A consolidation, however, differs from a merger in that the consolidated companies could also result in a new entity, whereas in a merger one company absorbs the other and remains in existence while the other is dissolved.

Whatever government’s intentions are, diamond miners have slammed government’s proposed move to consolidate the seven companies operating in the Marange fields saying it defies business logic.

The move creates legal and financial problems for the companies, said diamond miners who spoke to businessdigest on the sidelines of the second Zimbabwe Diamond Conference held last week in Harare.

“There are six or seven companies in Marange with different agreements, so how are you going to put them together as one,” Diamond Mining Corporation director Ramzi Malik said.

“It’s going to be challenging for government, I guess. We don’t know what the details are or what the situation is,” he added.

Marange Resources chairman retired army colonel Tshinga Dube said the proposal is “impractical” and requires very delicate handling of details if it is to be implemented at all.

“It’s easier said than done, there are a lot of legal and financial processes for instance some of the companies may have loans and others have debts,” he said.

“It’s easier to consolidate or merge government companies not private companies.”

Other officials who spoke to businessdigest on condition of anonymity said while it is good for Mines Minister Walter Chidhakwa to correct the wrongs of his predecessor, Obert Mpofu, government should seriously consider the impact of the process on the diamond industry, investors and workers who are employed by the existing miners.

“For me I foresee government having ZMDC (Zimbabwe Mining Development Corporation) partner one investor to run one company or maybe ZMDC can do it alone while the other companies will be forced to pull their resources together for a single joint operation,” said a source who requested not to be named.

ZMDC is a 50% partner in the diamond mines in Marange.



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