Mbada swam against the tide

Marange-Diamond.jpg

After kicking out illegal diamond diggers, government and foreign private companies joined the chaotic Chiadzwa diamond rush.

THIS week the Zimbabwe Independent — which in December last year began publishing fresh stories based on new and original material into the Chiadzwa alluvial diamonds discovery and subsequent plundering at various stages by state and non-state actors — continues with its exclusive interview with South African miner and investor, David Kassel, who was deeply involved in the saga.

By Elias Mambo/Obey Manaiti

Kassel, who is still the chairman of New Reclamation Group (Pty) (Reclam) Ltd, which owned 50% of Mbada Diamonds through Grandwell Holdings, a limited liability company incorporated under the laws of Mauritius in July 2009, is an insider in the Chiadzwa story. We tracked him down to Johannesburg, South Africa, for this interview, initially done last July and subsequently updated.

Checks this week showed Kassel did not, as earlier thought, resign as Reclam chair, but only stepped down as the company’s chief executive five years before the firm ventured into Zimbabwe’s controversial alluvial diamond sector, and best knows the inner-workings of Mbada and its investors, mostly his own company’s investment vehicle — Grandwell.

Grandwell was owned 50,1% by Reclam, while a consortium of Chinese investors owned 49,99% of the company. The other 50% of Mbada was owned by the Zimbabwe Mining Development Corporation (ZMDC), through its subsidiary Marange Resources.

Kassel began by explaining one of the most contentious issues regarding Mbada’s ownership structure and its chairman Robert Mhlanga: the involvement of the mysterious Hong Kong-registered Transfrontier Mining, which later acquired 49,99% of Grandwell.

The media was awash, at the time of Mbada’s early operation stages, with reports that Mhlanga was double-dipping as Mbada chairman representing the Zimbabwe government’s interest and as part of private investors, through an opaque network of offshore companies set up to cash in on the Marange diamond fields.

Zimbabwe’s mining portfolio parliamentary committee, headed by the late Edward Chindori-Chininga, in 2010 suggested Mhlanga was double-dipping, a claim he denies and which Kassel also dismissed.

Mhlanga was summoned on several occasions to parliament to clarify Mbada issues. He says he will not give interviews to journalists since he has already explained himself to legislators.

Media reports, including documents produced by non-governmental organisations, claimed Mhlanga was one of the beneficial owners of Transfrontier and thus creamed off in Chiadzwa through government and Reclam channels.

However, Kassel said there was no truth in the allegations and he has documents to prove it. “We saw all those reports and documents at the time, but there is no grain of truth on that in all of them,” he said.

“Mhlanga was not a shareholder as you have already found out in your investigation. It’s like saying I resigned from Reclam as chairman, yet I didn’t; I only resigned as chief executive way back in 2005 before we came to Zimbabwe in 2009.”

So who exactly owned the shadowy 49,99% of Grandwell? This has always been a grey area, which raised more questions than answers, hence suspicions. Some sources even claimed that was where the undisclosed interests of Zimbabwe’s top politicians were hidden for their personal benefit offshore.

“The 49,99% of Grandwell was owned by Transfrontier Mining, which was controlled by a consortium of Chinese investors in Hong Kong. I understand that shareholding is now being housed in a charitable trust controlled by the second largest Chinese accounting firm in Hong Kong on behalf of investors,” Kassel said.

“Mhlanga was not a shareholder at all; his role was mainly to introduce us to the Zimbabwean government authorities and that is why he became their representative in Mbada as chairman.”

Kassel said when Mbada started producing diamonds after a struggle to get mining rights at Chiadzwa, the Kimberley Process Certification Scheme (KP) issues became a new stumbling block.

“Pursuant to the decision by the KP’s Working Group on Monitoring in Swakpomund, Namibia, in November 2009, the KP’s monitor on Zimbabwe Abbey Chikane visited the country in March and May 2010 in terms of the Swakopmund Plenary and Administrative Decisions and the subsequent Terms of Reference to sort out the freezing or suspension of trade on the Marange diamonds,” Kassel said.

“Chikane first visited Zimbabwe during the first week of March on a fact-finding mission as the KP monitor on Zimbabwe in response to an invitation from the government before doing so again in May.

“Those were difficult times for us as Mbada and investors who had put in a lot of money, but were suddenly unable to sell the diamonds. We were horrified by the freeze and it was even more shocking as some in the Zimbabwe government were celebrating it. So the KP compliance issues became very critical, given the amount of money and the risk we had taken. Nobody wanted the KP to accept the sale of Zimbabwe’s goods with a ‘blood diamonds’ tag and so Chikane’s mission assumed greater importance and urgency.

“We had to deal with the KP issues; there was also the ACR (African Consolidated Resources, a London Stock Exchange-listed Zimbabwe company which initially claimed mining rights in Chiadzwa before it was kicked out after a bitter court battle); civil society campaigns; engagement with influential people in the region, international condemnation, security threats at the mining fields and translocation of people. Investing in Zimbabwe at the time was on its own a huge risk. There was also a lot of disinformation, similar to a recent article in the Herald on January 16 2017, under the headline Pricing scam scandal hits Mbada Diamonds. That is a good example of fake news.

“Mbada had to fight on all these fronts to get things working. The process was frustrating and painful. On the KP issues, we had to fight by talking to all stakeholders, including influential people like former (South African Mines) minister Susan Shabangu, who ended up saying if Zimbabwe doesn’t get KP permission to sell its diamonds we are pulling out.

“It took us almost the whole year, until September 2010, to start selling the diamonds again after the KP cleared Zimbabwe and said it was now complaint. All these things cost money and it was Mbada footing the bill.

“At some point we had to investigate the ACR issue, which was essentially a dispute between the Zimbabwean government and the company, and discovered they had obtained mining rights fraudulently. To get the Marange diamond industry in Zimbabwe going, we had to deal with all these issues.

“Civil society was very vocal and campaigning against us, and there was a lot of international condemnation of the ‘blood diamonds’. This was another huge challenge.

“There was also the security issue, which had to be urgently addressed. Artisanal miners were still digging around and the security forces were battling with them, but we had to install physical security and control systems around; that is putting access control systems, CCTV cameras, X-ray machines, and turnstiles even if there were soldiers, police, the dog unit and security guards. We funded a large part of the security infrastructure to secure the whole area (66 648 hectares). We had a security department headed by a security manager.”

Kassel said Mbada had to overcome difficult odds to restore normalcy in Chiadzwa and resume the selling of diamonds.

“Once Mbada had succeeded in the KP suspension being lifted, the diamond fields in Marange became attractive for investment by other companies. We fought and funded the battle not just for Mbada but also for other companies and Zimbabwe. Unfortunately some people don’t know that. We became politically exposed persons because of our involvement in Zimbabwe,” he said.

“We suffered a lot of condemnation and alienation. Besides, we worked very hard at the risk to our personal lives to ensure investors got a return on their investment and the Zimbabwe government also got its dues.

“Some of us even received threatening letters at our hotel rooms and had gangs storming our homes with guns over this issue; that’s how bad it was. On account of our fight we were put on sanctions.”

Next week, Kassel speaks about how European Union sanctions — which are now practically lifted — and United States financial restrictions made it difficult for Mbada to trade as parcels were seized and funds were frozen, especially by the Office of Foreign Assets Control of the United States Department of the Treasury.

To be continued . . .

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