via The tragic saga of Marange – The Zimbabwe Independent September 4, 2015
In 2000, a small geological survey team from De Beers Ltd, the largest diamond mining company in the world and a global top 500 enterprise, moved into a camp on the banks of the Save river. They secured an Exclusive Prospecting Order (EPO) over a large area and began to probe for raw diamonds. They found ample evidence of diamonds and sent loads of soil to Johannesburg, South Africa, for analysis but after six years decided that the qualities of the stones on site were not good enough to warrant commercial exploitation.
In London another company, African Consolidated Resources (ACR), formed by a group of Zimbabweans, watched the developments very carefully. When De Beers failed to renew their EPO over the area, they moved very quickly to take up the EPO and registered claims over 3 800 hectares of land that they identified as having the most potential.
Under the guidance of an experienced Australian geologist, the company cut deep trenches across the site and in a matter of weeks discovered gem quality stones. Although less than 20% of all the stones recovered were in this category, they felt that it was commercially viable because of the low cost of extraction.
The ACR team on site did a full survey of the area and concluded that the field was made up of two distinct resources — a large area (it subsequently turned out to be over 60 000 hectares) of alluvial sands bearing raw diamonds washed out of the eroded agglomerate that formed the core of the find. These sands varied in depth and generally the richer deposits were quite deep and lying on the rock bed under the sand overlay.
The main deposit was a large sheet of agglomerate that lay across a low range of hills and varied in thickness from one to three metres. This hard form of sandstone was drilled and analysed and found to contain up to nine billion carats of diamonds. As such, it is one of the largest finds in history.
ACR was publically listed on a secondary London market and under the rules of the market they had to make a discovery of this magnitude known as it would affect the share price. Accordingly, some three months after they had found gem quality stones on site, they published the basic facts in the British press.
The announcement was seen in Harare and within weeks the Ministry of Mines moved to take control of the new find. The EPO held by ACR was illegally cancelled and the claims confiscated. Materials on site, including fencing to control and manage access, was simply seized. ACR found themselves excluded from their own claims and were denied access to the courts or any other form of recompense. Management was intimidated and harassed and the company withdrew to its Harare offices and pondered what it could do next. The CEO, a Zimbabwean, was virtually hounded out of the country.
Having taken over control, the state did not know what to do with its new toy. After a few weeks of indecision they simply allowed the local community and others from all over the country to move into the area and start shallow mining and extraction. When a few significant gem quality stones were found and sold to traders from Mozambique for tens of thousands of dollars, the rush was on and an estimated 40 000 small scale miners moved on site. The economy of Mutare got an immediate boost and business linked to the discovery boomed.
While all this was going on, the national economy was in a steep downwards spiral accompanied by massive inflation caused by reckless printing of money. In March 2008, Zanu PF experienced its heaviest defeat since 2000 and its government was cash strapped so they turned their attention to the Marange diamond field.
Suddenly in mid-2008, the police and army descended on the diamond fields, 200 miners were allegedly shot dead, people travelling on the road to Chipinge reported people fleeing with evidence of poison spraying of miners in their holes in the ground. Five companies, all state controlled through the ZMDC, later moved on site with their partners all disguised in different ways.
Over the next six years, 2008 to 2014, these companies extracted an estimated US$12 billion worth of diamonds. Their sales peaked in 2012 when Zimbabwe suddenly held a third of the global market for raw diamonds, world prices fell putting severe stain on the economy of Botswana. The diamonds were easy to get at and all that the operators had to do was put in large earth moving equipment and then process the sand through extractors supplied from South Africa. The largest operator was Anjin followed by Mbada.
The only sign that very substantial funds were being generated from Marange diamonds was the growth in national imports which surged from 2009 and 2012 to double the value of exports — a balance of payments deficit of over US$2 billion a year – all funded without any indication of where the funds were coming from. Flights to Dubai were full with people who seemed to have unlimited funds.
In 2014, the bubble burst — alluvial diamonds were exhausted and the companies on site proved to be incapable of mining the conglomerate. Marange died; the companies were unable to pay their debts or their staff. Now the task is to try and exploit the agglomerate and so far this has been beyond the existing companies.
So what does this brief history of the Marange diamond discovery tell us? It tells us that the present government has little regard for the rule of law and property rights. There is no sign that ACR is ever going to be compensated despite their legal rights. Second, that theft of national resources on this scale is possible and that when it’s exhausted we are left with nothing to show for it except some very expensive holes in the ground at Marange. Third, that hard rock diamond mining is not a game for amateurs; the industry says that only two or three companies in the world can exploit this resource profitably.
Are we going to do the right thing at Marange? Of course not and that is the real tragedy of this whole saga and we are all the poorer as a result.
- Eddie Cross is an economist and Member of Parliament for Bulawayo South. These NEW PERSPECTIVES articles are coordinated by Lovemore Kadenge, President of the Zimbabwe Economics Society (ZES) Email: firstname.lastname@example.org cell +263 772 382 852