ZMDC executives probed over US$40m diamond funds

THE state-owned Zimbabwe Mining Development Corporation (ZMDC) is investigating suspended chief executive and general manager Dominic Mubayiwa and three other company executives over the siphoning of  US$40 million in gold and diamond proceeds.

The probe comes as questions are being raised within ZMDC and in public about Mubayiwa’s building of a huge mansion in Borrowdale.

ZMDC is trying to establish if there is a connection between the misuse of its funds and activities of the company’s top management, including Mubayiwa’s project.

 

Repeated efforts to contact Mubayiwa over the issue were unsuccessful yesterday.

Mubayiwa is building a three-storey mansion at number 33 Hillview Road, Philadelphia, Borrrowdale.

Revelations of Mubayiwa’s mansion come as the probe into murky utilisation of over US$40 million in gold and diamonds earnings is deepening. The house is a massive structure on a vast swathe of land by local residential standards.

The investigations into ZMDC financial affairs — which are in a shambles — and the construction of Mubayiwa’s mansion come as Zimbabwe started selling the Chiadzwa diamonds under the supervision of the Kimberley Process Certification Scheme.

Mubayiwa was sent on forced leave, together with his group finance director Robert Karemba, group technical services manager Albert Chitambo and the corporate secretary and legal advisor Tichaona Muhonde, on July 26 for two months to facilitate investigations into the shady usage of ZMDC’s gold and diamonds revenues by the company’s management.

ZMDC board chairman Goodwills Masimirembwa suspended the four just a month after coming into office.

Investigations by the Zimbabwe Independent, backed by a confidential preliminary ZMDC report into the issue, show that Mubayiwa and his team were suspended to facilitate a probe into the dodgy utilisation of US$412 million siphoned from ZMDC’s Sabi, Jena and Elvington gold mining operations between 2007 and 2008 purportedly to finance the setting up of a diamond mine at Chiadzwa.

The inquiry is also focusing on the usage of US$30 million which ZMDC earned from diamond sales between October 2008 and April this year. Finance Minister Tendai Biti announced on July 14 during the presentation of his mid-year fiscal policy review statement in parliament that US$30 million realised from diamond sales was missing.

“According to the KPCS monitor, Zimbabwe recently sold at least US$30 million worth of diamonds from Marange which Treasury and Zimra (Zimbabwe Revenue Authority) have no record or knowledge of,” Biti said.

 

However, Mines Minister Obert Mpofu denied that the money had vanished and dismissed Biti’s statement as “hot air” but failed to produce evidence of where the money was.

Mpofu said a forensic audit of diamonds mined in the controversial Marange fields was under way and would prove Biti wrong. However, investigations show there was a problem with accounting for the US$30 million from diamonds sales.

The ZMDC board is not yet clear as how much the state enterprise earned from diamonds sales during from October 2008 and April this year.

But the ZMDC report in possession of the Independent says during a recent strategic workshop retreat, management told board members that ZMDC had sold diamonds worth US$30 million between October 2008 and April 2010.

However, when the board demanded documents to support the assertion and account for the money, the records only showed revenues amounting to US$22 584 347.11.

The difference of US$7 415 653.89 was not accounted for. ZMDC has resolved that the usage of the US$30 million, particularly the whereabouts of the US$7 million, must be investigated.

The confidential reports says apart from the mystery surrounding US$30 million diamonds proceeds, there are also serious problems regarding the US$12 million siphoned from gold mining operations.

“ZMDC commenced diamond mining operations at Chiadzwa in April 2007. About US$12 717 739,89 was taken from the gold mining revenues purportedly to finance the diamond mining venture,” the confidential report says.

“However, only US$1 049 000,00 was used to purchase fixed assets. The balance of US$11 668 739,89 was allegedly used as working capital. Alluvial diamond mining is a low-cost venture. It is not possible to have spent US$11 668 739,89 on working capital.

 

Further, and in any event, management has so far failed to furnish the board with documents supporting the huge expenditure.”

The report says if US$12 million from gold proceeds was used in that way in starting a diamond mine in Chiadzwa, the resultant earnings from diamonds would have been used to repay the US$12 million borrowed, leaving the diamond venture with between US$8 million and US$17 million, depending on the exact amount of diamonds revenue realised.

It is not clear how much was earned from Chiadzwa between October 2008 and April this year, although US$30 million has been reported by ZMDC management to the board as the figure.

“Contrary to this logical expectation, management says that they spent US$5 142 162,79 from diamond sales revenue as working capital. This, with respect, begs the question: What happened to the US$11 668 739,89 that was taken from gold mine revenues purportedly to finance working capital at the diamond mine?”

Besides the question about the US$12 million, the other query which arises in the report and further checks by the Independent is: how much exactly was earned from diamond sales between October 2008 and April this year and how was the money used?