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Diamond mining consolidation elusive

Since a bloody security sector intervention to end chaotic and illegal extraction of alluvial diamonds by individuals and organised syndicates, that saw the formalisation of mining activities in Marange in 2009, civic society and opposition political groups have been calling for transparency and accountability in the mining operations.

Taurai Mangudhla

Between 2009 and 2013, the Mines ministry which was then led by Obert Mpofu ignored calls for transparency and accountability on the grounds full disclosure would make the country’s diamond trade more vulnerable to sanctions and seizures by Western countries and institutions opposed to the free sale of Marange diamonds, such as the United States’ Office of Foreign Assets Control.

The tone however drastically changed under current minister Walter Chidhakwa, who by early 2015 vowed to have consolidated all the diamond mining companies operating in Marange for, among other reasons, the need to facilitate a combined investment effort for kimberlitic mining at a time the country’s production has plunged as alluvial deposits run out.

The value of Zimbabwe’s diamonds on the international market tumbled by as much as 56% between 2013 and 2014 to US$238,6 million as the country’s precious stone loses bling, while volumes also took a 55% nosedive to 4,8 million carats, according to the Kimberly Process Certification Scheme 2014 report.

However, the consolidation process is yet to be concluded as players in the diamond mining industry are, by Chidhakwa’s own admission, using various delaying tactics and even calling for the merging of diamond companies to be shelved, in what is viewed as an indication the industry will exhaust all options to resist transparency and accountability.

The exercise has taken longer than previously stated as Chidhakwa’s initial timelines gave March 2015 as the deadline, resulting in observers wondering if government was merely leading the nation up the garden path.

Part of the delays, according to highly placed sources, are a result of resistance from the diamond mining companies benefiting from a chaotic system as shown by a June 2014 report by campaign group Partnership Africa Canada (Pac), which states that Zimbabwe lost about US$770 million in potential revenue between 2008 and 2012 through undervaluation and transfer-pricing of its gems from the Marange diamond fields.

“Perhaps one of the countries worst affected by transfer-pricing and under-valuation of diamonds is Zimbabwe, which lost an estimated US$770 million in taxable revenues on exports to UAE (the United Arab Emirates) between 2008 and 2012 due to an average 50% undervaluation of its diamonds,” reads part of the Pac report.

Zimbabwe Environmental Law Association (Zela) director Shamiso Mtisi said Chidhakwa has a difficult task to push for transparency now when the work done by his predecessors lacked openness.

Mtisi said the new vehicle, if properly constituted, could go a long way to end looting that had become the order of the day in local diamond mining.

“What is painful is that after four years, we have nothing meaningful to talk about from our diamonds,” said the Zela director, adding the country could list the new consolidated vehicle to attract private investment and ensure higher levels of transparency.

“We must ensure all shareholder agreements in terms of who invests what and has what obligations are made public.
We also need to ensure that we don’t mix companies that are doing things well with bad apples.”

Harare lawyer and MDC-T spokesperson Obert Gutu applauded Chidhakwa for his efforts to bring sanity into mining in general and in particular diamond mining, saying the country should deal with the lack of transparency in mining which has its roots in government.

“The Zanu PF regime is now a fully – fledged kleptocracy which has neither transparency nor accountability in the whole governmental set up. It’s a complete dog’s breakfast and a few well-connected Zanu PF politicians and some regime apologists have made mega bucks from the looting of diamonds over the past few years,” Gutu said.
Gutu said the few well connected individuals use proceeds from their illegal diamond dealings to support flamboyant lifestyles.

“Just take a drive to the fashionable Shawasha Hills residential district of Harare and you can see for yourself the grandiose houses that some of these crooks and dealers are building for themselves. Where are they getting the money to build these mansions whilst the majority of the people are living in abject poverty?” asked Gutu.

“There are obviously some people within the establishment who will fight tooth and nail to ensure that there is no transparency and accountability in the diamond mining sector. These are the very same people who have selfishly lined up their pockets from the country’s diamond reserves.”

As government pushed for the merging of diamond mining companies, players in Marange were by March on an alleged last -minute looting spree ahead of the mandatory consolidation exercise.

Mining officials are on record saying some players, among them Jinan and Anjin, are not pleased with the consolidation process and are resisting the arrangement.

The companies argue government’s mining arm, the Zimbabwe Mining Development Corporation (ZMDC), will emerge with a controlling stake post the consolidation exercise and yet it is not contributing any capital which has an established value.

The miners have reportedly requested an explanation on how ZMDC will acquire the 50% stake in the new company and what method and evaluation standard was used to arrive at 50%.

Chidhakwa’s resolve is clear after announcing last week licences for all miners in Marange had expired. He has warned diamond firms his ministry would not renew licences for miners who do not join the consolidated unit.

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