In September 2017, Global Witness released a report titled ‘An Inside Job –Zimbabwe: the state, the security forces, and a decade of disappearing diamonds’. Michael Gibb from the international watchdog organisation unpacks the exploitation of the country’s vast diamond wealth.
In eastern Zimbabwe, locals still remember mazuva ebvupfuwe (the days of plenty). In June 2006 one of the most significant diamond discoveries of recent times was made in Zimbabwe’s rural Marange region. The find soon turned the country into one of the world’s largest diamond producers, offering an ailing economy and struggling population a rare chance of revival.
However, the initial days of plenty were short-lived and a decade on, Zimbabwe’s once promising diamond sector has failed to benefit its people.
While the country has exported over US$2.5 billion in diamonds according to official figures from the Kimberley Process, limited government reports show that only around US$300 million can be clearly identified in public accounts.
Zimbabwe’s diamond sector has been shrouded in secrecy from the outset, with poor governance underpinned by a lack of transparency and accountability at all levels. Inside a closed industry, Zimbabwe’s population has lost out twice over: they been denied their rightful share of the proceeds, and chronic mismanagement and diverted diamond revenues have provided off-budget funds to those who have stifled dissent and democracy in their country.
In An Inside Job, Global Witness has documented how Zimbabwe’s state security forces have sought to capture this precious resource.
- Read the full report here.
Among the most powerful actors in all societies are state security forces entrusted with both the mandate and means of coercion. Constraining their power is one of the most urgent challenges for any democracy. This is typically achieved – at least in part – by retaining careful control of the purse strings.
When powerful state security forces depend on the national budget to finance their activities, these budgets are properly scrutinised by civilian and democratic institutions to ensure important checks and oversight over the scope of their actions.
Security forces wary of such oversight have occasionally sought to liberate themselves from this scrutiny by going into business. An independent revenue source – especially if its scale can be concealed – allows for activity beyond that which is catered for by state budgets, and limits oversight and accountability by civilian and democratic institutions.
Over the past decade, diamonds have been central to the efforts that Zimbabwe’s highly partisan security forces have made to limit scrutiny and oversight of their activities, particularly at critical moments such as elections.
Ownership
Until very recently, Zimbabwe’s diamonds were mined by a small number of joint venture companies, with ownership shared between the government and private investors. But instead of marrying the interests of the Zimbabwean people with the capital and investment needed to turn diamonds into development, a murky sector primed for capture was established.
Kusena Diamonds, reportedly owned – until recently – by the government’s Zimbabwe Mining Development Corporation (ZMDC), is revealed to have links to the country’s Central Intelligence Organisation (CIO). In 2014 the US Treasury linked the CIO to “activities meant to undermine democracy” and stated that the CIO’s “off-budget financing has contributed to CIO programs dedicated to pre-election intimidation in Zimbabwe.”
Anjin, another Marange joint venture company, was, according to a 2012 statement by Zimbabwe’s deputy minister of Mines and Mining Development, partly owned by the military company Zimbabwe Defence Industries (ZDI), and has numerous links to the military at board level.
Anjin’s diamonds were tendered in the European Union (EU) on several occasions in 2013 and 2014. As the EU retains economic sanctions against ZDI, these tenders likely violated those sanctions by providing significant benefits to ZDI and, ultimately, to the Zimbabwean military. While the Belgian companies involved have disputed this allegation and ZDI’s stake in Anjin, this case highlights the international dimensions of Zimbabwe’s diamond trade, and the crucial role international buyers can play in scrutinising its true beneficiaries.
“Basic information on production and revenues has never been meaningfully reported, either by the government or by the companies entrusted with Zimbabwe’s diamonds.”
Secrecy
Two structural weaknesses have been crucial to this capture of the diamond mining sector.
First, basic information on production and revenues has never been meaningfully reported, either by the government or by the companies entrusted with Zimbabwe’s diamonds. The ZMDC itself has only published two audited annual reports. Company reporting is more limited still, and is aggregated to a point that makes meaningful analysis almost impossible. This has stymied efforts to estimate who is owed what, as well as attempts to verify whether amounts have actually been paid.
Second, the actual owners of the private companies present in Marange have neither been properly reported nor scrutinised. A quarter of Mbada – the largest and likely most successful Marange company – is anonymously held through a complex web of companies stretching from South Africa to Mauritius, Hong Kong and the British Virgin Islands. Such secrecy cannot be in the interest of the Zimbabwean people and is highly inappropriate for the management of a lucrative national resource.
Alarm bells
President Robert Mugabe has recently rounded on the companies in question, accusing them of having “robbed” Zimbabwe of its wealth while insisting that not one of them can be trusted. The government has also announced a series of audits, again targeting the private investors, while billing its efforts to amalgamate the sector into a single Zimbabwe Consolidated Diamond Company (ZCDC) as a response to calls for reform.
But several of Zimbabwe’s civilian institutions had sounded warnings long ago.
In 2013, a Parliamentary Portfolio Committee chaired by MP Edward Chindori-Chininga raised serious questions about the process by which the first two joint venture partners – one of which was the private investor in Mbada – had been selected. Their report found that “the ZMDC was coerced into accepting these two companies” and that “the due diligence report by ZMDC revealed that two investors were probably not the best suitors for the country”.
The same year, Zimbabwe’s Auditor General reported that she had found Kusena to be “a joint arrangement between Zimbabwe Mining Development Corporation and an unidentified party”, and added that key information, including the joint arrangement agreement, details of all parties to the joint arrangement and the rights and obligations of the parties involved had not been made available for verification.
Zimbabwean civil society has met still greater resistance in their efforts to scrutinise their country’s diamond trade.
The country, rather bizarrely, rests its mineral rights in the president, and both the president and his government have played a key role in approving each of the private investors and in sidelining those who voiced concerns.
Reform
The need for reform is now urgent. Elections are scheduled for 2018 and always represent moments of heightened tension and often violence. The poll will now also take place against the backdrop of an increasingly public and divisive presidential succession struggle. The 93-year-old Mugabe has already been announced as the ruling party’s candidate for the elections, but the looming question of who will eventually take his place is already of real political consequence.
Moments of political tension and uncertainty demand a great deal of a country’s institutions. It is at these times that neutral institutions loyal to the constitution and democratic principles – not to any of the parties seeking power– are in greatest demand. Instead, Zimbabwe’s diamonds are providing an already partisan security sector a dangerous economic incentive to preserve the power structures that afford them access to these lucrative resources and the economic means to do so free of unwanted civilian and democratic oversight.
Recommendations
Zimbabwe is fast learning that diamonds are not really forever. With production dwindling dramatically, the government’s amalgamation efforts aim to extend its diamond adventure a little longer. But whether the companies number one or many, only root and branch reform of the sector can help ensure that this next phase will deliver to the people of Zimbabwe what the first did not.
Global Witness is recommending a range of reforms aimed at bringing greater transparency and oversight to all levels of Zimbabwe’s diamond sector through regular and public reporting of key information on production, profits, and revenue flows; as well as public disclosure of the true beneficiaries of all companies involved in Zimbabwe’s diamond trade, including shareholders in the new Zimbabwe Consolidated Diamond Company (ZCDC).
Global Witness is also recommending greater efforts to support and protect the crucial oversight role played Zimbabwe’s democratic and civilian institutions, including an independent review of the findings of the country’s Auditor General and Parliamentary Portfolio Committees, as well as greater support and protection for civil society.
Finally, Global Witness is urging all diamond companies to ensure the profits of their trade find the right hands through robust supply chain due diligence in line with international standards.
(Main image: Reuters/Goran Tomasevic)
The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of SAIIA or CIGI.
