‘Diamond merger costly’

via ‘Diamond merger costly’ | The Herald May 5, 2015

The proposed merger of diamond companies may be a costly exercise after it emerged that Government has to first engage audit firms to do the valuation of all the companies.Although Mines and Mining Development secretary Professor Francis Gudyanga last month indicated that the merger might be concluded early this month, the target seems unachievable.

This is so because Government has to do the valuation of seven diamond firms operating in Marange — Mbada Diamonds, Anjin, Marange Resources, Gye Nyame, Kusena, Jinan and Diamond Mining Company.

The valuation would also be extended to Murowa Diamonds and DTZ-OZGEO which would be part of the new big company.

Results of the valuation process would help Government to establish each company’s worth in terms of assets and financial status.

This is imperative in determining the share ownership structure of the new company where Government would own 50 percent while other companies would have to share the remaining 50 percent.

Further, Government has to come up with a viable business plan for the new entity before looking at legal issues involved that have to be sorted before the new company starts operating.

Mines and Mining Development Minister Walter Chidhakwa confirmed that Government was in the process of short listing companies that would do the valuation in an interview on Sunday.

He did not give a time frame as to when the merging process would be concluded but hinted that valuation was the major issue.

“We are working on the companies that will do the valuation of the diamond companies,” he said.

“We will use that information to calculate the percentage of each company. Zimbabwe Mining Development Corporation and our human resources (department) in the ministry are working on the list of the companies that can be recruited.

“We also have to come up with a business plan for the new company and there are legalities that are involved. On the legal side we will be looking at how the agreements can be brought together.”

The merger is aimed at plugging leakages in the trade of the precious stones.

A ministry official who spoke to The Herald said the valuation and legal issues at stake in the proposed merger might run into millions of dollars.

“The merger may take some time to complete due to financial constraints,” said the official.

“Government has to engage a reputable company to do the valuation and that is costly given the current financial status of our Government.

“It is a noble initiative but its realisation is another story.

“Most reputable audit firms do not charge anything less than $1 million for such a daunting task.”

The merger was proposed last year as a way of improving transparency and accountability in the diamond sector.

This was after Government realised that it was losing millions of dollars due to lax regulations and even connivance between some officials and mafia gangs in the diamond industry.