18 June 2017

Zimbabwe: Marange Gems Plot Thickens

Fresh revelations indicate that government kept the Office of the Auditor-General (OAG) away from the Marange diamond mines. This development appears to prove that a powerful clique from the ruling elite may have undermined key public institutions so as to facilitate the leakage of the gems, a parliamentary committee has said.

The clique comprise senior government officials and units, the security sector and local as well as external business proxies.

The OAG is obligated, under Section 6 of the Audit Office Act, Chapter 22:18, to "audit the accounts of any public entity or designated corporate body".

While the Auditor-General, Mildred Chiri, could not be reached to comment, senior officials from the OAG confirmed that the office had its hands tied and thus could not audit parastatals and firms involved in the mining of the diamonds.

These included the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ) whose auditing could possibly have exposed the shady deals taking place at Marange.

The OAG was also supposed to carry out annual audits of the diamond mining companies in which government had at least a 50% stake before the firms were expelled.

Mbada Diamonds, Jinan, Diamond Mining Company (DMC), Anjin Investments, Rera, Kusena and Gye Nyame and Marange Resources, in which government had 100% shareholding, mined in Marange.

The Zimbabwean government started diamond joint ventures in the field, which at that time was estimated to hold a quarter of the world gems, in 2010. Government then forced the companies to cease operations in early 2016 following the exhaustion of surface diamonds.

The companies were replaced by a controversial merger, the Zimbabwe Consolidated Diamond Company (ZCDC), whose takeover is being challenged by Mbada and Anjin.

Chiri was reported to be out of office on several occasions that The Standard, working in collaboration with Information for Development Trust (IDT), a non-profit organisation promoting access to information on public and private sector governance, sought her comment.

This reporter sent text messages to her mobile phone but there were no responses.

Senior managers refused to comment on record, insisting that Chiri was the only one who could shed light on issues relating to the controversial mining of diamonds in which billions of dollars were reportedly lost through shady deals.

"That issue can only be handled by the AG herself," said one of the managers.

Paurina Mpariwa, the chairperson of the parliamentary Public Accounts Committee (PAC) confirmed the failure to audit the Marange diamond mines. She said they had not received any report on ZMDC, MMCZ or the mining companies from the OAG.

"The current committee which was set up in 2013 (after the general elections) has not received or debated a financial audited report of the diamond mining companies in Marange," she said.

"We cannot order audits but merely have to wait for those that are presented by the Auditor-General's office."

It was only after the forced closure of the seven mining companies that government ordered the OAG to conduct forensic audits of the firms to sniff out company officials and key government officials as well as other collaborators who plundered the diamonds.

The audits are under threat as some of the mining firms, particularly Anjin and Mbada, are arguing that they lack the capacity to provide necessary records as they have laid off their staff and are challenging their forced closure in the courts.

The exclusion of the OAG from playing an oversight role was part of an apparently deliberate scheme by the executive arm of government to keep information on diamond mining under a tight lid.

A 22-member parliamentary portfolio committee on Mines led by the late Edward Chindori-Chininga faced stiff resistance from government during a 2010-2013 fact finding mission focusing on the Marange diamonds.

"During the four-year period of inquiry, the committee observed with concern that the executive and its offices were generally not willing to be held accountable," noted the committee when it finally presented its findings in Parliament in June 2013.

Chindori-Chininga subsequently died in a car accident.

The committee was denied entry into the Marange fields twice and its members were at one time mobbed by security agents during a three-day pre-visit camp in the nearby city of Mutare. They only managed to access the fields two years after the commencement of their work.

According to the committee, "there was a contestation of power between the executive and the legislature over access to information and entry by the committee to carry out on-site visits in Marange".

This standoff, according to the report, resulted in long delays in completing the Marange inquiry.

Some of the mining companies such as Mbada where a reported ally of President Robert Mugabe, Robert Mhlanga, was the chairperson, made several attempts to deny the committee information, according to the report which accused the Mines minister Mpofu of instigating the defiance among company officials.

The committee was also barred from visiting and talking to surrounding communities where massive human rights abuses allegedly perpetrated by the security forces had been reported.

The heavy-handed involvement of the executive, according to the parliamentary report, created a breeding ground for corruption since it discouraged transparency and accountability in the production, marketing, fiscal contributions, selection of joint venture partners and general administration of the diamonds.

In January 2010, Mbada, which the committee accused of having a "big brother mentality", attempted to auction diamonds in a way that flouted national and international laws. They dribbled past key institutions like the police's Minerals Unit, ZMDC, MMCZ and the Mines ministry.

The committee accused Mpofu, whose wealth is alleged to have grown tremendously during his tenure as Mines minister, of circumventing ZMDC in the choice of joint partners as is required by the law. The corporation played a minimal role in the choice of board members at the joint ventures.

Not all key members of the executive were, however, in the loop about the diamond looting machinations by a powerful clique within government.

Tendai Biti, the Finance minister from 2009 to 2013, told The Standard that he attempted to put the diamond leakages on the agenda several times during cabinet meetings but was frustrated by Mugabe.

"He asked me dismissively why we were seized with diamonds as if they were the only mineral in Zimbabwe," he said.

"He would wonder loudly why we were not talking about platinum instead."

A group of Dutch investors who were kicked off their ventures by government, it has emerged, wrote to the International Monetary Fund (IMF) in 2013 revealing how a powerful circle in government deliberately obscured the exploitation of its resources. They revealed how individuals created offshore companies fronted by shady individuals and flouted financial best practices for personal gain.

Bernardus Henricus Funnekotter, the Dutch frontman, said in a lengthy letter addressed to several IMF heads that their investigations spanned numerous countries that included the USA, UK, Hong Kong, United Arab Emirates, Isle of Man, British Virgin Islands, Mauritius and South Africa.

He wrote: "Incredibly valuable mineral resources have been handed over without public tender to a web of offshore companies, whose owners (likely government insiders) remain hidden behind nominee shareholders".

The creation of offshore companies helped the elite in facilitating transactions involving illicit capital flight which also included underhand diamond deals, said Funnekotter.

"These transactions have several commonalities 1) obfuscation by the government, 2) offshore counterparties with hidden beneficiaries (which evidence strongly suggests are government insiders or their proxies) and 3) financial terms that are at odds with arm's length commercial dealings.

"That is, in certain cases, state assets worth hundreds of millions of dollars appear to have been covertly transferred to government insiders (and their proxies) for a fraction of their market value," added Funnekotter.

Centre for Natural Resources Governance director, Farai Maguwu is convinced that the diamond joint venture negotiations were meant to musk the elites' looting sprees.

"The joint ventures were not joint ventures between private capital and the state," he said.

"On paper that was the case but in reality the ruling elites used ZMDC to enter into these joint ventures for personal enrichment.

"Parliament was left out in the identification of investors. At times, even the Ministry of Mines was left out.

He added: "The marketing was also scandalous. Marange diamonds were grossly undervalued for the benefit of ruling elites who got the variance."

Mugabe last year claimed that at least $15 billion worth of diamonds could have been siphoned out of Marange but the president is yet to set up an investigation to test these claims.

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