via Tension as bigwigs resist diamond mergers – The Zimbabwe Independent January 23, 2015
TENSIONS are mounting in Zimbabwe’s diamond industry with top government officials behind the country’s major diamond mining companies reluctant to comply with Mines minister Walter Chidhakwa’s move to merge the firms in an effort to bring about a culture of transparency and accountability in the sector.
The refusal to play ball is threatening to derail mergers given that Mines ministry officials already have a daunting task of evaluating the liabilities and assets of reluctant players before negotiating with all parties on how the two companies formed as a result of the consolidation would operate.
Chidhakwa announced last year that government wanted diamond mining companies to merge, in a move meant to streamline their operations while curbing leakages.
The move came after most diamond companies failed to account for revenue they realised in their mining operations, save for Mbada Diamonds which in March last year declared to parliament that it had surpassed the US$1 billion turnover mark.
Chidhakwa’s move also came after years of complaints from within government and ordinary Zimbabweans, civil society and opposition parties that diamond revenue was not finding its way to Treasury, but was being used to line the pockets of top politicians and service chiefs.
Zimbabwe is the world’s fourth-largest diamond miner, producing an estimated eight million carats annually, with potential to supply 25% of global demand. However the country, in the midst of an economic crisis, has little to show for its diamond wealth.
Seven mining companies were operating in Marange namely Mbada, Anjin Investments, Diamond Mining Company, Gye Nyame, Jinan Mining Private Ltd, Kusena and Marange Resources.
Government wants the companies to merge thus reducing the number of operators to about two companies. It is in the process of merging the wholly government owned Marange Resources and Gye Nyame. Gye Nyame’s licence was revoked last year.
“But the task of forming joint ventures especially where it concerns the big players Anjin, Mbada and DMC is proving to be difficult,” said a Ministry of Mines official.
“To start off with, there is reluctance from hidden forces behind the companies, for example Anjin, which is a joint venture between the Chinese army and the Zimbabwe Defence Forces, is dragging its feet on the issue.
“There are so many people with vested interests and the question is how do you deal with them. Besides, all the companies have liabilities and assets, so there are questions as to how the deals will be structured.
“There are concerns on who will get what stake and how shareholders and investors in different companies will be handled.”
An official in the diamond industry also revealed that diamond companies are also reluctant to reveal how much they had produced over the years, and what they have generated from their operations.
But Chidhakwa is said to be adamant that merging the companies is the best way forward for Zimbabwe.
“He has even threatened not to renew licences for diamond companies when they expire. He is convinced that the only way that the country can benefit from its diamonds is to have a few big companies operating in a transparent manner,” said the official.
Chidhakwa is certain that a significant amount of revenue from the Marange diamond fields was lost due to leakages, he said.
The minister on Wednesday declined to take questions on his consolidation efforts saying he was “rather busy”, while his deputy Fred Moyo said he was travelling.
Both referred questions to the ministry’s secretary, Professor Francis Kudyanga, who could not be reached for comment.
Global Witness, an international non-governmental organisation in 2013 revealed that about US$2 billion in diamond revenues had been unaccounted for since 2008, joining a long list of individuals and organisations who have alleged that proceeds of Zimbabwe’s diamonds were not finding their way to Treasury.
During the inclusive government era, then Finance minister Tendai Biti constantly complained over low remittances by diamond mining companies.
In 2012 Biti was forced to slash the country’s national budget to US$3,4 billion from US$4 billion after receiving US$41 million instead of a targeted US$600 million which was expected from diamond sales.
His predecessor Patrick Chinamasa has also complained about disappointing revenues from the diamond mining sector.
In November 2013, shortly after being appointed Finance minister Chinamasa told parliamentarians during a 2013 budget review seminar in Victoria Falls that Treasury had not received any proceeds from diamond revenue in the nine months to September 2013.
Then diamonds firms were expected to have paid at least US$40 million from sales of the mineral.
The push to consolidate diamond mining firms comes at a time when alluvial diamonds are fast running out in Chiadzwa, resulting in revenue generated by the companies dwindling.
Big companies, among them Anjin and Mbada, have been forced to retrench workers and are in salary arrears.
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