Zimbabwe could still be losing millions of dollars worth of potential revenue from diamonds, through leaks orchestrated by a closely knit syndicate according to a recent intelligence report.
As such, a red flag has been raised at the Zimbabwe Consolidated Diamond Company (ZCDC) against the backdrop of serious allegations against some top managers and politicians allegedly in cahoots with some buyers, to manipulate prices.
But the company has dismissed the allegations saying they raise issues that happened in the indusry before ZCDC.
There are fears happenings at ZCDC could end up as another diamond ‘curse’, which Government attempted to thwart by consolidating all diamond operations, amid little inflows to Treasury despite the State being a 50 percent shareholder.
There is a separate report suggesting that a diamond processing deal with Botswana might well have been oversold, and that it would be better to process diamonds within Zimbabwe.
ZCDC was formed following the March 2015 Government decision to consolidate all the diamond mining companies in Zimbabwe to form a wholly owned State company.
The Government’s objective was to ensure transparency, accountability and optimal commercial exploitation and marketing of diamonds, lack of which had prejudiced the country of billions.
Prior to this Anjin, Diamond Mining Company, Jinan, Mbada Diamonds, Gye-Nyame, Kusena and Marange Resources had been extracting diamonds in the Chiadzwa on the basis of special grants.
ZCDC CEO Dr Morris Mpofu refuted all the allegations saying they were attempts to denigrate efforts being made by the company to improve the country’s diamond industry through transparency and accountability.
“Most of the times we have enemies of progress and the deal with Botswana was never proposed by ZCDC, but it was a government to government between ministry of Mines,” he said, adding the idea was conceived in 2017 with meetings held by September.
The move was meant to ensure Zimbabwe learns best practices from Botswana and benefits from the critical mass that buys Botswana’s stones.
He said, currently, Zimbabwe does not have the online technology and systems to conduct tenders and bidding. Zimbabwe, Mpofu said, can afford to acquire the system over time.
Before consolidation, he said, there had been undervaluation, under declaring and under-pricing of diamonds.
The latest allegations say that some in management at ZCDC has allegedly been smuggling diamonds out of Chiadzwa, flouting procurement procedures and abusing their positions to collude with buyers during tenders and auctions, according to intelligence reports authored in December, 2017 from Manicaland Province.
This has been done by top and influential executives of the company said to have support and protection of some senior government officials and top politicians.
“There is a reserve price which was previously set before bids were made, but it was discovered that some officers leaked the information to buyers who all made their bids close to the set price.
“It was then resolved to set a reserve price after bids were made and what has now been happening is that the reserve price is being set too low. This explains why the last parcel sold at more than $800 000 against a reserve price of $600 000,” said a source close to the Minerals Marketing Corporation of Zimbabwe (MMCZ).
Whistle-blowers also accused ZCDC executives of misrepresentations in the impending deal between Zimbabwe and Botswana for Zimbabwean diamonds to be cleaned, processed, and polished by Diamond Trading Company, in Botswana.
It is alleged that the deal, structured with the heavy involvement of MMCZ’s Israeli consultant Raphael Bitterman, involves people with strong conflict of interest.
A company called Clearcut Diamonds, which facilitated the deal between Zimbabwe and Botswana, is claimed to be owned by officials in the Botswana Government and their close relatives although ZCDC says the shareholding register shows no such interest.
Accusers say ZCDC management could have overstated viability of the deal to Government. In the past First Element, a company, was booted out of Zimbabwe amid allegations of collusion with buyers.
First Element, itself a major diamond buyer that is also involved in cutting and polishing of the precious stones in Botswana, was accused of being conflicted as Government’s partner at the Zimbabwe Diamond Tender facility. First Element also cleaned the country’s diamonds prior to sale through auction.
Insiders claim ZCDC management, led by Dr Morris Mpofu, fast-tracked processes with regard to the conclusion of the deal with Botswana at a time newly appointed Mines Minister Winston Chitando was still settling into office.
The lady (internal audit executive) Dr (Cleopatra) Mutisu has very strong ties in Government and the security sector,” added the source.
While Zimbabwe is potentially a world leader in diamond production, it is often alleged much of the revenues have not been accounted for since the formalisation of mining activities in the Chiadzwa diamond fields.
Finance and Economic Planning Minister Patrick Chinamasa once said the impact of diamond revenues was better felt during the time of artisanal activities than when the industry was formalised, indicating apparent massive revenue leakages.
His predecessor during the inclusive government Tendai Biti on several occasions also complained about the limited inflows of diamond revenues into the national coffers.
In 2013, a Parliamentary Portfolio Committee on Mines and Energy, chaired by the late former Mines and Mining Development Minister Edward Chindori-Chininga compiled a report, which exposed alleged systematic looting of the gems.
Even when former President Robert Mugabe said $15 billion worth of revenues from the diamond industry had gone missing, the majority of Zimbabweans believed him although the figure could have been exaggerated.
Zimbabwe is the eighth largest diamond producer in the world with 4, 7 million carats produced in 2014, according to industry group Kimberly Process, but critics believe proceeds from the diamonds could have benefited very few, mostly politicians.
The Government repossessed all diamond operations because existing miners had “robbed” the country of its wealth, and brought Chiadzwa operations under the ZCDC.
Fears abound that the ZCDC board, appointed by former Mines and Mining Development Minister Walter Chidhakwa is running down the State enterprise. Chidhakwa and his permanent secretary Francis Gudyanga currently stand accused of corruption charges.
A group of whistle-blowers comprising Government workers, local and foreign private players in the diamond industry has reportedly teamed up to alert the Office of the President and Cabinet on the “scandalous” diamonds deal with Botswana.
A security brief also raises a lot of irregularities including worsening living conditions for the Marange community.
“It is with concern to note that His Excellency the President of the Republic of Zimbabwe may have been wilfully misled by cohorts within ZCDC management with regards to the processing capacity within Zimbabwe. For the record, claims that Zimbabwe does not have the capacity to downstream rough diamonds into a finished product either jewellery or international gem tenders are falsehoods propagated by Dr Mutisi, Dr (Morris) Mpofu and other members so as to benefit themselves and their privately owned companies,” according to a letter gleaned by the Business Weekly.
“Capacity to clean diamonds to internationally recognised standards has been proven locally.
“Furthermore, cutting and polishing infrastructure has been set up through companies like Aurex Private Limited owned by the RBZ, Chess Diamonds and African Fire Diamonds to fill the void in the diamond value addition chain,” read the letter.
The Botswana arrangement, according to the whistle-blowers, undermines the indigenisation drive shown by these companies and prejudices the state of valuable income to the benefit of a select group of individuals.
The assertions that the Botswana deal will circumvent the sanctions levied against Zimbabwe or increase the value of diamonds in misguided also argued the whistle-blowers.
“Botswana diamonds are sold through DeBeers Company and as such will be under the scrutiny of the Kimberly Process and subject to their due diligence procedures.
“The current arrangement benefits only a select group of individuals and not the true intended beneficiaries, the Zimbabwean people. We urge these and other facts to be put into consideration.”
“It is hereby submitted that a lack of diamond mining, marketing and logistical management experience lacks within the rank and file of ZCDC causing the failure of ZCDC to utilise its equipment to maximise production for the benefit of the nation.
As a result, Zimbabwe’s diamond production has been inconsistent and below optimal projections.
ZCDC CEO Mpofu, besides refuting the the allegations said the company was attempting to end underpricing..
“We sought to correct that. Whatever we do as ZCDC; there is transparency and accountability,” Mpofu added.
The ZCDC CEO said due diligence on the Botswana deal. He said Bitterman was a consultant on behalf of Clearcut diamonds adding the shareholding of Clearcut Diamonds, based on their findings, has no political leaders in Botswana.
“The shareholding doesn’t have that. If he is a silent partner we don’t know,” he added.
Of concern is that the complex nature of diamond processing requires astute individuals within proven track experience unlike that currently constituting the ZCDC management.
In 2018, production is projected to hit 3 million carats, up from 1, 8 million carats last year. The ZCDC says it requires about $187 million to ramp up production.
From March to December 17 the same year, Minister Chitando said, ZCDC accumulated a diamond stockpile of 1, 558 million carats which were now up for sale.