via Diamond Special with SW Radio Africa’s Alex Bell and guest Farai Maguwu | SW Radio Africa by Alex Bell December 19, 2013
Farai Maguwu talks to Alex Bell in a special programme that focuses on Zimbabwe and the diamond trade
Alex Bell examines the details of a new report on the global diamond trade, which exposes how illicit and corrupt deals, facilitated by international groups, are being allowed to continue without any intervention from the watchdog body meant to oversee the trade. The report published this month by the World Policy Institute, has revealed a complex structure of diamond deals and international dealers that span the globe, with Africa’s main diamond producers, Zimbabwe included, being plundered to benefit a corrupt few. Alex is joined by Farai Maguwu, the Director of the Centre for Natural Resource Governance, who talks about Zimbabwe’s role in the illicit diamond trade.
BELL: Hello Zimbabwe and welcome to tonight’s special show on SW Radio Africa, your independent voice. I’m Alex Bell and tonight, in place of our usual program I examine the details of a new report on the global diamond trade, which exposes how illicit and corrupt deals, being facilitated by international groups, are being allowed to continue without any intervention from the watchdog body meant to oversee the trade.
This report was published by the World Policy Institute, has revealed a complex structure of diamond deals and international dealers that span the globe, with Africa’s main diamond producers, Zimbabwe included, being plundered to the benefit of a corrupt few.
The details have slowly been surfacing as a result of key court cases against the international diamond trading firms, many of which have settled in quiet, out-of-court arrangements. In March this year, a key player in the industry, a Belgian firm called Omega, was handed a record breaking, multi-million dollar fine for tax evasion, with investigators claiming that close to $4 billion in international diamond profits had simply vanished as a result of Omega’s tri-continental diamond dealings.
So briefly, Omega’s illegal diamond trade linked countries in Africa to its subsidiaries in Dubai and Antwerp. The report details how Omega, by “employing corrupt African autocrats and money-hungry businessmen,” would purchase diamonds of questionable origin for little to no money in Angola, the Democratic Republic of Congo, and Zimbabwe. They would then ship the diamonds to Dubai, where they would be given certificates of mixed origin and subsequently over-value the worth of these diamonds. From Dubai, the diamonds would be sent to Antwerp, where they would be sold on the biggest diamond market for more than their actual worth. The money gained from those sales would then finance the personal bank accounts of Omega and many of the corrupt characters they employed in their tri-continental scheme.
The report goes on to detail how the key failing in the diamond trade which is allowing this illicit activity to continue, is the flawed oversight body the Kimberley Process, whose narrow mandate, while commendable at its inception, has actually helped the looting of Africa’s diamonds.
The report can be read in more detail on our website, but joining me now to talk about Zimbabwe’s role in this illicit trade is Farai Maguwu, the Director of the Centre for Natural Resource Governance. The report has really shone a light on how there is this tri-continental network between Belgium, Dubai and Africa which has seen Zimbabwe’s diamonds among others from Africa, being mixed with other loads of diamonds and then being certified as being diamonds from mixed origin and then sold on. Farai, what do you make of this practice?
MAGUWU: It is an awful practice and one that is going on for long. For instance there was a time when Zimbabwe was banned from selling diamonds by the Kimberley Process, that was between 2009 and 2011, but the country continued to sell its diamonds and other African countries were helping to give Zimbabwean diamonds KP certificates. In as much as they were doing that in the name of solidarity, the reality on the ground is that the money, or the bigger chunk of the money never reached the Treasury and this unfortunately has continued even after Zimbabwe has been certified by the Kimberley Process to trade normally like any other country, we still have this opaqueness and recently the Finance Minister also revealed that he’s still clueless as to where the diamonds really are going so it’s a very sad situation that we are having that the resource that must be breathing life into the economy is benefitting individuals who do not even invest their money in Zimbabwe – they invest it elsewhere.
BELL: One of the things which is made quite clear in this report is that there is this system of undervaluing the diamonds; it’s described as the most effective tactic enabling the continued looting of African mineral resources – is this also happening in Zimbabwe and what does that actually mean for Zimbabwe?
MAGUWU: Yes this has been happening in Zimbabwe; I’m sure these companies have been making a lot of noise about low-quality diamonds. In as much as I agree that the quality of Zimbabwean gems is not at par with say the Botswana or Lesotho gems, I think our diamonds have been severely undervalued in order to lower the public expectation in Zimbabwe and to facilitate illicit financial fraud and when these diamonds now reach Belgium or not Belgium but Dubai and they are now sold to a country like Belgium, then the price is inflated now because Dubai will have received the diamonds at little cost and when they sell the diamonds to Antwerp they want their sister Antwerp company to appear like it bought the diamonds at a very high price, therefore it’s making little profit which means they are going to evade tax, both in Belgium and in Zimbabwe. This is the crisis we have been having in Zimbabwe – that what we are getting are peanuts and some of the syndicates who are in Zimbabwe are also helping to facilitate this illicit transaction and they will get their kickbacks from Dubai whilst the fiscus is bleeding.
BELL: Do we know who is involved in these syndicates? There’s been a lot of accusations about how and who Zimbabwe’s diamonds are actually funding and who they are supporting but are we any closer to knowing who is involved?
MAGUWU: Well I’ve been asked that question by many media personnel to mention people and I’ve said I’m not going to mention names because definitely the Zimbabwe government has put in place some laws which will criminalise the revelation of such information but I’ve always challenged the government that if the government is really serious about combatting corruption in the diamond sector and if they really want to make sure that every diamond is accounted for, why not set up a Commission of Enquiry to investigate all the dealings involving the mining companies in Marange and the auctioning of Zimbabwean diamonds, there will be a wealth of information that government can access if they set up a Commission of Enquiry. It’s not like people don’t know what is happening. We know but is there the political will to fight corruption or it’s simply saying things which the public want to hear but acting completely differently and even covering up for those people who are looting our diamonds.
BELL: It’s obvious from this report and from these court cases that have led to this report being published that there is an illicit trade, a very illicit trade that is helping a handful of people in all areas – whether it’s in Dubai, whether it’s these little companies that are facilitating all this happening or whether it’s political players across Africa, so when it comes to a situation like this, my question is how has this been allowed to carry on for so long?
MAGUWU: In the case of Zimbabwe, we had a coalition government and a highly polarised political environment whereby any person who looted, who committed crime in the name of president Robert Mugabe or of busting sanctions, they were immune to the law and so a lot of vultures descended on Marange in the name of protecting national sovereignty, chanting Zanu PF slogans and even the name of the president. Even sometimes they tend to abuse the name of the president for their personal gain and in that situation a lot of lies have been told to the president by these criminals. A lot of lies have been told to the president and these people have taken advantage of the political situation in the country for them to enrich themselves at the expense of the nation, so to correct that it’s not easy. For instance we’ve talked about the very strange companies which did not exist but they were given the licence to mine in Marange in the name of sanction-busting and these people we now know that they are not remitting money to Treasury so how are we going to correct that? Can we get the money into the Treasury without correcting the shareholding structures where some of the companies are registered in the names of individuals and some shelf companies and the like? So it’s not simple to correct this anomaly in Marange; it needs strong political will to put the foot down and start correcting where we got it wrong especially in the shareholding structures and make sure that no-one is getting into these deals on behalf of State and prejudicing the State of revenue.
BELL: We know that the accountability issue and the transparency issue in Marange is a huge problem, but can that be helped and can that be tackled with Zimbabwe’s diamonds now being quite publicly auctioned on the international market – like with the auction of the gems last week in Belgium? Does something like that in any way maybe help the accountability fight?
MAGUWU: There is a possibility that the selling of the diamonds in Europe can somehow lift the lid but also, let’s also know that the Belgians are not all that transparent as they say. For instance this whole issue, I think you saw in that document that this company that was responsible for this financial fraud is actually a Belgian company and one of the guys, is the minister of Finance or something like that so let us not really expect a lot of things to come from the Belgians. The Belgians are in it because they want profit – not that they want transparency and accountability, they want development in Zimbabwe – that is secondary – what they want is how much they can make out of these deals. So the real deal is in Zimbabwe – we need our government to guard our resources jealously. They need to make sure that they don’t just mortgage the national assets for a song. So without a shift in our values as a people in Zimbabwe, it doesn’t matter whether we are trading with the Americans or the British or the Belgians – those people have no ties with Zimbabwe except ties which pertain to their business interests but we do we have interests, do we have national interests? Do we have a national vision whereby we are saying – these are our resources, what do we want from these resources and how can we maximise the benefits from these resources? So the real answer is within Zimbabwe – it’s not from Belgium or elsewhere. I don’t think so.
BELL: Nowm if you don’t mind if we can talk about the Kimberley Process for a moment then Farai because this report for me just further damages the credibility of the certification scheme because it shows some fundamental flaws, not least of them being the fact that non-diamond producing jurisdictions like Dubai are using the KP loophole of giving certification to diamonds from other countries. And of course there is the on-going debate about the narrow definition of the Kimberley Process mandate. Do you agree that this is just another severe blow to the Kimberley Process’ credibility?
MUGUWU: It’s a very serious blow to the credibility of the KP because the value or the worth of the diamonds have been siphoned out of Africa. It is amazing and when if you look at how much money can contribute to sustainable development, poverty eradication in Africa, you then ask the question – so what is the Kimberley Process doing in Africa? Is it about facilitating or giving a clean bill of health to conflict diamonds so western consumers can buy the diamonds with a clean conscience? Does the KP represent the interests of Africa and these are questions that no-one can really give a satisfactory answer to but you look at countries like Angola – it’s going to be the next chair of the Kimberley Process but when you look at the diamond sector of Angola it’s a sham, a big sham. You look at a country like the Democratic Republic of Congo – we all know the Congo is in conflict and diamonds play a role both in financing the conflict in Congo but also in entrenching the government of that young autocrat, Joseph Kabila. So when you think of the conflict in the Congo you think of diamonds obviously but the Kimberley Process is trying to convince the world that all the diamonds coming from the DRC are conflict-free. So I think this report is a major indictment on the Kimberley Process as the guarantor of the rough diamonds that are going into the world’s markets that these diamonds are definitely they need a lot to be desired.
BELL: Once again this report has underscored the repeated calls for the Kimberley Process to reform on a number of levels and it really highlights its narrow mandate of conflict diamonds only being about those that are mined to support rebel groups, that being a key problem making all this possible. So again Farai why is it so important that the Kimberley Process reform given that the credibility of this certification scheme has been in doubt for a number of years now?
MAGUWU: I’ll give you an example of Marange: as we are talking, tomorrow we’ll be releasing a report on the impact of diamond mining induced relocation on women and children. Over a thousand families, comprising of over five thousand people have been relocated from Marange to Arda Transau to pave the way for diamond mining in Marange and these diamond mining operations have been given a clean bill of health by the Kimberley Process but if you come to the place where these people have been relocated to, it’s a disaster, a humanitarian disaster. They have no food, there is no land for cultivation, the school which has been built by Anjin is poorly resourced – no exercise books, no text books, no furniture for the primary school children. You look at the clinic – there is no doctor; there are two nurses, the buildings are dilapidated, the clinic is not even fenced – it is just a disaster that is unfolding there and these people are here because of some companies which have been set aside by the Kimberley Process are mining diamonds and when you take this problem to the KP to say the relocation has created a humanitarian disaster, KP will tell you this is a non-KP issue. The issue of environmental pollution where the, especially Anjin is dumping raw sewerage in Odzi river and it’s a river where some families depend on it even for domestic water which they use for consumption and the Chinese are dumping raw sewerage and you bring this up with the KP they will tell you it’s a non-KP issue. So some of us are beginning to ask what value is it in participating in the Kimberley Process because we are here, we do the work that we do because of the communities in which we work in so if the KP feels it has absolutely nothing to do with the community problems which are caused by the diamond mining activities, then I think it needs to seriously revise its mandate so that it can align itself with real people rather than being an imaginary institution that talks a lot of things but delivers very little on the ground.
BELL: Final question for you Farai and thank you so much for being with us again – this is of course a problem that is complex, it involves many international nations – how do we as observers, as participants, as campaign groups and people who would like to put pressure on the system – how do we begin to start exposing it and getting people’s attention to this because it seems to me there’s very little public debate and public interest in what is an incredibly illicit problem?
MAGUWU: Yes definitely. I think one thing is the media people like yourself have shown a lot of interest in exposing illicit financial fraud but I think the media in the western world ought to conscientise their governments and the public about these illicit financial fraud. The companies doing this ought to be named and shamed and the governments also which protect these companies should also be named and shamed and also research institutions, universities they also need to carry out more research on illicit financial fraud because I think what is known right now is only a tip of an iceberg. I will tell you a story – in 2011 I visited the Democratic Republic of Congo and to my surprise when I arrived at the airport, there were more cargo planes than passenger planes and the question was what are they carrying out of this country? You try to get out of the airport into Kinshasa, the road is one of the most awful roads I have ever driven on and yet there is a hive of activity and this scenario paints the whole picture of Africa where there is a lot of extraction but little reinvestment taking place on the continent. So we need more research on the continent to find out who is doing what. We also need to target consumers who are consuming some of these things. I believe there are some wonderful people in the western world who really want to see to it that when they buy a product, they are contributing to poverty-alleviation in Africa, they need to be informed about what is happening with regard to these illicit financial fraud so they can play a part in asking before they buy and putting pressure on their suppliers so that when they buy things they don’t buy illicitly acquired products from Africa.
BELL: That was Farai Maguwu, he’s the director of the Centre for Natural Resource Governance in Zimbabwe. And if you want to read the full report from the World policy Institute, you can go on-line to www.swradioafrica.com and we have more details there. There’s also more reports on diamond deals involving Zimbabwe that we’ve got on the website. Right now though it’s the end of tonight’s special with me Alex Bell, thank you for joining me, I’ll be back with our usual programming at the same time next week.