14 March 2014

Zimbabwe: Govt Fumes Over Diamond Revenue

Government would rather halt all diamond mining in Marange than let firms operating there continue fleecing the country of millions of United States dollars through understating the real value of the stones they extract and sell through cartels, a Cabinet minister has said.Mines and Mining Development Minister Walter Chidhakwa yesterday said Government lost much revenue through the cartels, and he was boosting monitoring mechanisms to ensure Zimbabwe realises true value from its resources.

Mbada Diamonds, Marange Resources, Anjin Investments, Jinan and Diamond Mining Company have come under fire after they told Parliament last week that they were not aware of the existence of the Marange-Zimunya Community Share Ownership Trust in which they were supposed to contribute US$10 million each.

The minister's blistering censure came as the Antwerp Diamond World Centre yesterday criticised the relationship between diamond miners and the Government in an assessment of the country's second gem auction in Belgium.

The auction realised US$69 109 465,18 but only US$10 366 419,78 went to Treasury even though four of the miners are joint ventures with Government, while Marange Resources is 100 percent State-owned.

AWDC said the money remitted to Government was low because the companies were not paying related taxes.

"The failure of the companies to remit the resource depletion fee and marketing fees to the Treasury is of deep concern.

"Could it be they are exempted from paying these taxes in the contracts they have? Contracts should be made available to the public and the diamond mining companies should publish their financial statements."

AWDC said Zimbabwe's tax regime was tailored to ensure Treasury received 15 percent of the diamond companies' revenue as royalty and over 75 percent of profits as dividends and corporate tax.

"However, given the tokenistic payments made to Treasury since operations in Marange commenced, it is evident that there is something terribly wrong either with the way the Zimbabwe Revenue Authority is operating or the way mining contracts are negotiated."

Addressing students taking Joint Staff Course Number 27 at the Zimbabwe Staff College in Harare yesterday, Minister Chidhakwa said it was better to stop mining than continue losing money to miners.

"We used to watch close circuit television yesterday, now we watch the footprint," he said.

"If the footprint in Marange is 10 to 15 percent gem and if you come to me and say 'No, we just found two percent gem,' you are out.

"We don't need you in Zimbabwe because you are deviating from the footprint and we know it's deliberately happening. We have lost a lot of our diamonds," Minister Chidhakwa said.

He gave the example of the recent auction where a diamond valuer had set the price at US$400 per carat. This rose to US$1 000 during the auction and ended as high as US$18 000 per carat.

"So, tell me where is the problem? The guy who is valuing diamonds at US$400 must either be a terrible valuator or he was taken aside and told not to give the right price," Minister Chidhakwa said.

He said he was still establishing the correct position regarding the quality of Zimbabwean diamonds between what he gets from local miners and what Indian buyers say.

"I haven't figured out what our footprint is," he said. "You go to one company and you get 70 percent gem and 30 percent industrial, you go to another one, you get 15 percent gem and the rest industrial and you talk to people from India and they say there are no industrial diamonds in Zimbabwe, everything is gem.

"I have been trying to understand what they mean, but somebody has sat down with me and said the Indians have developed a technique. Each and every diamond from Zimbabwe has a small, little sparkle ... If you take the sparkle, cut it properly and you put it on a ring properly" it can be sold "to the Sheikh of Saudi Arabia".

He said, "That is what they (Indian buyers) meant when they say that Zimbabwe diamonds are gem."

Minister Chidhakwa said when he became minister six months ago, he heard lots of stories about how the country was fleeced of diamond revenue.

"One of the touching stories was that the people who buy your diamonds on the local tender system are controlled by one person and that one person is controlled by one of your producers. So they buy your diamonds at US$34 a carat," he said.

Government, Minister Chidhakwa said, would not extend the tenure of the five firms in Marange, some of whom were reluctant to go into underground mining preferring to concentrate on cheaper surface operations.

Zimbabweans urged all the mining companies to honour their pledges to operationalise the 59 Community Share Ownership Trusts launched by President Mugabe over the past three years.

The funding is in line with Statutory Instrument 114 of 2011, which requires mining companies complying with indigenisation and empowerment regulations to dispose shares to designated entities, with at least 10 percent of the shareholding going to Community Share Ownership Trusts.

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