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Zimbabwe bleeds diamond revenues

Zimbabwe Defence Minister Emmerson Mnangagwa with map displays with Chinese diamond dealer.

Zimbabwe Defence Minister Emmerson Mnangagwa with map displays with Chinese diamond dealer.

Politicians have unite to condemn Mines Minister Obert Mpofu’s favouring of SA firm and clandestine trade of Marange gems.

A powerful  Zimbabwean parliamentary committee, comprising members of both Zanu-PF and the Movement for Democratic Change (MDC), has raised the alarm about the lack of accountability for the sale and smuggling of diamonds from Marange, which is costing the Zimbabwe fiscus hundreds of millions of dollars in lost revenue.

The mines and energy portfolio committee also put Mines Minister Obert Mpofu on the spot by demanding that he justify the choice of a South African company, the New Reclamation Group (Reclam), for a diamond mining joint venture with the state-owned Zimbabwe Mining Development Company (ZMDC).

The committee’s report, presented to Parliament last week, dealt with mining in the Marange fields in Eastern Zimbabwe from 2009 to 2013. It highlighted a number of irregularities and loopholes in the revenue chain.

The committee, headed by Edward Chindori-Chininga, a vocal Zanu-PF MP and former mining minister, visited four mining companies operating in Marange: Anjin, Diamond Mining Corporation (DMC), Mbada Diamonds and Marange Resources.

The report quoted Mbada Diamonds as saying that it had paid $293-million to the government since it started mining in 2009, including $117-million in 2011-2012. But it pointed out that Finance Minister Tendai Biti said in his 2013 budget statement that the government received a total of only $41-million in diamond revenues in the previous year.

The report also said that Anjin, Marange Resources and DMC, which could supply a quarter of world demand, refused to disclose the payments they had made to the government.

A recent report by Partnership Africa Canada (PAC) stated that the lack of transparency surrounding Zimbabwe’s diamond revenues was depriving the treasury of much-needed revenue and could be funding a “parallel government” other than the government of national unity.

The PAC said the lack of transparency over the flow of the money pointed to systemic failures in Zimbabwe’s internal controls, including an illegal trade.

The committee added that since the formalisation of mining in Marange’s heavily protected Chiadzwa area it had been dogged by problems of transparency and accountability; the smuggling and leaking of diamonds from Marange and controversy over the selection of joint venture partners and governance systems in the joint venture companies.

In its report the committee expressed concern that, since Zimbabwe was allowed to trade its diamonds on the world market, the government had not received meaningful contributions from the sector, despite “the fact that production levels and the revenue generated from exports has been on the increase”.

It highlighted serious discrepancies between the government’s receipts from the sector and what the diamond mining companies claimed to have remitted to the treasury.

The committee also described its frustrations in trying to access information on diamond revenue, saying Mpofu had not responded to its queries. It said that, between 2010 and 2102 it was not allowed to conduct on-site inspections of the mining companies operating in Marange.

The committee said Mbada Diamonds’ attempted diamond auction in January 2010, blocked because of national and Kimberley Process requirements, violated national and international law and “opened a Pandora’s box, revealing several irregularities and loopholes in the entire diamond value chain”.

Institutions involved in the chain, including the ZMDC, the Minerals Marketing Corporation of Zimbabwe, the Zimbabwe Republic Police Minerals Unit and the ministry of mines, professed ignorance about the proposed auction.

“This was a sign that the institutions were not well co-ordinated in the production and marketing of the diamonds in Marange,” said the committee. “It seems Mbada Diamonds took advantage of this weakness and attempted to auction the diamonds without the knowledge or presence of these institutions.”

The committee expressed concerns that the selection of companies to operate in Marange was flawed and that the choice of Reclam and Core Mining for joint ventures with the ZMDC was “not in accordance with any known precedents, procedures or with reference to any legislation in the country”.

It said Mpofu would not be drawn into revealing who chose these investors. He said: “I was a new minister and directed to go that way.”

The committee said it was “clearly unacceptable” that Mpofu and his officials did not want to disclose who selected the joint venture partners, creating the impression that the selection process was conducted by an unknown person or body.

The committee also expressed displeasure over the mining contract with Grandwell Holdings (Reclam’s holding company), which led to the formation of Mbada Diamonds, which, it said, showed that government could have been prejudiced in a number of ways.

Tycoon denies acting on Mugabe’s behalf

The chairperson of Mbada Diamonds, the mega-rich Zimbabwean businessperson Robert Mhlanga, is President Robert Mugabe’s former personal pilot and is alleged to be his business agent. But Mhlanga, through his lawyer, Lazelle Paola, has denied acting for Mugabe.

The Mail & Guardian reported last year that Mhlanga had been on a R185-million property-buying spree, acquiring prime real estate on the KwaZulu-Natal North Coast and in Sandton, Johannesburg. His dealings raised eyebrows, as he appeared to be content to pay up to six times the going rate for the properties.

The M&G also reported that he is at the centre of an opaque network of companies based in South Africa, Mauritius, Hong Kong and the British Virgin Islands.

Mbada Diamonds is a 50-50 joint venture, which the New Reclamation Group entered through its Mauritian registered subsidiary, Grandwell Holdings.

In May this year Mhlanga told the Zimbabwean Parliament that Mbada Diamonds had had a turnover of just less than $600-million over the past two years. It had paid half of this in dividends and taxes to Zimbabwe’s treasury, 26% towards working capital and 24% (about R612-million) to private shareholders.

Last year Mbada Diamonds claimed sanctions against it were an attack by a “jealous and outright anti-Zimbabwe and anti-African agenda”.

 

1 Response for “Zimbabwe bleeds diamond revenues”

  1. wilbertmukori says:

    It is interesting to note that the work of one MP has done more to shed light in Zimbabwe's murky diamond industry, proving once again that if MDC with their majority in parliament had had the po-litical will, this parliament could have achieved something.

    As it happened, these MDC MPs really have nothing to show for their five years in power. Indeed on the Marange diamonds, it was PM Tsvangirai who gave the Marange diamonds operations a clean bill of health which Chininga’s report has shown was a lie!

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