The Herald (Harare)

30 November 2012

Zimbabwe: Sanctions Stifle Free Diamond Trade

Photo: Denford Magora
The reddish-coloured diamonds of Marange.

SANCTIONS on Marange's diamond trade should be lifted as they are creating loopholes for illegal trade and fiscal leakages, Parliamentary Committee on Mines and Energy chairman Mr Edward Chindori-Chininga has said.

He said the committee, which provides an oversight responsibility over the Ministries of Mines and Mining Development and Energy and Power Development concurred with Finance Minister Tendai Biti's call upon the US to lift all sanctions and financial barriers that were preventing free trade of the gems.

Diamond firms that are under the US sanctions are Mbada Diamonds, DMC, Marange Resources and Anjin. The four companies are KPCS complaint.

"The United States as a member of KPCS played a major role to make sure Marange diamond mining and exports are compliant with KPCS rules," said Mr Chininga.

"(Therefore, it) should not at the same time create an environment that promotes illegal (sale of diamonds) through financial sanctions that force companies to circumvent normal export channels.

"These financial restrictions and sanctions create loopholes for illegal, fiscal leakages and loss of revenues to Zimbabwe."

Presenting the 2013 National Budget recently, Finance Minister Tendai Biti

called for the lifting of all "forms of sanctions" against the marketing of Marange diamonds.

The World Diamond Council also called for the removal of the restrictive measures on diamond trade at the just ended diamond conference in Victoria Falls.

Mr Chininga, a former Minister of Mines said the sanctions were promoting, what all members of KPCS and the international legal mandate of KPCS member states and parties strived to get rid of when it was established.

He said Zimbabwe, as a founding member of the KPCS should be treated equal like all members.

In November last year at the Kinshasa Plenary in the DRC all diamond exports from the mines in Marange were approved as KPCS compliant with the consensus of all participating countries while the new mines would be verified as compliant by the KP monitoring team of Mark Van Bokstael and Mr Abbey Chikane.

After the Kinshasa Plenary, the US announced that it had abstained from the consensus approving the Marange exports and further explained that this was consistent with its foreign policy on Zimbabwe.

Observers, however, noted that within the framework of the KPCS, there is no scope for abstentions. It's either one objects or is part of the consensus and more so given that decisions are not made by vote.

As such, they argue that the US was part of the Kinshasa consensus. The US did also not give opportunity to the affected companies to comment on the allegations made against them, in particular, that they where involved in undemocratic practices to undermine human rights in Zimbabwe.

At the time, two of the mines employed more than 1 500 people.

The Marange miners had also made a commitment of a National Budgetary support of US$600 million in the 2012 Budget which to date has not been achieved.

Last year in December, Minister Biti wrote to the US Treasury Department, registering his concern with the unilateral imposition of sanctions without due process, let alone a justified basis for doing so.

However, no action was taken.

The US has not positively acted by lifting the diamond export financial restrictions.

Conflict of Interest

The US is the outgoing KPCS chair. At the time it imposed sanctions, it had accepted that the diamond mining operations in Marange were KPCS compliant.

It had also accepted that these diamonds were legitimate within the Kimberly Process.

The US, however, condemns the diamonds on the basis of its foreign policy on Zimbabwe.

It therefore means the US conflicted its chairmanship by advancing its foreign policy through the group while on the other hand advancing the common interest of the KPCS.

"This is the reality, which the KPCS chair was confronted with at the diamond conference in Victoria Falls.

"What has since been agreed to, by all the progressive participants who attended the conference is that, the KPCS must call for the removal of sanctions imposed on compliant diamond mining operations.

"This call must be made for the KPCS own good and the preservation of its integrity as an international certification scheme founded on the principles of the UN Charter.

Prejudice

The committee said the prejudice being suffered by the country as a result of the sanctions was huge as diamonds were being traded at about 25 percent below market.

International courier companies such as Brinks have refused to ship Marange diamonds.

As a result traders are hiring private jets or use commercial airlines.

Some international insurance firms are refusing to insurer the diamonds from Marange.

The payments for the diamonds are being made in South African Rand or in the Hong Kong dollar with massive exchange rate costs because of the size of the transactions.

This however does not apply to Murowa diamonds owned by RioTinto.

Despite international impediments, Zimbabwe grew its production of diamonds by 1 000 percent in three years to 11,1 million carats in 2011.

Although the country is yet to conquer its myriad of problems, it has still emerged as an important global diamond producer.

Based on reports from companies operating in Marange, and including production from Murowa and River Ranch, Zimbabwe diamond output could 14,5 million carats of gem and near gem quality diamonds by 2014, according to a research report Equity by Communication Diamond Report.

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InFocus

Green Light For Zimbabwe's Diamond Exports

The reddish-coloured diamonds of Marange.

The country has finally been cleared to export diamonds to international markets despite human rights and corruption concerns that have dogged the mining industry. Read more »