Zimbabwe’s Diamond Revenue Goes Down

The Zimbabwean government has announced it will summon mining companies in the controversial Chiadzwa diamond fields to ask why their revenues are so low.

A top government official says diamond production targets are not being met in the rich gem fields, currently mined by companies linked to the Chinese and President Robert Mugabe’s ruling party.
Until now President Robert Mugabe’s party has blamed official low revenues on Zimbabwe’s diamonds on sanctions but now the mining ministry is taking a different tact.

Deputy Minister Fred Moyo says mining companies working in the Marange fields have been summoned to explain why they are not making the profits they promised.

Moyo told the Sunday Mail the boards of the state mining corporation and the minerals marketing corporation are also to be revamped.

He admits Zimbabwe is not efficiently producing its diamonds.

As predictions grow that Zimbabwe’s economy is slipping into a second down turn, the authorities need to boost revenue more than ever from the sector that has been blighted by allegations of smuggling and lack of transparency.
Meanwhile Substantial revenue from Zimbabwe’s Marange diamond fields have evidently been going into state coffers, despite claims to the contrary by former Movement for Democratic Change finance minister Tendai Biti.

This is according to classified documents from the Kimberley Process Certification Scheme (KPCS or just KP) which was set up to filter conflict diamonds (also known as blood diamonds) out of world markets. They show that the four mines at Marange exported over $717 million worth of diamonds between November 2011 and October last year and paid 15 percent of that – just over $107m – in royalties into state coffers.

The KP research was part of the process of clearing Zimbabwe after its suspension from the KP due to reports that its forces had violently evicted informal miners from Marange.

The KP Monitoring Team comprised Abbey Chikane (brother of former director-general in president Thabo Mbeki’s presidency, Frank Chikane) and Mark van Bockstael, chairman of the Working Group of Diamond Experts at the World Diamond Council in Antwerp.

The documents are not public but they are on the KP’s restricted website which is available to any of the many government, industry or civil society members of the KP. This has raised some questions about why they have not been cited before to counter the claims made by Biti.

He frequently said he never saw any Marange revenues while he was finance minister in Zimbabwe’s coalition government from 2009 until this year’s elections, which Zanu-PF won.

The MDC and many observers have often suggested that all income from Marange due to the state went directly into Zanu-PF’s coffers. In their report for the quarter February to April last year, the authors say statements by ministers about the lack of transparency in the “chain of custody” of Marange diamond production and export, “have caused serious confusion regarding compliance to KP standards and minimum requirements.”

They refer to contradictory statements by Zimbabwe’s ministry of mines – then controlled by Zanu-PF – and the finance ministry and agencies then controlled by Biti’s MDC.
Chikane and Van Bockstael found that both the Reserve Bank of Zimbabwe and the Zimbabwe Revenue Authority (Zimra), which is part of the treasury, were both directly involved in authorising diamond exports so they could be KP certified.

Zimra was involved in several steps of the process, including receiving copies of customs forms which showed that the amount paid to the producer, as noted on the KP certificate, had been received in the producer’s bank account in Zimbabwe.

Zimra also had to give clearance for the shipment of the rough diamonds near the end of the process by issuing “Release Form 21”.

Zimra “thus holds the key to all rough diamond exports from Zimbabwe,” the report says.
“Statements that Zimra is completely unaware of the exports of rough diamonds are therefore alarming as these could indicate that the KPCS-compliant export process for rough diamonds is no longer applied or not applicable in case of rough diamond shipments from Marange.”

However, Chikane and Van Bockstael’s report says further investigation showed that proper process was still being implemented for all rough diamond exports, including Marange, and that Zimra need only check its records to identify how much revenue through royalties had been generated by rough diamond exports.
This week at the annual KP Plenary in Johannesburg, campaigners failed to persuade the KP to block rough diamond exports by rebel movements and exports by governments which exploited diamonds to fuel violence.