17 September 2017

Zimbabwe: How Zimbabwe Squandered Its Diamond Riches

opinion

JUST a year before its citizens couldn't find basic food items in their stores in 2007 and were literally starving, Zimbabwe made the largest diamond find in recent history. The Marange fields were so flush with alluvial diamonds that within six months there were 35 000 locals sifting for them. Behind the backs of the marauding security forces, people were stuffing diamonds into turkeys, hidden pockets, and any other cavities they could.

But just two years later, the government launched "Operation Never Return" to drive out informal miners from the Marange fields using brutal methods such as dogs and helicopter gunships. The intention was to exert greater control over the profits for the benefit of the political and military elite. The windfall from the great diamond find for ordinary Zimbabweans living on the poverty line was over.

But even with the profits filtering into the local economy in 2006 and 2007, the economy of the country was so devastated that finding basic food items to buy was almost impossible. Store shelves were empty, the prices of basic items rocketed, and Zimbabweans were flooding into South Africa by the thousands.

How did Zimbabwe squander such a rare chance to revive its beleaguered economy? In 2011, the Minister of Mines estimated that Marange could generate $2 billion (R26bn) a year in revenue.

Well, the answers can be found in a ground-breaking report released this week by Global Witness which tracks who profited, and how ordinary Zimbabweans were denied.

Despite Zimbabwe quickly becoming one of the top five diamond producers in the world after Russia, the Democratic Republic of Congo and Botswana, Zimbabweans continued to starve, face an unemployment rate of 80%, endure collapsing infrastructure, and a country without cash flow. The most stunning official admission from the policy establishment came last year from Finance Minister Patrick Chinamasa who said in his 2016 budget statement: "There was a greater economic impact from diamonds during times of uncontrolled alluvial panning than through formal diamond mining arrangements."

As Global Witness has exposed, the reason formal diamond mining did not see profits filtering back into the society is because the five main diamond companies which were given licences to mine the Marange fields were allegedly siphoning off the profits either to the Central Intelligence Organisation, the Zimbabwe Defence Industries, former security force chiefs, or associates of President Robert Mugabe.

Mugabe has tried to claim that private companies involved "robbed Zimbabwe" as his government had anticipated profits worth $15bn from Marange, although only $2.5bn has been received from exports since 2010. But of that $2.5bn that the state earned, only $300 million was accounted for in public accounts, according to Global Witness.

While there may have been discrepancies between what private companies received and what went to the Treasury, the government owns 50% of the companies licenced to mine, and the responsibility for selecting and overseeing the private partners.

Of the five main mining companies, Kusena is entirely owned by the Zimbabwe Mining Development Corporation (ZMDC), and was set up by the CIO as a source of off-the-books financing. Then there is Anjin mining in which the Zimbabwe Defence Industries has a 40% stake. Jinan mining is another, and is considered an extension of Anjin that is 50% owned by the ZMDC. Mbada Diamonds has operated one of the largest mining concessions in Marange, and its owners hide behind a web of companies. Global Witness has uncovered that the company is owned by retired Air Force Chief Robert Mhlanga, who is a close associate of Mugabe.

More recently the government has tried to amalgamate the diamond industry into the Zimbabwe Consolidated Diamond Company (ZCDC), and has refused to renew the licences of Marange companies. The shareholders of the ZCDC are largely the same cast of characters that emanate from Mugabe's inner circle.

The tragedy is twofold. One is that so much revenue which could have been put towards lifting people out of poverty was squandered by the political and military elite when suffering was at an all time high. Second, members of the security establishment will seek to influence the outcome of next year's election to further entrench their control over the diamond industry.

Needed now are steps toward parliamentary oversight of the operations of the ZCDC, and greater transparency concerning the revenue flows associated with the diamond industry.

Zimbabwe

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