Diamond companies make a killing

COMPANIES involved in shady mining deals at Chiadzwa in Marange, Manicaland province, are making a fortune on a staggering scale from the hotly contested diamond fields.

In a matter of a few months they have scooped diamonds like coal, minted millions in hard currency and in the process accumulated vast wealth. The story does not end there: their rich pickings from possibly the richest deposits ever discovered are set to increase dramatically — very soon.

However, there could be a serious price to pay for Zimbabwe. The spiralling Chiadzwa diamond conflict could result in the country being systematically plundered by an organised clique of greedy politicians, soldiers and unscrupulous corporate sharks who will become filthy rich at the expense of the poor majority who should benefit from the national resource.

The simmering low-intensity conflict at Chiadzwa, if not contained in time, could also easily deteriorate into a bloody fight. This has happened elsewhere in Africa where bloody conflicts have been triggered or fuelled by diamonds.

Diamonds have led to civil strife in Angola, DRC, Liberia and Sierra Leone with disastrous consequences which included massive displacements, slave labour and killings, as well as economic ruin.

Scooping out diamonds has been given more priority in Chiadzwa than relocating villagers and protecting the environment.

This has created frustration and anger in the surrounding communities which suffered violent and brutal attacks by the army battling to take control of the diamond fields from illegal panners between 2007 and 2008.

The mining companies dipping into the controversial diamond fields include Mbada Diamonds and Canadile Miners (Pvt) Ltd, joint-venture partnerships hurriedly formed and given licences without going through a transparent process and procedures. Mbada and Canadile signed Memorandums of Agreement in July and final agreements in October last year before they started minting.

Since then they have been extracting the gems in Chiadzwa, although in January they were ordered by the Supreme Court to cease their operations pending the finalisation of the diamond claims ownership wrangle with African Consolidated Resources (ACR) plc.

ACR has been fighting in the courts to regain its claims which were seized by the government in 2006 and given to Zimbabwe Mining Development Corporation (ZMDC) and later to Mbada and Canadile.

The Mineral Marketing Corporation of Zimbabwe (MMCZ), a state-run agency which markets precious minerals, was also drawn into the fray. MMCZ was in January ordered by the Supreme Court to release 129 400 carats belonging to ACR to the Reserve Bank for safekeeping but police seized the parcels in blatant contempt of court.

President Robert Mugabe and Mines minister Obert Mpofu supported the move. They now risk criminal contempt of court charges. The saga still rages on.

Investigations by the Zimbabwe Independent show that Mbada and Canadile, which are linked to politicians, soldiers and officials in Mugabe’s inner circle, are creaming off Chiadzwa. Pointedly, Mugabe has vigorously and repeatedly defended the companies despite clear and mounting evidence that they were neither qualified nor experienced to secure the mining contracts.

By last month Mbada had accumulated about two million carats of diamonds worth US$60 million. Mbada is likely to be extracting a whopping 1,5 million carats by the end of May and over 3,5 million carats by June.

Canadile amassed nearly 260 000 carats in almost two months from the rich alluvial fields. This left the two companies sitting on a cool US$70 million worth of diamonds in a few months of operation.

This information is gleaned from letters written to Mpofu by Mbada and Canadile on February 8 and 10, respectively.

Diamond analysts say this is a remarkable yield by any standard. The levels of extraction and resultant proceeds in Chiadzwa are set to boom by June and could set new records by the end of the year if adequate capital, technology and skills are put in place.

Mbada was blocked last month from selling 300 000 carats because Zimbabwe has yet to comply with the Kimberley Process Certification Scheme (KPCS) procedures. Documents show that even MMCZ, the legal and legitimate marketing agency, was not involved in the failed unprocedural Mbada sale.

Even ZMDC, one of the Mbada partners, was not involved. Mbada officials claim they have a special dispensation from the Ministry of Mines to sell the diamonds on their own, something which almost certainly would be unlawful.

The KPSC is a process introduced by United Nations Resolution 55/56 that was designed to certify the origin of rough diamonds from sources which are free of conflict fuelled by diamond production. The process was established in 2003 to prevent “blood diamond” — diamonds fuelling war and human rights abuses — sales in the mainstream diamond market.

Mbada is a joint venture between the (ZMDC)’s subsidiary Marange Resources (Pvt) Ltd and South Africa’s New Reclamation Group (Reclam) (Pty) Ltd’s Mauritian-registered subsidiary, Grandwell Holdings.

Retired Air Force of Zimbabwe Air Vice-Marshal Robert Mhlanga is the chairman of Mbada. Mhlanga, who was involved in the DRC war between 1998 and 2002 which was fuelled by diamonds, testified against Prime Minister Morgan Tsvangirai, alongside former Israeli intelligence operative and arms dealer Ari Ben Menashe, in his treason trial in 2004.

Investigations by the Zimbabwe Independent show that ZMDC is unhappy with Mhlanga’s assumption of the Mbada chairmanship because it violated the agreement between itself and Reclam. It was “unprocedural”, documents say, because the chairperson was supposed to come from ZMDC, not Reclam.

ZMDC also did not participate in the selection of directors of Mbada which is practically run by Reclam.

According to official documents in possession of the Independent, ZMDC chief executive Dominic Mubaiwa on February 8 told the parliamentary portfolio committee on Mines and Energy investigating the Mbada and Canadile affair that the mining state enterprise was not consulted in the appointment of Mbada directors as it was supposed to.

The Zimbabwean directors of the company were imposed by Mpofu, documents show. However, documents also indicate that ZMDC is now scrambling to regularise that corporate aberration as a damage limitation exercise.

The move is meant to cover Mpofu’s tracks and give ZMDC a semblance of control over a company in which it has 50% equity. Mbada is a 50/50 joint venture between ZMDC and Reclam.

Mubaiwa also told the parliamentary committee on February 8 that Mpofu had effectively imposed Reclam and Core and Minerals (Pvt) Ltd on ZMDC as “approved investors”. Asked if Mhlanga did not have a conflict of interest in the deal since he was a director of Reclam, Mubaiwa told MPs that “there could be”.

Mbada and Canadile directors are refusing to appear before the parliamentary probe committee. They have been ducking and diving for weeks on end.

Mhlanga, who is also chairman of South Africa’s Liparm Corporation, was a director at Reclam at the
time when the deal was stitched together.

Investigations further show that ZMDC did a due diligence on Reclam and Core Mining between August 4 and 6 last year merely as a formality because the two companies were “imposed from the top”.

This has raised questions of who exactly is behind Mbada and Canadile within the corridors of powers.

Reclam — which is not a mining company but a controversial scrap metal merchant — has a dubious corporate record. In 2008, South Africa’s highest competition authority, the Competition Tribunal, imposed a R145-million fine on the recycling firm for its involvement in collusion and price fixing in the ferrous and nonferrous scrap metal markets.

A ZMDC report says the state mining enterprise’s due diligence team found that “Reclam is not a mining house and is currently not involved in mining, let alone diamond mining”. “Further it has no diamond mining as part of its vision and growth strategy,” the report says.

However, Reclam was chosen ahead of other companies with capacity and experience in mining because it was a large corporation, had a broad-based shareholding, strong revenue base and good balance sheet and ability to finance the project.

Reclam was supposed to pour US$100 million into the Mbada project. However, the point remained that Reclam’s only mining “experience” was that it had a geologist, James Abson, on its board and geological information.

In Zimbabwe Reclam had never been involved in mining. Its only claim to fame was involvement in a scrap metal deal with the struggling state-owned steel works giant, Ziscosteel.

Canadile is a joint venture between Marange Resources and South Africa’s Core Mining and Minerals (Pvt) Ltd. Canadile is also chaired by a retired soldier, Lovemore Kurotwi. It also obtained its mining contract in a controversial way.

Core Mining refused to reveal the identity of its “Godfather” behind the project — who is domiciled in Israel — saying “the principal must remain confidential”. This thickened the plot of the already murky saga.

Despite securing their diamond deals in a non-transparent way, Mbada and Canadile are skimming off Chiadzwa and millions are flowing into their already fat coffers.

 

By Dumisani Muleya

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