HomeLocal NewsMPs unearth illicit financial flows

MPs unearth illicit financial flows

A REPORT presented by the parliamentary portfolio committee on mines and energy to the National Assembly this week has raised fresh questions over diamond sales, smuggling and illicit financial flows. It also brought into sharp focus dwindling production levels since government took over the diamond mining fields through mine seizures and coercion to form the Zimbabwe Consolidated Diamond Company (ZCDC).

Elias Mambo/Obey Manayiti

This story is part of our ongoing ground-breaking investigation into the Marange alluvial diamonds discovery and subsequent plunder at various stages by state and non-state actors. The special series is supported by the Investigative Journalism Fund.

According to the report, Mines minister Walter Chidhakwa said the formation of the ZCDC was meant to address “erratic diamond sales”.

“Mining companies were negotiating contracts for the sales and marketing of diamonds to companies of their choice and these contracts were individualistic in nature and disregarded national interests. Through consolidation, marketing and sales would be conducted through one institution,” the report says.

Chidhakwa had also said the ZCDC would help to stem the smuggling and leakage of diamonds. Allegations abound of leakages and smuggling of diamonds, with President Robert Mugabe claiming an estimated US$15 billion in revenues could not be accounted for.
As previously reported by the Zimbabwe Independent, the report confirms illicit financial flows (IFFs) and corruption in Marange. Africa is estimated to be losing US$50 billion annually through IFFs.

“The committee received evidence from the former acting general manager of Minerals Marketing Corporation of Zimbabwe (MMCZ) Mr Richard Chingodza of illicit financial flows from the extractive sector,” it says.

“Some of these illicit financial flows were aided or facilitated by government officials, in clear violation of government accounting procedures and regulations.

“The MMCZ lost approximately four (4) million America dollars. The money was transferred to Pedstock, an agricultural company, which further transmitted it to an unknown recipient who resides outside the country. The Director of Pedstock, Mr Jackson Dror admitted before the Committee that he was being used as a conduit to transfer the money from MMCZ to the unnamed recipient.”

The report also notes that Chingodza was ordered to release this money by the Permanent Secretary of Mines and Mining Development, Francis Gudyanga, who is currently the acting board chairperson of the parastatal. “The invoice raised for the money was that it would be used for the Zimbabwe Republic Police Border Control and Minerals Unit operations in curbing leakages and smuggling of minerals.”

The report also refers to the 3,37 million carats of diamonds worth US112 million which were controversially exported to Shanghai by Chinese diamond mining firm Anjin Investments. The Independent’s investigation uncovered the story.

“No explanation has been forthcoming as to the Zimbabwean diamonds discovered at the Shanghai Stock Exchange in China. Monitoring and supervision would be easier through one company,” it says.

The minister also stated that there was no mutual commitment between government and its joint venture partners. “This was emanating from the fact that the joint venture partners were unwilling to expand their operations into the mining of conglomerates and to explore for the kimberlitic pipes given that alluvial diamonds are almost depleted,” the report adds.

The report also says that production levels from Marange diamond operations have been on a downward trend for the past five years. “Depletion of alluvial diamonds at most of the concessions, inadequate exploration to determine the quantities and values of the diamonds before formal mining operations began in 2009, as well as determining the lifespan of the mining operations in Chiadzwa are some of the reasons production has gone down,” it notes.

“Current ZCDC operations are not supported by any geological or exploration information. The six (6) million carats per annum projections are possible only if the company acquires investment for exploration. Right now, no one knows the quantum or the values of the diamonds in Chiadzwa.

“Without adequate geological information, ZCDC cannot outline strategic goals for the future. Secondly, in proper governance system, management is supposed to advise the board on operational issues, but instead, in this case, the Secretary of Mines is directing the mining operations.”

The report also indicates diamond recoveries in the mining concessions have gone down. “At the height of production in 2011, recoveries stood between 25 to 40 carats per tonne, but at the time of consolidation this had gone down to between 5 to 6 carats per tonne,” it says.

It also highlights inadequate investment to meet mining obligations by companies which operated in Chiadzwa.

“Most of the joint venture companies did not fully fulfil their investment agreements,” it points out.

“The portfolio committee was informed that at the time of consolidation all the companies were insolvent, hence impacting negatively on mining operations.”

“As a result ZCDC was hiring and sub-contracting most of its mining equipment and machinery, and operations,” it says.

“To boost its operational capacity, ZCDC secured a loan from the Reserve Bank of Zimbabwe worth US$30 million for recapitalisation. The company somehow managed to purchase equipment at an auction in January, 2017 worth US$7,5 million that previously belonged to Mbada Diamonds.”

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