Chinese firm externalises US$500m

via Chinese firm externalises US$500m – Nehanda Radio Apr 17, 2015

CHINESE diamond mining firm, Jinan Mining, is under investigations for allegedly externalising close to half a billion dollars, which it later brought back into the country as investment capital, the Financial Gazette reports.

Jinan is one of the eight companies operating in Chiadzwa, a ward in Mutare District, which is home to controversial Marange diamonds. The fraud, now under investigation by the police, involves BancABC, which is said to have facilitated the transaction and failed to inform the central bank about the movement of the cash outside the country.

BancABC is the commercial banking unit of ABC Holdings, dually listed on the Botswana and Zimbabwe stock exchanges until February this year. ABC Holdings was recently bought by former Barclays Plc chief executive officer, Bob Diamond, through his Atlas Mara investment vehicle which he jointly controls with African billionaire Ashish Thakkar.

Well-placed sources said Jinan externalised US$546 million through the bank, then routed it back as investment. Jinan is said to have donated US$100 million to the Zimbabwe National Defence College but transferred about US$446 million to Botswana without exchange control approval from the central bank.

A source familiar with the transaction revealed that this money was proceeds from diamonds mined in Chiadzwa. It is understood that BancABC undermined the Reserve Bank of Zimbabwe (RBZ), which is battling to curb illicit financial transactions, by facilitating this transaction.

In fact, the RBZ has not liberalised capital accounts, meaning that BancABC’s failure to advise the central bank about the illegal transaction may have been in violation of standing regulations.

This was also not in line with best practice in mitigating incidences of externalisation.
Although no comment could be obtained from the RBZ governor, John Mangudya, or his deputies, Kupukile Mlambo and Charity Dhliwayo, the Financial Gazette has it on good authority that the central bank is seized with the matter.

The RBZ has reported the fraudulent transaction by the Chinese company to the police, who are said to be investigating the issue.

BancABC Zimbabwe managing director, Joe Sibanda, declined to comment when contacted, citing client confidentiality.

“Jinan is a customer with the bank so I can’t discuss the issue with a third party without their (Jinan) authority,” said Sibanda.

Jinan’s deputy managing director, Tapiwa Goronga confirmed the police investigations but declined to give details.

“I can’t comment on issues under police and RBZ investigations. All I can say is that let the law take its course,” said Goronga.

Police spokesperson, Charity Charamba, whom the Financial Gazette has sought comment from for the past three weeks, only said on Tuesday: “I need time to check with our departments and will come back to you.”

She had not done so by the time of going to print.

Presenting his 2015 monetary policy statement early this year, Mangudya expressed grave concern over illicit financial transactions.

“The RBZ is seriously concerned by the abuse of individual or personal accounts to externalise business earnings under the pretext of free funds, thereby circumventing or evading taxes,” he said.

“This practice of promoting illicit financial flows is counter-productive and should be stopped. The RBZ has no intention to put impediments on the conduct of free funds accounts but we cannot also remain naive at the wanton abuse of the liberalised facility by a few nationalities.”

“Accordingly, the RBZ would like to remind the banking public to adhere to good principles in conducting transactions in their free funds accounts and for banks to continuously exercise and conduct customer due diligence or to adhere to the know your customer principles at all times.”

Jinan’s case highlights long-held fears that diamond mining companies in Chiadzwa have been looting resources, depriving the country of meaningful revenue in the form of taxes and dividends in the case of firms jointly held by government.

Indeed, there has been no transparency in the handling of diamond proceeds by miners operating in Chiadzwa diamonds fields.

Most of the country’s diamond revenues have reportedly been unaccounted for, and leakages are said to be rampant, with individuals benefiting at the expense of the nation.

The Minister of Mines and Mining Development, Walter Chidhakwa, has equally been perturbed by the development, and is mulling consolidation of all diamond mining companies in Marange to promote transparency.

But critics argue that firms in the alluvial diamonds-rich area were allowed to operate with impunity, with politicians deliberately allowing the looting of diamonds because they personally benefitted from the vice.

Former finance minister, Tendai Biti, called for transparency in the operations of diamond mining firms in Chiadzwa, but was rebuffed by his colleagues in the then-coalition government who said lack of transparency was a deliberate strategy to conceal Zimbabwe’s operations which were meant to bust illegal sanctions imposed on the country by the West.

But incumbent Finance Minister, Patrick Chinamasa, himself a ZANU-PF politburo member, has begun squirming from the deprivation of resources to Treasury by the diamond mining firms and has called for transparency.

There are several companies mining diamonds in Chiadzwa, including Mbada Diamonds, Marange Resources, Anjin Investments (which is jointly owned by the Chinese military and their Zimbabwean counterparts), Diamond Mining Company, Jinan, Rera, Kusena and Gye Nyame.

Recently, these diamond mining companies said they have hit a hard rock and that alluvial deposits had been depleted.

But several reports suggest that they have accelerated looting at the fields ahead of the planned amalgamation of operations. Financial Gazette