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This article participates on the following special index pages:
Marange, Chiadzwa and other diamond fields and the Kimberley Process - Index of articles
what you sow: Greed & corruption in Zimbabwe's Marange diamond
Africa Canada (PAC)
November 12, 2012
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Reap What You
Sow is the third investigation by Partnership Africa Canada into
illicit activity in Zimbabwe's diamond
sector. The report is divided into three main sections. The
first looks at ongoing
trade irregularities and the lack of transparency of diamond revenues,
and examines ways ZANU and the global diamond industry have interacted,
before, during and after the Kimberley Process imposed an embargo
on Marange stones in 2009. The second
examines the various revenue streams of Obert Mpofu and concludes
the Minister of Mines is utilizing monies and assets divorced from
his ministerial salary and known business entities. The third offers
policy suggestions and recommendations that would improve the management
and public beneficiation of Zimbabwe's diamond revenues.
conclusion of this report is that despite government pronouncements
to the contrary, the illicit trade of Marange diamonds is alive
and well. A parallel trade in Marange diamonds continues to thrive,
with the full knowledge and complicity of top officials in the Ministry
of Mines, ZMDC, MMCZ and military.
The theft of
Marange diamonds is perhaps the biggest single plunder of diamonds
the world has seen since Cecil Rhodes. Conservative estimates place
the losses due to illicit activity at over $2 billion since 2008.
PAC has found
that while the mismanagement of Marange remains primarily a Zimbabwean
problem, the global dimensions of the illegality has metastasized
to compromise most of the major diamond markets of the world. Previously
most of the illegal trade primarily involved South Africa, Mozambique,
UAE and India. This remains the case, but greater vigilance by enforcement
authorities should now extend to other centres, particularly Israel.
A summary of
the report's other main findings include:
- The lack
of transparency surrounding Zimbabwe's diamond revenues is a matter
of critical public interest. The whole-scale theft is depriving
the national treasury of much needed revenues and amplifies concerns
PAC and others have shared for some time that these revenues are
funding a parallel government other than the legally constituted
Government of National Unity.
- At the heart
of this illicit trade is Zimbabwe Defence Industries (ZDI), a
government procurement agency linked to mining company Anjin-whose
joint partner is a Chinese State-owned company. ZDI's former CEO,
Tshinga Dube, also now runs another mining concern, Marange Resources.
ZDI's controlling interest in these two companies means that top
officials in Zimbabwe's military establishment are the biggest
beneficiaries of Marange's riches-not legitimate State entities
or the public good.
- While artisanal
smuggling continues, as does a smaller organized trade by political
elites, the biggest conduit of smuggled Marange goods happens
inside the confines of the legal KP system. This is largely done
through a sophisticated price manipulation scheme that sees Marange
goods trade in centres like Dubai and Surat, India at twice the
price they were sold for. This theft is perpetrated largely by
Indian buyers and their Zimbabweans allies, with whom they are
believed to share the spoils.
about revenue transparency go to the heart of a country's compliance
with the Kimberley Process minimum requirements. Missing money
means systemic breaks in that country's internal controls, including
the reality that there is an illegal, parallel trade underway.
Their subsequent trading makes a mockery of the Kimberley Process
Certification Scheme and the diamond industry's System of Warranties,
an honour system that promises diamond shipments are untainted
by violence and in keeping with KP standards.
- While Minister
Mpofu is not the only ZANU official benefitting from Marange's
riches, his role as the chief guardian of Marange raises the most
concern. His unexplained wealth is emblematic of wider problems
of revenue transparency associated with this promising national
resource. PAC has identified expenditures of over $20 million-mostly
in cash-made by Minister Mpofu over the last three years. This
figure is a conservative assessment and does not include his philanthropy,
which exceeded $500,000 in
Mpofo's confirmed landholdings also place him in the top five
landowners in the country, and second in his home province of
Matabeleland only to the Oppenheimer family. His possession of
land belonging to government agencies is likely in contravention
with Zimbabwean law. The terms of the Land Acquisition Act-the
legislation responsible for the dispossession of most white-owned
land-explicitly limits expropriations to private and commercially
held farmland, not state assets.
- A diamond
trading company, Three Waters Investments, operates from one of
Minister Mpofu's Bulawayo properties at 10 Livingstone Road. This
raises a perception-real or perceived-that a company, and possibly
individuals, associated with the Minister is obtaining a pecuniary
benefit from an industry over which Mpofu has fiduciary responsibility.
It also raises questions about what role he personally played
in procuring diamonds for this company and facilitating their
The report makes
several recommendations aimed at improving the management of, and
public beneficiation from, Marange diamonds. They include:
- The Zimbabwean
parliamentary committee on mines and energy should revisit and
publicize the terms and conditions of each of the joint ventures
approved between 2009 and 2012, including disclosing the ownership
structures of the company and individuals who sit on the boards
of directors. If the contracts are found to contravene Zimbabwean
law or not be in the public's good, mining licenses should be
rescinded and/or renegotiated.
- Any current
or future joint ventures in Marange that involve serving or recently
retired members of the army, police, or other security agencies
in either leadership or ownership positions should be made illegal.
A suggested "cooling off period"-the length of time
after leaving a security force during which an individual could
not be associated with a mining company-could be five years.
- In order
to give the public clarity and assurances that diamond revenues
are properly accounted for, the Ministries of Mines and Finance
should come to an agreed and publicly disclosed understanding
of what each diamond mining company exports on a quarterly basis,
and what taxes were collected. The Government of Zimbabwe and
all companies operating in Marange should also regularly disclose
in a full and transparent way all diamond production, trade and
should undertake to create a mandatory and publicly available
registry of assets for elected officials, senior government appointees
and their spouses. For the duration of an individual's term of
public service any companies in which they have a share should
be publicly disclosed and placed in a blind trust.
- The Ministries
of Finance and International Trade should force all companies
listed and operating in Zimbabwe's extractive sector to publicly
divulge the ownership structure and location of any foreign held
trust accounts. Doing so would lessen the opportunity for public
officials or their family members to hide pecuniary relationships
to companies they may have oversight over.
- The Kimberley
Process's failure to appropriately respond to Marange's challenges,
adds pressure on Industry to prove its commitment to the ethical
and legal sourcing of diamonds, something that is lacking in the
WDC's warranty system. With this in mind the World Diamond Council
should commit itself to the Responsible Jewellery Council's Chain
of Custody efforts that track diamonds from mine-site to market.
Moreover, it should undertake to mainstream the best practices
outlined by John Ruggie, the United Nations Special Representative
for Business and Human Rights, and the OECD's Due Diligence Guidance
for Responsible Supply Chains of Minerals from Conflict-Affected
and High-Risk Areas.
- Should the
global diamond industry-particularly in India and UAE-be unwilling
to adopt comprehensive measures to protect itself from legal and
illicit Marange diamonds owned by the Zimbabwean military or those
shown to be undermining governance or contributing to violence,
the United States, European Union and any other willing country
should develop legislative measures aimed at protecting their
manufacturing and consumer markets from these diamonds.
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