13 June 2014

Zimbabwe: New Report Reveals U.S $770 Million Lost to Diamond Corruption

More corruption in Zimbabwe's diamond industry has been exposed in a new report by Africa Partnership Canada (PAC), which claims that the country lost $770 million in potential revenue during a four-year period.

The PAC report refers to the period between 2008 and 2012, when Zimbabwe sold diamonds from Marange to its partners in the United Arab Emirates (UAE), mostly Dubai, and uses import and export statistics submitted by both countries.

PAC found that Zimbabwe undervalued its gems by about 50%, with the UAE then exporting them at a much higher price. This undervaluing and transfer-pricing of the precious stones cost the country an estimated $770 million in lost revenue in just four years, but it netted diamond chefs a sizeable fortune.

According to Newsday newspaper, the PAC report was on the agenda of the Kimberly Process Certification Scheme (KPCS) meeting that ended in Shanghai on Thursday. The statistics used by PAC had been submitted to the KPCS by Zimbabwe and the UAE.

The report names the Democratic Republic of Congo (DRC) as the key centre where so-called conflict diamonds obtained fraudulent KP certificates in order to qualify for export to trading centres, including Dubai.

The DRC also lost $66.2 million in circumstances similar to Zimbabwe's, according to the report.

Farai Maguwu, director of the Centre for Natural Resource Governance, said he was not surprised by the report and explained that the lost revenue estimated by PAC might actually be a conservative figure.

Maguwu said in March this year Zimbabwe's diamonds were selling in Dubai at about $76 per carat. But back in 2012 the country sold 15 million carats, mainly to Dubai, at an average price of about $50 per carat. This raised many questions regarding the price difference.

"It's not legal. It's actually corruption. Only that it's corruption which is well managed by political elites. It has to be done by people who have power. People who make decisions," Maguwu explained.

He added: "We are talking about selling over 15 million carats of diamonds and you can tell how much money the country would lose. It's in billions. I think it's an open secret that Zimbabwe's diamond sector is very opaque and will remain opaque for the foreseeable future."

Maguwu stressed that the culprits are powerful people "with political and military might" and cannot be questioned, even as they go through customs with their loot.

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