The gems failed to enrich Zimbabwe and now its resources are running out
by Greg Klein
Zimbabwe’s vow to merge all the country’s diamond miners into one state-led entity follows reports that the country’s largest diamond-producing region has largely played out. The Marange fields, once considered the world’s biggest diamond-producing area by volume, has left Zimbabwe little if anything to show. Much blame has been directed at the government. Now that same government rationalizes its planned merger on the basis of transparency.
The mining minister’s announcement, reported by Reuters on March 12, gives companies until March 16 to respond. The idea had been discussed previously but was originally directed at six companies working in the Marange, where the government already holds a slightly better than 50% stake. The plan now encompasses every diamond miner in the country, including Rio Tinto’s NYE:RIO 78%-held Murowa mine.
Earlier this month Zimbabwean finance minister Patrick Chinamasa told parliament he’s not expecting diamond revenue this year because, as NewZimbabwe.com stated, Marange’s resources are depleted and miners have no capacity to dig deeper. The journal added, “When the Marange diamonds were ‘discovered’ around 2005, then-mines minister Obert Mpofu claimed that Zimbabwe would earn $2 billion annually from the gems. Mpofu famously boasted that the country would never again need to beg for financial help.”
Yet Zimbabwe still depends on handouts from the West and China, which has invested widely in the country. Meanwhile accusations of corruption persist. In one example, president Robert Mugabe’s inner circle stands accused of “perhaps the biggest single plunder of diamonds the world has seen since Cecil Rhodes,” stated human rights watchdog Partnership Africa Canada in November 2012. “Conservative estimates place the losses due to illicit activity at over $2 billion since 2008.”
PAC noted Mpofu’s “unexplained wealth,” exhibited by a conservative estimate of $20 million in personal spending, mostly in cash, over the previous three years.
Accusations hardly stop there. Last July Mpofu tried to deflect charges of demanding a $10-million bribe from diamond miners by pointing out his accusers also faced charges—of defrauding the government of $2 billion, the Zimbabwe Herald reported.
After Chinamasa announced Marange’s depletion earlier this month, opposition critics again raised accusations of government corruption. Chinamasa didn’t deny the allegations, but offered a strange rationale. “Sanctions have caused corruption and other vices you are talking about,” NewZimbabwe.com quoted him. “Business is no longer done directly due to sanctions and for your own information these illegal measures were put on us not because of human rights violations but because we had taken back our land.”
The sanctions followed concerns from organizations like PAC, which called Zimbabwe and Angola “the main perpetrators of diamonds-related human rights abuses, as their governments have waged violent campaigns to control lucrative diamond fields.”
Nor did Zimbabwe do well after the EU lifted its embargo in 2013. Last September Belgian authorities confiscated Zimbabwean diamonds up for auction in Antwerp, following a $500-million suit by Amari Platinum Holdings over a cancelled mining concession. The following month diamond miners warned they would face “collapse” if Zimbabwe adds a new 15% dividend to their government payments.
Analyst Paul Zimnisky estimates 2013 Marange output at nearly 17 million carats. Pointing out that neither the government nor miners release production figures, he stated anecdotal evidence suggests this year’s production will fall to between six million and 10 million carats averaging a low $45 per carat. Continued U.S. sanctions, he stated, “has resulted in Marange diamonds trading at a discount to global market prices.”
As for the planned miners’ merger, it would come under a Zimbabwean government affiliate, Zimbabwe Mining Development Corp, “which has mining partnership agreements with quasi-private entities, most of which are thought to have ties with Zimbabwe ex-military and political officials,” Zimnisky added.
A diamond-rich neighbour has fared considerably better. Botswana took advantage of its resources to face up to the once-indomitable De Beers, taking a 15% share of the global giant. Through 50/50 joint ventures with De Beers, the country holds a bigger stake in its Botswana mines. The country won another historic victory when it persuaded De Beers to transfer its sorting and sales operations to the capital city of Gaborone. The move was part of a government goal to make the country a global “mines-to-market hub.”
De Beers credited diamonds with 25% of Botswana’s GDP in 2013 and 75% of exports that year. But in last November’s state of the nation address, President Seretse Khama Ian Khama called for greater diversification, warning that diamonds alone can’t sustain the economy, allAfrica.com reported. Even so, “We will remain a leading global producer over the next three decades until at least 2050.”