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Mystery surrounds Zim’s gems revenue

MASSIVE production of diamonds has not translated into improved living standards for ordinary Zimbabweans because proceeds from the sale of the gems have been benefitMpofu shifting goalposts, says Maguwuing a few politically-connected individuals and financing covert security operations, analysts have said.

Report by Caiphas Chimhete

The observation comes after Zimbabwe, which produced diamonds worth US$334 million last year, was ranked the world’s seventh biggest producer of gems by the Kimberly Process last week.
But the majority of the country’s citizens remain among the poorest in the world, with over 80% of them surviving on less than a dollar a day while education, health and other social services are in a dire state.
The discovery of diamonds in Marange was seen as the panacea to the country’s myriad of economic ills, also characterised by a serious liquidity crisis and lack of exports.
But that optimism has since faded away because very little revenue is flowing into Treasury amid indications that the money was being diverted to finance parallel Zanu PF structures within the shaky coalition government.
The Kimberly Process report shows Botswana as the world’s top gem producer with US$2,5 billion followed by Russia (US$2,38 billion) and Canada (US$2,3 billion). South Africa, Angola and Namibia were ranked fourth, fifth and sixth respectively.
Centre for Research and Development (CRD) director, Farai Maguwu said it was unlikely that ordinary Zimbabweans would benefit from the diamonds because revenue was not properly accounted for nor channelled to government coffers.
“I don’t know what they are using the revenue from diamonds for,” he said. “But national development can only be done through central government and there is enough reason to suspect that the money is being used to fund parallel government activities.”
Maguwu’s suspicion is confirmed by a recent report by the Global Witness, an organisation that campaigns against corruption and human rights abuses, which urged the international community to prevent off-budget financing of security forces from diamond sales by President Robert Mugabe’s Zanu PF.
The report, Financing a Parallel Government?, exposes links between Anjin Investments (Pvt) Ltd, the biggest diamond company in Zimbabwe’s Marange diamond fields, and the country’s security forces.
“Given the violent reputation of the CIO (central intelligence organisation) and the military, we fear that this money could fund human rights abuses during the forthcoming election,” said Nick Donovan of Global Witness. “Off-budget financing of the security sector undermines Zimbabwean democracy by subverting civilian control over key organs of the State.”
Elections are expected next year.
The report said Zanu PF lost control of the Finance ministry to the MDC-T and appear to have engaged on a hunt for off-budget financing for the military and secret police.
Security forces stand accused of spearheading an onslaught against MDC-T supporters during the violent 2008 elections to keep the 88-year-old Mugabe in power.
Security forces have dismissed the allegations.
A source in the diamond industry and close to Zanu PF said the revenue from diamonds was now the major source of funding for the former ruling party, most of whose business entities collapsed during the hyper-inflation era.
Sanctions, he said, crippled most of Zanu PF’s operations as companies linked to the party are failing to access loans to boost their operations.
“They (diamonds) are now the lifeline,” said the source. “Companies such as Jongwe Printers and other parastatals that used to generate or donate to the party no longer have that capacity.”
Mines minister Obert Mpofu dismissed claims that diamond mining companies, particularly Anjin, were not remitting revenue to Treasury arguing that the budget was being sustained by minerals, mostly the gems.
“We don’t have credit lines, balance of payments and the economy is being run on diamonds,” said Mpofu. “There is no secrecy as far as diamonds are concerned because we have the police and Zimra are there (in Marange) and collection is done in an organised manner.”
Mpofu said diamonds were a national resource that are supposed to benefit every Zimbabwean.
“All things being equal, we should be among the top three top producers in world but we are curtailed by sanctions,” said Mpofu.
An expert on diamond cutting and polishing, who requested anonymity, blamed the crisis in the sector on the absence of a clear policy framework that guides operations in the billion-dollar industry.
“If there is no clear policy as it stands now, Zanu PF will use the chaos in the industry to loot the gems for their benefit,” said the expert.


Mpofu shifting goalposts, says Maguwu


Farai Maguwu said he was worried that Mines minister Obert Mpofu continually changed statements on why some mining firms were not remitting proceeds to Treasury.
He said at first Mpofu argued that companies were not remitting any money to Treasury because the KP had banned the country from selling diamonds on the global market.

When the KP lifted the ban in November last year, Mpofu announced that they expected at least US$2 billion diamond revenue annually and of that amount, Finance minister Tendai Biti was promised US$600 million, which could have had a significant impact on the country’s budget of US$4 billion.

But it never came as promised. Biti only got US$41,6 million during the first half of the year.
Biti was forced to cut his 2012 budget from US$4 billion to US$3, 4 billion, blaming poor revenue inflows from diamonds.



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