Government to blame for looting of diamonds

via Government to blame for looting of diamonds | SW Radio Africa by Tichaona Sibanda on Thursday, December 5, 2013

Government is to blame for the looting and smuggling of diamonds in Zimbabwe because of its reluctance to put in place measures that will stop the massive leaks, says an expert in the field.

The expert, who preferred to remain anonymous, said the authorities should take full control of all diamonds extracted on a daily basis and ensure the gems are all accounted for, amid allegations that all top quality diamonds are sold privately to outsiders, leaving poor quality diamonds to be cut and polished locally.

Zimbabwe, which is currently the seventh largest producer of diamonds in the world, has the potential to supply 25 percent of global demand and has also been tipped to become the third biggest producer by the end of this decade.

The Zimbabwe Mining Development Corporation (ZMDC) has entered into joint ventures with companies operating in the Chiadzwa diamond fields, including Anjin Investment (a joint venture with China’s Anhui Foreign Economic Construction Company) Diamond Mining Corporation and Mbada Resources.

‘The best quality diamonds are sold privately and very little of the proceeds goes to the treasury. Mining companies that operate from Marange usually declare 10 percent of the poor quality of diamonds with 90 percent of the best quality being smuggled out,’ said the expert.

In Botswana the government controls all diamonds that are extracted on a daily basis and all the cutting, polishing and sales of the gems is done transparently. In Zimbabwe, smuggling, looting and leaks in the diamond industry remains a serious problem. Two years ago diamond consultant Keith Lapperman said Zimbabwe lost up to $500 million due to theft and smuggling.

‘My estimate is that between 20 million to 30 million carats were smuggled from Zimbabwe in 2011. This translates to between $400 million and $500 million. This is substantial,’ he said in an interview with the Zimbabwe Independent last year.

Demand for the country’s cheap gems led to the opening of diamond cutting offices in Surat, India which employs over 60,000 Indians, while Zimbabwean cutting and polishing companies are closing down because of the licensing fees that went up from $20,000 to $100,000 a year.

Richard Mvududu, the chairman of the Diamond Beneficiation Association of Zimbabwe (DBAZ), told us their members are reeling from the hefty licence fees. The DBAZ is an umbrella body that represents the interests of companies that are registered and licenced to cut and polish diamonds,

In Botswana the licence fee is pegged at $100 a year for up to 10 years while in South Africa the fees do not go beyond $500 a year for up to five years. The fees in Zimbabwe are too high and actually contribute to the cost of production per carat.

‘In the last 12 months, the number of companies operating has gone down from eight to one…the fees do not encourage viable conditions to work under,’ Mvududu said, amid reports that $5 million worth of equipment is lying idle as more companies close shop.

What is also negatively affecting the output are the operating costs of $100 per carat. This makes the product uncompetitive when you compare it with international markets like China where costs are about $15 per carat. In India production costs are between $8 and $10 per carat.

Meanwhile diamonds from the Marange fields will be sold in Antwerp, Belgium after the European Union lifted sanctions even as human rights groups have said abuses have been committed at the mines and revenue has financed President Robert Mugabe’s ruling party.

The sale may take place before Christmas or early next year in January, according to the Antwerp World Diamond Centre. A spokeswoman for the AWDC, who asked not to be identified, told the Daily News newspaper that the sale will involve at least 500,000 carats.

The EU removed targeted sanctions against the state-owned Zimbabwe Mining Development Corporation in September. But advocacy groups, including the Ontario-based Partnership Africa Canada have accused the ruling ZANU PF party of taking $2 billion from the Marange fields.

New York-based Human Rights Watch said in 2009 that more than 200 illegal workers were killed in Marange as they were being driven off the site by the military. Some were shot from a helicopter gunship, the group said, citing an unidentified eyewitness.