Dumping Antwerp ‘a costly blunder’

via Dumping Antwerp ‘a costly blunder’ – The Zimbabwe Independent May 9, 2014 by Herbert Moyo

THE lead story dramatically headlined “Chinamasa hunts Arab conmen” that appeared in a local weekly over the last weekend could have come straight out of a Hollywood movie script and certainly made for light-hearted Sunday reading, with the more imaginative movie aficionados perhaps visualising the Finance minister clad in some superman kit fighting Arabian villains.

But the story is no laughing matter as it reflects on the grave real-life scenario involving the non-remittance of US$30 million in proceeds of the sale of Zimbabwean diamonds in Dubai — a mineral touted by the Zanu PF government as holding the key to pulling the country out of a more than decade-long economic meltdown which has resulted in grinding poverty for the majority of Zimbabweans.

According to the newspaper, experts say the delay goes against international law which compels a winning auction bidder to transfer money — usually in no more than three days — soon after closing a deal.

The delay has sent shivers across the diamond companies and government, as the companies grapple with sustaining daily operations due to the payment delays, while government projects earmarked to benefit had stalled.

Finance minister Patrick Chinamasa’s response was, according to the weekly, unequivocal: the Dubai Diamond Exchange (DDE) — the company commissioned to organise the diamond sales in Dubai on behalf of Zimbabwe — had flunked the test.

For a long time Zimbabwe could not sell its precious diamonds “through the front door” on account of sanctions imposed on the country over human rights and rule of law concerns, with some politicians and sections of the international media even declaring them “blood diamonds”.

Given such travails that had to be endured to get certification from the Kimberley Process, it was widely expected that the country would be awash with cash to kick-start various stalled development projects, as government had even trumpeted the diamonds as “sanctions-busting”.

The sceptics were not so easily convinced, as they pointed to the controversy that has continuously dogged diamond mining in the country, which included opacity, non-remittance of proceeds to Treasury, human rights abuses, the shady involvement of the country’s security sector, and failure by companies to plough back in their communities of operation.

Questions are now being asked of government’s decision to dump the more transparent diamond market of Antwerp in the European Union in favour of Dubai, amid claims that the country would realise bigger returns from selling there.

“Here we have the same Third World people with sympathies for us. Together, we are part of the KPC process. You do not have the evil heart of Europe,” said President Robert Mugabe while addressing a Dubai gathering, a part of which has since been hastily downgraded from “partners” to “conmen” in the state media lexicon.

“We want partners who regard us as human beings, partners who share our misfortunes and appreciate that we want to develop also in the same way that we appreciate their own development,” Mugabe said, using emotive language that revealed a sad failure to appreciate that processes such as the sale of diamonds are driven by business rather than emotional or romantic considerations of anti-colonial struggles.

However, that Mugabe’s choice of words reflected an emotive rather than a business disposition was hardly surprising: the country is crying out for the injection of funds to ease a dire liquidity crunch preventing government from meeting its obligations including infrastructural and development projects.

“You cannot be engaging astute and even cunning business people talking about ‘evil, heart and sympathies’ as Mugabe did,” said political commentator Godwin Phiri.

“It is business and nothing else. Hopefully the government has learnt the lesson and move back to the Antwerp market where you can at least be guaranteed prompt payment.”

Unsurprisingly, questions are emerging about the veracity of claims Dubai would provide a more lucrative market, with some analysts even suggesting the decision could have been motivated by the desire to escape the transparency and accountability associated with Antwerp.

Speaking of the decision to try Dubai, Chinamasa said “we were testing the market”, but the general consensus among analysts is that Zimbabwe should dispense with experiments and “third world solidarity”, and take its precious diamonds to the tried and trusted Antwerp market.

Charity Manyeruke, a political scientist at the University of Zimbabwe, queried how government could have been conned.

“I read the article about Chinamasa pursuing diamond conmen and I wondered how does a government get conned? How do they get connected to conmen and do diamond markets need go-betweens?”
Manyeruke cautioned against experimenting with markets saying “we need to fully understand the rules of each sector when trading internationally”.

“Gatekeepers should not cost the government to this extent. Let us do due diligence when it comes to international trade for any products,” she said, concluding “Antwerp is a better and more transparent market therefore”.

There are doubts Dubai pays more than Antwerp with some raising the possibility that Zimbabwe may have taken inferior quality diamonds to Antwerp so that it can justify the move to the “murky underworld of Dubai”.

“The question is whether there is a match in the footprints of the diamonds taken to Antwerp and to Dubai,” said Mukasiri Sibanda of the Zimbabwe Environmental Law Association (Zela), an organisation which champions transparency and accountability in natural resource extraction.

“There were claims that some of the diamonds taken to Antwerp were of lower quality to those taken to Dubai hence the lower price fetched at Antwerp,” Sibanda said, adding that if this were the case then it could have been because some individuals wanted to justify the move to a less transparent market where they could engage in murky deals.

Even EU’s head of delegation to Zimbabwe, Ambassador Aldo Dell’Ariccia, suggested that the move from Antwerp to Dubai could have been down to the highly transparent nature of proceedings associated with the Antwerp auction.

“In the two auction sales of diamonds that took place in Antwerp, there was full information about the quality and quantity of the stones, the price fetched and therefore the amount of funds that will go to Zimbabwean coffers,” Dell’Ariccia told the Zimbabwe Independent last month soon after the switch to Dubai.

“Dubai is a fiscal paradise; there is certain opacity in the transactions. It is possible the auction can be transparent, but it is also possible that it may not be,” he said while expressing the hope Zimbabwe would continue selling its diamonds in Europe.

The speculation that something was amiss was also fuelled by the fact that Mugabe had a rather small entourage for the Dubai trip which even excluded journalists from the state media which are always in tow.

He was accompanied by his wife Grace, his daughter Bona and her husband Simba, Mbada Diamonds chairman Robert Mhlanga, Abu-Ali Imad of Diamond Mining Company and Foreign Affairs secretary Joey Bimha.

Chinamasa is wondering “why it has taken this long for us to receive our money,” adding, “we could have used that money to fund some of the projects awaiting completion.”

While government continues to wait and wonder, the nation continues in the vice-grip of the economic tribulations which include over 80% unemployment, alarming company closures and consequential poverty.

 

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