Diamonds are an Autocrat’s Best Friend: Corruption in Zimbabwe’s Mining Industry

via Diamonds are an Autocrat’s Best Friend: Corruption in Zimbabwe’s Mining Industry | GAB | The Global Anticorruption Blog  March 28, 2016 by Katie King

Earlier this month, Robert Mugabe, Zimbabwe’s president of nearly 30 years, announced his intention to nationalize diamond mining. He explained the decision by blaming corruption in the industry for “robbing [the Zimbabwean people] of our wealth,” estimating the government’s loss in the past seven years as upwards of $13 billion. For a country with an annual budget of $4 billion, 30% of which comes from the money that does make its way from the diamond mines to the government’s coffers through taxes and other fees, this move has enormous economic significance. Factor in Zimbabwe’s recent attempts to convince international donors and investors that its basket case economic days are behind it, and the ripple effects of Mugabe’s decision are likely to be even more important.

Undoubtedly, Mugabe is right about one thing: there’s been plenty of corruption surrounding the diamonds of Marange, a district in eastern Zimbabwe, since the 2006 realization that the pebble-like objects “so common that children were using them in their catapults to shoot birds” actually represented “the richest diamond field ever seen by several orders of magnitude.” The trouble is that Mugabe is the one mostly responsible for that corruption. In fact, this nationalization plan is best understood as the next step in Mugabe’s utilization of corruption at the mines for his own benefit.

At this point, it’s unfortunately unsurprising that extractive industries and graft often go hand-in-hand. Still, the abuse of entrusted power for private gain has been particularly egregious in Marange from practically the day the diamond fields were discovered. After the company with prospecting rights to the area revealed the fields’ potential value, the government quickly cancelled the company’s permit. The right to distribute new licenses was given to the Minister of Mines, and getting formal or tacit permission to operate in Marange quickly became a matter of who one knew. Elite regime and military officials—including Mugabe—were allowed to engage their own “diamond barons” to illicitly mine and smuggle the goods, while ordinary locals looking for gems were trapped by a ring of explosive ordinances and then shot down by military helicopters and soldiers with AK-47s. That trend has continued, with constant reports of security forces using torture and excessive force against anyone who lacks the legal or under-the-table backing of members of high-ranking government officials… unless the would-be miner in question had enough money to bribe the security forces himself. The message was clear: If you didn’t grease the right palms, then you wouldn’t be granted a license or permitted to engage in the illegal mining that siphoned off the majority of the region’s diamond output. If you did, then you could get away with anything.

Since then, the abuses of the Mugabe regime have been numerous. The Minister of Mines’ $800 per month salary miraculously allowed him to spend over $20 million in three years. The central bank chief contributed to Zimbabwe’s hyperinflation problem by printing masses of Zimbabwean currency so that he could use it to buy diamonds for himself, and then resell them on the foreign market for hundreds of thousands of dollars per month. Though the government’s half-share of diamond operations—conducted in cooperation with private companies—should have brought in substantial royalty payments, the president and other party officials directed the money that should have gone to the treasury to their political party’s campaign funds or their own pockets.

It’s hardly as if the orgy of greed and graft was hidden; numerous news outlets, monitoring groups, and advocacy organizations ran features on it, and the Minister of Finance repeatedly presented Mugabe with reports about the problem. Nevertheless, Mugabe used to disavow any problems with good governance in Marange. So, after years of denying corruption was an issue while he and his cronies benefitted from it financially, what’s caused Mugabe’s about-face on the need to cut back on graft at the mines?

Most of the media coverage so far suggests the decision was a result of a desire to “clean up” the diamond industry and mitigate Zimbabwe’s economic difficulties. Given the country’s trouble with money in the past, that seems unlikely to be a complete explanation (though, to be fair, the need to pay public employees has become acute). The answer more likely comes down to politics and a desire to keep the ill-gotten gains flowing.

• First, the finance ministry is now back in the control of Mugabe’s Zanu-PF party. Up until several years ago, a power-sharing agreement meant that the finance ministry—which would have had control of the diamond revenues had they actually arrived at the treasury as they were supposed to—was occupied by a member of an opposing political party. Even if it would have been in Zimbabwe’s best interest for the benefits of diamond mining to be invested in better government services, in the world of Zimbabwean realpolitik, it was better for Mugabe—more interested in his own well-being than his country’s—to divert the money towards his private and political party bank accounts and prevent a rival from having access to funds that could increase his power or popularity. Now, that incentive is gone. With a fellow Zanu-PF man running the Finance Ministry, Mugabe can afford to allow more diamond industry revenue to make its way there.
• Second, many of the easy-to-reach diamonds have already been mined; any future mining will likely have to be focused on resources deeper underground. Setting up the infrastructure to engage in that type of mining is much more expensive and difficult to do in a fly-by-night way, deterring illicit miners. Further, private companies, unsettled by Zimbabwe’s tendency to disregard property rights, have been reluctant to make the long-term investments necessary to conduct underground mining. If high-ranking officials wanted to continue to siphon off the maximum amount of funds, they needed to find a way to force the expansion of underground mining, which they will be better able to do once in full control of the industry.
• Finally, Mugabe fears that Vice President Emmerson Mnangagwa is attempting to marginalize him, or at least lock up a position as his successor, a role for which Mugabe’s wife is also contending. Mnangagwa, a former defense minister, has strong backing from the country’s security forces, which have made huge profits from the corruption in Marange. Further, Mnangagwa himself has been linked to Anjin, a diamond mining venture run by “the most important agent in Marange, Anhui Foreign Economic Construction Company Ltd. of China.” By removing the mines from the control of his rival and his rival’s allies, Mugabe undermines Mnangagwa’s financial support and his ability to offer patronage. In short, though Mugabe is using the rhetoric of anticorruption to justify his actions, his decision to nationalize the mines is largely due to the fact that too many of the people benefiting from them have taken the wrong side of Zanu-PF’s internal power struggle.

In response, one might wonder, “Well, regardless of any nefarious intentions on the part of Mugabe, if the mines are so corruptly run, maybe a little abuse of power to take them away from their current managers isn’t such a bad thing—it might cut back on corruption in the long run.”  Even if one is willing to accept an ends-justifies-the-means argument, though, that sort of positive outcome is unlikely.  Without changes in regulation, transparency, and political will (none of which seem forthcoming), mere nationalization alone is unlikely to result in diminished corruption (or less bloodshed); state-run industries are just as capable of graft as private companies. Moreover, by preventing his opponents from taking their cut of the diamond industry’s profits, Mugabe can continue his own corrupt operations there and still have the necessary net increase in government revenues to claim that his policy was a success.

Mugabe is enough of a pariah among international good governance activists that it’s unlikely that anyone was going to start praising the nationalization as a bold strike against corruption. However, when claims like his go unchallenged by the broader anticorruption community, it helps foster an environment where politicians shamelessly—and successfully—tout their purported anticorruption credentials to hold onto power. With Zimbabwe currently trying to woo its way back into the international community’s good graces, it is important that states, international organizations, and activists understand the larger context at play—and comment and act accordingly.