THE Chinese are creaming off millions in hard currency from Marange diamond fields through an agreement which allows them to milk 90% of the revenue generated from the deal, depriving the country of more than US$200 million to date.

Deputy Mines Minister Gift Chimanikire has disclosed Anjin Investments, the biggest diamond company in Chiadzwa, is controlled by Chinese who own 50% equity and the Zimbabwe Defence Industries (ZDI) which has 40%. The remaining 10% is supposed to be owned by the government through the Zimbabwe Mining Development Corporation (ZMDC).

However, Finance minister Tendai Biti yesterday said ZMDC is not involved, suggesting the 10% Marange diamond fields is actually owned by a company called Matt Bronze controlled by the army.

The directors of Matt Bronze are not known, raising fears this could be benefiting individuals in the army, not the public. Since Anjin is a Chinese Defence Industry company, ZDI controlled by the army and Matt Bronze a military outfit, this means the company's proceeds are going to the military which is averse to transparency and accountability.

According to a compliance report drafted by the Kimberley Process Certification Scheme seen by the Zimbabwe Independent, Anjin mined 3 000 000 carats of diamonds between July 2010 and October 2011.

"At full throttle, the monthly production capacity may reach approximately two million carats for which a comprehensive production footprint has developed," the report says.

In an interview yesterday Biti said if Anjin was to operate at full capacity the company would produce two million carats valued at an average of US$80 per carat which could yield US$160 million a month. However, Biti said Anjin was not remitting anything to treasury despite creaming huge profits.

"They are not remitting, not even a single cent," he said.

Biti also gave a breakdown of the structure of royalties and taxes, showing Anjin is expected to pay 14% in corporate taxes (based on the net figure), 4% non-resident shareholders tax, royalties of 17% and also VAT.

This means Anjin is supposed to remit revenues covering the 50% shareholding (if the ZDI's 40% and the controversial 10% are added) and taxes, some-thing which should have yielded more than US$200 million so far.

"Because it's a joint venture we are automatically entitled to 50%, so 50% plus taxes gives you the figure we are supposed to get (US$200 milllion). Our complaint is that ZMDC is not in there; it is this Matt Bronze company which is owned by the army," Biti said.

Anjin has not made remittances to treasury partly because diamonds are being used to pay off a high-interest loan from China's Export-Import Bank (Eximbank) to build a state-of-the-art National De-fence College near Mazowe.

Zimbabwe entered into a US$98 million loan agreement with Eximbank on March 21 2011. The contract states the Chinese would fund and build the National Defence College.

At a 2% interest rate, Zimbabwe would repay in a series of 26 installments over 13 years, but only after a seven-year "grace period" has passed.

However, government ministers claim to be in the dark over how much is generated by Anjin to repay China's loan.

When the deal was initially presented to parliament in May 2011, MPs objected to its high-interest rates and the lop-sided structure of the loan which had greater financial benefit for the Chinese as lenders. However, after much heated debate, it was approved in a second parliamentary sitting in June.

Top government sources say diamond revenues from Anjin are also being used to pay for arms being imported from China. Zimbabwe buys arms from China.

Speculation is rife China is supplying Zimbabwe with arms in exchange for diamonds. Just before the 2008 elections, a Chinese ship loaded with arms was stopped from docking at the Durban port after pro-tests by trade unions. The Anjin deal seems to be the new cover.

In an interview this week, Chimanikire said: "We are aware that there was a loan arrangement for the defence college that would be paid through Anjin's diamond mining and China would supply equipment."

Of the five diamond mining companies licenced to mine in Marange, Anjin is the biggest. It has seven shafts which amount to seven mines in one area.

Biti has blamed the under performance of revenue collected this budget year on poor contribution by diamond mining firms, lamenting revenues of only US$30,5 million had been remitted to the fiscus between January and March, against a target of US$122,5 million.

Revenue collections for March 2012 amounted to US$287,9 million against a target of US$320,2 million, giving rise to a US$32,4 million shortfall which Biti said arose mostly owing to under performance of diamond proceeds.

It is estimated Anjin mines seven million carats a year and with additional processing plants, it is expected to increase production to 10 million. However, the company's financial records remain a mystery, according to Chimanikire.

"Their records must be made available to the pub-lic; in many companies at the end of the financial year a dividend is declared to the shareholders and even a 1% shareholder is told how much the company made and what they will get. Speaking in my capacity as deputy minister of mining, there is no way Anjin could have recorded a loss," he said

Chimanikire further said diamond remittances were essential to the fiscus and companies like Mbada and Marange Resources are supposed to declare their dividends on a monthly basis because government needs the money.

Anjin has been at the centre of controversy since it began operations in Chiadzwa in early 2010. Zimbabweans on Anjin's board mainly comprise serving and retired members of the military and the police.

In its report, Diamonds A Good Deal for Zimbabwe?, international human rights group, Global Witness, warned involvement of the military and police in diamond mining "creates opportunities for off-budget funding of the security sector".