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Financing a parallel government? The involvement of the secret police and military in Zimbabwe's diamond, cotton and property sectors
Global Witness
June 20, 2012

http://www.globalwitness.org/library/financing-parallel-government-Zimbabwe

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Executive Summary

This report reveals how Zimbabwe's feared secret police, the Central Intelligence Organisation (CIO), appears to have received off-budget financing from Sam Pa, a businessman based in Hong Kong; and how members of the CIO are directors of a group of companies, Sino Zimbabwe Development, registered in Zimbabwe, Singapore and the British Virgin Islands.

Several well informed sources have told Global Witness Sam Pa (AKA Antonio Famtosonghiu Sampo Menezes, Xu Jinghua and Sam King) holds leadership positions in a network of companies known as the Queensway syndicate. The syndicate was the subject of a detailed study by the Economist in 2011. This study concluded that syndicate has a track record of opaque 'resources for infrastructure' deals across sub-Saharan Africa. Despite the official sounding names of its companies, such as China International Fund and Africa Development Corporation, the syndicate is largely owned by private Hong Kong business interests. Until recently some of the key companies, such as China Sonangol International Ltd, were also partly controlled by a leading Angolan politician, Manuel Vicente, the former head of Angola's state oil company Sonangol. Finally, the Economist highlighted that two companies in the syndicate, China Sonangol International (S) Pte Ltd and CIF Singapore Pte Ltd, are noted for an ethically dubious deal with the Guinean military junta in 2009, signed just weeks after security forces killed over 150 protestors and raped over
100 women in a stadium.

This briefing extends the Economist's analysis of the Queensway syndicate's activities in Zimbabwe. Several reliable sources within the secret police have passed information to Global Witness demonstrating how Sam Pa appears to have provided a significant sum of money, said by one CIO document seen by Global Witness to be $100 million, to the CIO. The same sources, corroborated by another source with firsthand knowledge of the deal, also describe how Sam Pa provided 200 Nissan pick-up trucks to the CIO. In return, Sam Pa received diamonds and accessed business opportunities in the cotton and property development sectors. As figure 1 shows we also use company registry records and sources within the secret police to identify three Zimbabwean directors (Gift Kalisto Machengete, Pritchard Zhou and Masimba Ignatius Kamba) of Sino Zimbabwe Development in Zimbabwe, Singapore and the British Virgin Islands who are members of the CIO, and which we therefore believe to be companies which are controlled in part by members of the Zimbabwean secret police. Global Witness invited Sam Pa and the directors of Sino Zimbabwe Development to comment on our findings, and they have not done so.

There are three reasons why these developments are of concern.

First, by its very nature any off budget financing for the secret police undermines democratic processes and institutions in Zimbabwe. Off budget funding subverts civilian and democratic control of the CIO, and allows the secret police to set, and fund, its own agenda. Second, Sam Pa's likely financial support for the CIO may undermine Zimbabwean democracy more directly. According to two sources, one senior Zimbabwean government official and one source within the CIO, the secret police is engaged in 'Operation Spiderweb', covert activities designed to discredit senior figures from the opposition Movement for Democratic Change (MDC) including Prime Minister Morgan Tsvangarai, Finance Minister Tendai Biti, and Industry Minister Welshman Ncube. According to the single source within the CIO Sam Pa's money was allocated specifically to Operation Spiderweb. However, by their very nature, such claims about secret intelligence agencies are difficult to verify and should be treated with caution. Third, members of the CIO have been repeatedly identified as perpetrators of violence in the recent past, and therefore Sam Pa's apparent material assistance may fund future human rights abuses in the run up to the forthcoming election.

This report also revisits earlier Global Witness research into a large diamond mining company, Anjin Investments (Pvt) Ltd. Our last report established the partial control exercised by figures from the Zimbabwean military, police and Ministry of Defence over the firm's executive board. This current briefing reports the results of research into Anjin's ownership. Zimbabwean company records reveal that a senior military lawyer in the Ministry of Defence holds 50 per cent of Anjin's shares. Together with factors such as the presence of the Permanent Secretary of the Ministry of Defence on Anjin's executive board, these company records have led Global Witness to conclude that half of a large diamond mining company is likely part-owned and part-controlled by the Zimbabwean Ministry of Defence, military and police.

The MDC Finance Minister has stated that the Treasury has not received any revenues from Anjin. Global Witness has received copies of receipts from Anjin for payments to other government bodies but not the Zimbabwe Revenue Authority and we conclude that the Finance Minister's claim is plausible. This leaves two possibilities: that Anjin has used revenues earned so far to recoup significant capital expenditure, or that revenues have been diverted to the company's part owners in the military and police. Anjin is a large diamond mining company. It claims to be the world's largest, and a well informed industry observer has told us that, in terms of size, Anjin could be "the next De Beers". If these claims are true, then one explanation is that significant sums of money could flow to the Zimbabwean military.

Key Recommendations

Global Witness believes that the activities of Sam Pa, Sino Zimbabwe Development (Pvt) Ltd and Anjin Investments (Pvt) Ltd should be investigated by relevant authorities to see if their actions undermine Zimbabwean democratic institutions or risk funding future human rights abuses and therefore meet the threshold for being placed on targeted sanctions lists.

The MDC Finance Minister, when discussing Anjin, feared that "there might be a parallel government somewhere in respect of where these revenues are going." This is a serious accusation, with profound consequences for Zimbabwe's Government of National Unity. The Southern African Development Community (SADC) plays an active role in mediating the political process in Zimbabwe. SADC facilitators should give the problem of off-budget financing of security forces a high priority in forthcoming negotiations, with the aim of securing democratic, civilian control over the budgets for the security services. It may also be necessary for SADC to appoint an expert panel to investigate these claims.

Reform of Zimbabwe's partisan security forces requires democratic and civilian control of their budgets. Zimbabwe's Government of National Unity (GNU) should pass legislation banning serving and recently retired members of the military, police, the CIO and other members of the security services from control over, or beneficial ownership of, mining companies. Consumers should not buy diamonds originating from Zimbabwe's Marange mines until they can be certain they will not fund the Zimbabwean secret police, military and police. Companies should conduct due diligence investigations into the source of their rough diamonds. OECD member states should ask the OECD to work with industry and other interested parties to draw up supplementary guidance on how supply chain due diligence could operate in the diamonds sector.

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