Diamonds – Honeymoon is over

via Honeymoon is over | The Financial Gazette by Clemence Manyukwe 10 Oct 2013

THE government, which is battling a severe cash crunch amid escalating pressures on the expenditure side especially from the civil servants, this week said every cent from diamond proceeds must be accounted for with all those found on the wrong side of the law facing prosecution, the Financial Gazette can report.

Since the discovery of diamonds in Marange in Manicaland province, it has been said that government was losing substantial amounts of money owing to leakages in the system.

While there have been strenuous denials of looting from the gatekeepers in the value chain, the perception that government has suffered serious prejudice has refused to go away.

In fact, the on-going diamonds saga, in which former Zimbabwe Mining Development Corporation (ZMDC) chairman, Goodwills Masimirembwa is said to have demanded and received a US$5 million bribe from a Ghanaian investor appears to have vindicated skeptics.

The reality has also sunk in President Robert Mugabe’s government that it may fail to deliver on its election promises if it adopts a ‘hear no evil, see no evil and speak no evil’ approach to concerns around the goings on in Marange, also commonly referred to as the Chiadzwa diamond fields.

President Mugabe himself has taken the lead by cracking the whip on his bloated Cabinet, which faces pressures from all angles — socially and economically.

Sensing that it is no longer business as usual; his officials have been talking tough lately, suggesting this could be a prelude to serious action being taken against those who do not heed the call to adopt zero tolerance to corruption and other vices.

This week, Mines and Mining Development Minister, Walter Chidhakwa, said all cases of corruption, including those that took place before he was appointed as the new Mines Minister would be dealt with to ensure transparency and accountability in the sector.

He has already met diamond players, among them officials from ZMDC and Marange Resources to read the riot act and outline his vision for the ministry.

The minister’s consultative proc-ess will also take him to platinum fields and to Shabanie and Mashaba Mines which were seized by the government from businessman, Mutumwa Mawere, among others.

“We will not tolerate corruption; we will deal with issues of corruption historically, the things that have happened. Systems will be refined to ensure transparency. At the end of the day, that part that is due to government must reach government,” said Chidhakwa.

“I am going around starting this week to look at the systems. If you want to call that an audit (it’s entirely up to you, but) I will call it understanding the systems, how they can be improved and ensuring that there are no loopholes,” he added.

Chidhakwa said they are still waiting for the Ghanaian investor who is the complainant in the bribery scandal involving Masimirembwa to come forward.

During his predecessor (Obert Mpofu)’s era,  Treasury had persistently complained that   diamond proceeds’ were not reaching State coffers.

At one time, former finance minister Tendai Biti was forced to revise the 2012 National Budget from US$4 billion to US$3,4 billion after the US$600 million that had been earmarked from diamond proceeds did not reach the fiscus as a result of the opaque nature of the operations of companies in  Chiadzwa.

Biti had also hoped to fund the July 31 harmonised polls through diamond revenues, but government had to scrounge for resources elsewhere amid allegations of continued leakages.

Chidhakwa’s pledge to shake-up the diamond sector is therefore likely to be welcomed by those who believe the leakages are enriching an elite few at the expense of the majority.

In June this year, a report released by the Parliamentary Committee on Mines and Mining Development which was headed by the late ZANU-PF Guruve South lawmaker, Edward Chindori-Chininga was scathing in its criticism of Mpofu and the diamond sector.

Among others, the committee said Zimbabwe was losing millions of dollars in potential revenue from its Chiadzwa diamond fields due to smuggling, underhand dealings and a weak policy on investment in the sector.

Committee members also said ministry officials had frustrated the work of the legislature and discouraged officials from diamond companies from co-operating with the parliamentary  team.

Mpofu was also accused of violating the ZMDC Act by appointing board members to the parastatal’s subsidiaries firms when the law prohibits him from doing so.

The unilateral appointments to subsidiary companies saw a number of individuals with conflicted  interests being appointed as board members to the extent that some of them even owned their own diamond-trading companies.

Crucially, the committee said it had observed with concern that government had not realised any meaningful contributions from diamonds because there were “serious discrepancies between what it receives and what the diamond- mining companies claim to have remitted to Treasury”.

Estimates suggest that Zimbabwe could earn up to US$2 billion a year from the Marange diamonds.

The Marange diamond fields have been hailed as “the greatest find of the century” and said to hold 25 percent of global rough diamonds by Israeli diamond watchdog, Tacy Limited.

Instead of improving the livelihoods of ordinary Zimbabwe, 80 percent of whom are wallowing in poverty, the gems have courted more controversy than fame.