Diamond firms dispatch SOS to govt

via Diamond firms dispatch SOS to govt | The Financial Gazette – Zimbabwe News Staff Reporter 27 Feb 2014

COMPANIES operating at the controversial Marange diamond fields in Manicaland are haemorrhaging owing to the decline in output with labour disputes over the non-payment of salaries and the reduction in working hours becoming the order of the day. There are seven companies operating in Marange namely Anjin, Jinan, Marange Resources, Mbada Diamonds, Diamond Mining Company, Gye Nyame Diamonds and Kusena Diamonds.

Not even one has been spared by the operational challenges caused in the main by the drop in output and the inability to invest in technology that would have enabled them to mine conglomerate diamonds that are underground. Lately, these companies have sent an SOS to government, pleading with President Robert Mugabe’s administration to urgently consider making available additional claims to keep them viable.

But the Mines Ministry has responded by saying it is actually planning on trimming the number of players from seven to one to enhance transparency and accountability. This has compounded the uncertainty gripping executives and ordinary workers alike at the diamond fields. To stay afloat, most of the companies are streamlining operations by cutting back on their workforce and reducing working hours.

A number of them have been struggling to meet their salary obligations as well as other statutory payments, resulting in strained industrial relations and the accrual of arrears. The Financial Gazette understands that Anjin, one of the biggest firms in Marange, has retrenched at least 950 workers out of close to 1 800 employees since it started operations in 2010. A joint venture between the Chinese and the Government of Zimbabwe, Anjin is expected to lay off another 190 of the remaining 845 workers as it targets to remain with at least 655 employees by next month.

Of its seven processing plants, Anjin is only utilising four while some of its dump trucks, excavators and front-end loaders are inactive. “We have had to cut down on labour by reducing the shift cycle from three to two,” said Martha Chikata, the public relations officer at Anjin. “Our challenge is not equipment but availability of diamond ore within depths that make it viable to extract.

“We have seen a decline in diamond output in 2013 and the trend is continuing in 2014,” she added. Jinan, which opened its doors in July 2012, is also finding the going tough. It has retrenched over 30 of its contract workers citing viability challenges. In addition to closing some of its mining sites, Jinan has constantly been dragged to court by its workers over unpaid salaries.

It was first hauled before the Mutare Labour Court after it failed to pay its workers their August and September, 2013 salaries. Last month, workers downed tools after the company failed to pay the November and December salaries.  While workers resumed work after some settlement of the matter, they are still owed at least one month’s back pay.

Jinan worker’s committee chairperson, Francis Matinyare, said there are fears that the company could shut down operations. “We strongly believe that the company is rounding up its operations in a move to close shop. One of the conglomerate mines has since been closed. Also we understand that the company is planning to remain with just one operating mine out of its five mines,” he said. The company’s human resources manager, Ntombi Mlilo, revealed that they had been hit hard by financial difficulties since late last year.

The Financial Gazette also understands that Mbada Diamonds has also started to streamline some of its operations and embarking on cost cutting measures.
Reports say payments to suppliers, which the company used to do upfront in its heydays, are now being staggered or delayed as the company juggles its financial priorities.

Most of the diamond mining companies are also struggling to honour their commitments towards the relocation of about 4,300 families in Chiadzwa. Another bone of contention has been their failure to honour the US$50 million they collectively pledged for the Marange-Zimunya Community Share Ownership Trust.
Minister of State for Manicaland Province, Chris Mushohwe, this week said while the government was aware of the challenges confronting industry players, it still expects them to honour their outstanding obligations.

“I think what we are lacking is enforcement. And, as government, we are going to enforce compliance because if we leave these (diamond) companies and say this is what we want you to do and don’t force compliance they will not do it,” Mushohwe said. Government had projected that diamond revenue from Marange would spur economic growth but the sector continues to lose its shine at a time the country desperately needs revenue.

Across the board, the diamond companies have had to institute cost saving measures and streamline operations in a bid to stay afloat. After a flying start, companies operating in Chiadzwa are now grappling with challenges because most of the alluvial (surface) diamonds they had been mining are now running out. This has created a need for the companies to invest in equipment to mine the conglomerate diamonds under the ground but most of them cannot afford the cost of the equipment.
Diamond output rose from 1,3 million carats in 2009 to 12,5 million carats in 2012 before decreasing to 11 million carats last year.

Monthly production of the precious stone fell from one million carats in February, 2013 to 775,132 carats in June, 2013. This means that the government is realising a mere US$40 million from the diamond industry, which is only a fraction of the US$300 million Treasury estimated it would receive. This is in striking contrast to the US$23 million to US$33 million Treasury received from the diamond sector monthly in 2011.

In his budget statement, Minister of Finance and Economic Planning, Patrick Chinamasa, said diamond inflows had not contributed anything to the fiscus since July 2013. The 2014 budget is, however, projecting diamond output to increase to 12 million carats following the lifting of sanctions on the Zimbabwe Mining Diamond Corporation (ZMDC) by the European Union. But given the latest developments at the diamond fields, this might not happen.

The diamond mining sector has also not been spared from corruption.  Maladministration and non transparent handling of proceeds has shrouded the sector for years prompting Mines Minister Walter Chidhakwa to dissolve the ZMDC board – the sole concession holder of the Chiadzwa gems. The minister who took over the ministry after elections in July 2013 has since ordered that an audit be undertaken in the sector.