Govt illegally exporting diamonds to Dubai

GOVERNMENT is illegally exporting diamonds through the back door to Dubai, United Arab Emirates (UAE), in violation of a Supreme Court ruling which ordered an immediate freeze in all mining activities at the controversial Chiadzwa diamond fields, the Zimbabwe Independent has established.

The secret and unprocedural diamond exports to the Middle East are also being done in contravention of the Kimberley Process Certification Scheme (KPCS) procedures, a move which might jeopardise Zimbabwe’s already difficult entry into the global diamond trade through the front door. 

The KPCS 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 diamonds” — diamonds fuelling war and human rights abuses — sales in the mainstream diamond market.

KPCS monitor Abbey Chikane visited Zimbabwe recently to check if the country complied with the required procedures before it could be allowed to formally export the diamonds from Chiadzwa. However, in a report afterwards he revealed that diamond mining security procedures at Chiadzwa were weak and could still facilitate illicit trade.

Information to hand shows that government has exported over 153 071 carats of diamonds worth US$11,2 million  through shady state-controlled entities owned by the Zimbabwe Mining Development Corporation (ZMDC). Some of the companies used to export the diamonds include ZMDC subsidiaries, Sandawana Mines (Pvt) Ltd and Kimberworth Investment (Pvt) Ltd.  Sandawana is owned 55% by ZMDC while Kimberworth is 100% owned by the state mining company.

According to documents, the diamonds were shipped out through Harare International Airport and their destination on invoices was invariably given as the UAE.

Most of the funds obtained from the controversial Dubai diamonds sales were wired through telegraphic transfers and received through CBZ Bank and ABC Bank. The monies were often transferred to Zimbabwean banks via American intermediary banks, particularly Standard Chartered New York and American Express Bank in New York.

The beneficiaries of most of the transactions were Sandawana Mines and Lesley Faye Marsh Jewellers (Pvt) Ltd which trade as Premier Diamonds.

The commercial invoices for the exports were prepared and authenticated by the state-run Minerals Marketing Corporation of Zimbabwe (MMCZ), the official minerals marketing agency.

MMCZ has tried to defend its exports, claiming it was only selling diamonds produced by the ZMDC-owned Marange Resources between 2007 and 2009.

In a letter to chair of the Working Group on Monitoring of the KPCS, Stephane Chardon, on April 28 — after the sale of many diamonds in Dubai — Mines permanent secretary Thankful Musukutwa tried to defend the current diamond sales.

In his letter, he defended the “shipments of some Marange diamonds” in relation to the Swakopmund Administrative Decision and Joint Work Plan.

“From our discussions from the Joint Work Plan in Swakopmund, it is our understanding that the diamonds produced by Marange Resources from 2007 until decommissioning in 2009 are not subject to the KP monitor-supervised export mechanism,” Musukutwa said.

“We have thus exported the diamonds produced by Marange Reosurces on the premise that they would be accounted to the forensic audit, and not affected by the KP-supervised export mechanism.”

As if to head off accusations of illegal and “blood diamond” exports, MMCZ always put a disclaimer on the invoices which read: “The diamonds herein invoiced were produced from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions”.

The MMCZ disclaimer continued to say: “We hereby guarantee that these diamonds are conflict-free, based on written guarantees provided by the producer of these diamonds”.

However, the Chiadzwa diamonds being exported by ZMDC with the help of MMCZ to companies and individuals in Dubai are hotly contested.

ZMDC is working with Mbada Diamonds and Canadile Miners (Pvt) Ltd in joint-venture partnerships hurriedly formed and given licences without going through transparent procedures last year. Mbada and Canadile signed Memorandums of Agreement in July and final agreements in October last year before they started mining and minting.

African Consolidated Resources (ACR) plc, listed on the London Stock Exchange, is challenging their mining activities in the courts. ACR says all the diamonds mined by ZMDC since 2007 and now by Mbada and Canadile were extracted from its claims. The company, which has British, South African, Australian and Zimbabwean shareholders, has been fighting in the courts to reclaim its concessions.

Recently the High Court said ACR’s application to block the sale of its 129 400 carats of diamonds seized by the government in 2007 was not urgent and if ACR was to suffer prejudice in the process, as it argued in its court application, it could seek compensation.

Last year in September Justice Charles Hungwe ruled in favour of ACR and said his order should stand notwithstanding an appeal. Mines minister Obert Mpofu (pictured), ZMDC and MMCZ appealed and the Supreme Court ruled in February that Mbada and Canadile should “cease all mining activities” in Chiadzwa pending the finalisation of the appeal because ACR could suffer “irreparable damage” if it eventually wins in the courts. It however suspended Hungwe’s order.

Prior to this in January the Supreme Court had ordered MMCZ to release ACR’s 129 400 carats to the Reserve Bank for safekeeping but police seized the parcels in blatant contempt of court.

President Robert Mugabe and Mpofu supported the move by the police although the Supreme Court insisted that the “diamonds must be returned to the Reserve Bank immediately” in order to purge the contempt of court. “Failure to do so should attract serious consequences,” the Supreme Court warned.

Mbada also tried to sell the diamonds through the back door in February but failed.

It was blocked last month from selling 300 000 carats because Zimbabwe has yet to comply with the 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 claimed they had a special dispensation from the Ministry of Mines to sell the diamonds on their own, something which almost certainly would be unlawful.

According to documents, UAE-registered companies have been snapping up ZMDC diamonds since February this year.  At least eight transactions were sealed with the blessing of MMCZ.

Gems valued at US$11, 2 million weighing 153 071, 94 carats were exported to Dubai, according to documents.

On February 16 this year Zardium DMCC of Dubai bought diamonds worth US$659 000 weighing 3 973, 81 carats. The invoice identifies MMCZ as the seller.

ON April 6, Pure Diam bought a parcel weighing 9985carats (1,97 kgs  2,9  million.) The money came through ABC Bank, Account Number 10041533902017. The swift code for the transfer was SCBLUS33.

Purediam also bought a consignment worth US$786618 weighing 1,5 kgs (7799,83 carats). The payment came through Express Bank Ltd New York. The money was paid into Sandawana’s CBZ account. The Swift Code number was AEIBUS33.

The same company bought rough gem diamonds weighing 0,95 kgs (4772,62 carats) worth US$2 million and paid another US$2,9 million for diamonds weighing (9515,45  carats) 1,9 kgs. Again the money came through Standard Chartered Bank New York into Sandawana Mines’ CBZ account.

The money was wired into Sandawana Mines’ CBZ Account number 3582 0232258001. The payment came from Standard Chartered bank New York.

Two days later, Vishal Diamond LLC, a Dubai registered company, bought a small parcel of ROM quality diamonds weighing 0,58 kgs (2 898,40 carats) valued at US$48 221,40.

The payment came through Standard Chartered New York paid into Sandawana Mines’ CBZ account.

On the same day, ZArdium DMCC of Dubai paid US$1,4 million for Rom quality diamonds weighing 11,83 kg (59 143,65 carats). Zardium wired the funds into Lesley Faye Marsh Jewellers (Pvt) Ltd’s ABC Account number 10171645502019.

Four days later, Siroya Jewellers, another Dubai based company, paid US$539 963, 71 weighing (52 230,75 carats) 10,45 kgs.

The money was wired through American Express Ltd New York into Sandawana Mines’ CBZ account number 736 868.

On April 16 last month, ZARdium DMCC of Dubai paid US$813 000 for rough gem diamonds weighing 0,55 kgs (2 752,43 carats) paid into Minerals Marketing Corporation of Zimbabwe.

Despite all the diamonds sales and receipts, ZMDC has only paid out a US$800 000 dividend to government.

After its National Executive and National Council meetings last weekend, the MDC-T condemned the Chiadzwa diamond mining activities. It issued the following resolution on the issue:

•    The party notes with concern the lack of transparency and due process in the handling of diamonds at Chiadzwa and in the granting of concessions and mining rights in the same,
•    The MDC demands that all concessions and mining rights should be granted on the principle of transparency and openness involving public auctioning or public tender processes to be carried out by an independent authority,
•    That the current investors at Chiadzwa should comply with Zimbabwe’s laws, in particular the Zimbabwe Investment Act and are prepared to make equity investment to the State, failure of which their rights should revert to the State,
•    That due process of the law and all court orders issued in respect of the Chiadzwa claims should be honoured and respected,
•    That all income from Chiadzwa should be accounted for transparently to the State to enable the same to attend to capital and recurrent expenditure and in particular the adequate remuneration of civil servants,
•    That the Zimbabwean government must speed up compliance with the Kimberly Process and those concerned must equally speed up the process of certification and
•    That the interests of the Marange people must be made paramount and due process, decency and fairness must be applied in the processes of compensations and relocations of affected Marange communities.

 

Dumisani Muleya / Chris Muronzi