The Herald (Harare)

7 December 2012

Zimbabwe: 'Sanctions On MMCZ Are Sanctions On Zim'

interview

ZIMBABWE successfully hosted its inaugural Diamond Conference in Victoria Falls that brought together the who is who in the industry from mines ministers in the region to international buyers and cutters. The Herald caught up with Minerals Marketing Corporation of Zimbabwe chairperson Mrs Juliet Machoba (JM) to talk about issues related to the political economy of mineral marketing in Zimbabwe ahead of the KPCS Plenary in Washington DC where Zimbabwe was given the greenlight to export diamonds without consulting KPCS monitors. TICHAONA ZINDOGA: Very little about MMCZ is known in Zimbabwe, yet its role in the mining industry is quite critical.

For the benefit of stakeholders, what is MMCZ?

MMCZ is short for Minerals Marketing Corporation of Zimbabwe. It is a wholly-owned Government entity, which operates under the ambit of the Ministry of Mines and Mining Development.

The Corporation is the exclusive selling and marketing agent of Government for all minerals produced in Zimbabwe, except gold and silver, which fall under the jurisdiction of Fidelity Printers & Refiners. MMCZ was established in 1982 through an Act of Parliament -- the MMCZ Act. It began operations in March the following year.

 You mentioned that the selling and marketing role of MMCZ is "exclusive". Do you mean no one else is allowed to sell and market minerals in Zimbabwe?

It is exclusive in the sense that no one else has the mandate to sell or market minerals on behalf of the Government of Zimbabwe. That mandate is vested in the MMCZ.

I see. For the benefit of stakeholders, what is the mandate of MMCZ?

The role and mandate of MMCZ is two-fold - there is the selling role and the marketing role. They are two blades of the same scissors. We also serve as advisor to Government on all issues related to the marketing of minerals. Our mandate also encompasses mineral accounting, that is, we verify the amount of minerals mined in the country and what is earned from those minerals on behalf of Government.

We do that through the inspection and assaying of minerals. In addition to that, we also collect royalties and Value Added Tax (VAT) from mining companies on behalf of Government. MMCZ also encourage the local beneficiation of minerals and local utilisation of all minerals produced in the country.

A point of clarification, do you actually look for buyers?

When things were normal, before sanctions were imposed on MMCZ, we had offices in Europe (Belgium). They were more like Zimbabwe's gateway to international markets.

The offices were responsible for marketing Zimbabwean minerals. Through the office, mining companies could interface with buyers. Although we're facing challenges, we are still looking for buyers and arranging deals for mining companies.

Do you charge a fee for doing that?

Of course, we charge a commission for it. The rate is prescribed by Government.

If I may take you back, you mentioned that MMCZ is responsible for the monitoring and assaying of minerals. How do you do the monitoring and inspection? Do you have agents?

The inspection is done through our Mining Inspectorate. We have mining inspectors and monitors stationed at mines.

All Mines?

We make sure that all mines are covered. Where we have mines concentrated in one area, we can have one or two monitors covering more than one mine.

Next year, MMCZ celebrates 30 in operation. What can you say have been your milestone achievements over the three decades?

We have managed in a big and transparent way to account for minerals produced in Zimbabwe on behalf of Government. Through us, Government can tell how much of a mineral has been mined and how much has been realised from the sales. We have also helped to create international markets and to arrange deals for our mining companies in a big way. Of course, we would have done better if there were no sanctions.

What challenges are you facing in fulfilling your mandate?

Bad publicity is one of them, but the biggest challenge is the issue of sanctions. As I mentioned earlier on, MMCZ is the sole selling and marketing agent of Government. With sanctions in the way, it is difficult to perform our marketing and selling role.

Point of clarification, can you explain a bit more on the effects of sanctions. I am saying so because the US and the EU maintain that the sanctions they have imposed on the country, individuals and entities are not necessarily affecting trade. Furthermore, Ambassador Gillian Milavanovic of the US said the same thing at the Zimbabwe Diamond Conference. Can you explain in what the sanctions are affecting the selling and marketing of minerals, including diamonds?

Let me point out that the US and the EU have imposed sanctions on MMCZ, the Zimbabwe Mining Development Corporation, Mbada Diamonds and Anjin. The sanctions have the effect of scaring away buyers, and that means that the EU and US markets are not open to us as a country.

Sanctions on diamond producing companies, in particular, create big risk, which makes it difficult to insure the diamonds and ship them.

Insurers are not prepared to assume the risk of a commodity on sanctions by such as huge bloc for fear that it can be seized at any time before it reaches the buyer.

Effectively, sanctions make the country the most expensive and riskiest country to do business with. They are a burden to anyone who is going to deal with. Since Mbada Diamonds and Anjin were put under sanctions, diamond sales have dropped drastically.

This means the Corporation cannot attract the best buyers for the diamonds. If buyers are not free to deal with us, it means we're not getting real value out of the minerals. It also means the diamonds are heavily discounted in the market because the situation gives buyers too much bargaining power. As a result, our minerals sell at a discount; it's like the buyers are doing us a favour by buying from us. The result is that the producers are not getting full value and government is not getting full value in terms of royalties and dividends. The whole country will suffer because of that. The sanctions are not affecting the diamond sector alone because MMCZ, which is responsible for marketing and selling all minerals, is itself under sanctions.

 What role can the Kimberly Process Certification Scheme (KPCS) play in freeing trade in Marange Diamond?

The support of the KPCS is quite critical. So far the KPCS has helped us greatly as a nation to bring Zimbabwe to compliance with KPCS minimum conditions. Today all four companies in Marange have been certified as fully compliant.

That strengthens our case. If the principal role of the KPCS is to eradicate conflict diamonds, and if all our companies have been certified as conflict-free, why then are the companies being penalised?

It shows that the US and the EU have a bi-lateral agenda, which has nothing to do with what they purport to represent.

I'm encouraged by the position taken by the President of the World Diamond Council Mr Eli Izhakoff that he's going to ask the body to present Zimbabwe's case to the US Government, because he himself is convinced that the sanctions are unjust.

In normal cases, the KPCS was supposed to do it. But the challenge is that the current chair as a US diplomat is appears inclined more to the foreign interests of her country than with the position of Member States.

For the good of the global diamond industry, all members of the KPCS must be treated with equality and fairness. If we fought the certification war and won it, we can win this one together as the diamond family.

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