Let us bring back diamond sales to Zimbabwe

On 15 September 2014 the Daily News led with a story that about $45 million in diamond revenue had been seized by a South African company in Belgium after it had been granted an interim order against the Zimbabwean government over a cancelled platinum concession.

The article reported that this was after Amari Platinum Holdings Limited (Amari) had taken the Zimbabwean administration to the International Court of Arbitration (ICC) with a $500 million suit. It further claimed Harare risked losing more assets, and cash to global creditors taking advantage of its decision to "transact in hostile jurisdictions".

The local daily goes to refresh the minds of the public by recalling that in March this year, Mbada Diamonds Chairman Dr Robert Mhlanga urged government to stop selling diamonds at the centre of global diamond trade in Antwerp, Belgium saying there were risks involved.

Addressing the parliamentary committee on Youth, Indigenisation and Economic Empowerment, Mhlanga said:  "I have strong reservations about Antwerp because they are our yesteryear enemies. We have actually reeled under sanctions, thanks to Brussels and for us now because they have claimed to have lifted sanctions and we run to them. Personally, I have my own reservations," Mhlanga said.

"I don't think that is good. I strongly believe that Zimbabwe as a country we have capacity to hold auctions in this country where hundreds of companies can attend. There is a multiplicity of benefits when you invite people to do tenders in your own country. You bolster your own tourism industry… I don't believe in appeasing a foe."
Dr Mhlanga was right as the "multiplicity benefits" were there for everyone to see both in the hospitality and banking industries. Most of the local hotels were beaming with business when the diamond auctions were still being held locally as potential buyers continued to trickle into the country. The liquidity challenges the banks are facing today had been eased. All diamond buyers were required to deposit their cash with a local bank of their choice and produce a deposit slip to the Minerals Marketing Corporation of Zimbabwe (MMCZ) before being considered for any tender.

It is critical to note that Marange diamonds were discovered in 2006, but the international clearance to sell the gems on the world market came in 2011 and the sales were being conducted locally.

The World Bank report for 2012 titled Zimbabwe Growth Recovery stated that Zimbabwe could easily raise about $5 billion and jump start the economy if it converted its large stockpiles of diamonds from Marange which had been accumulating since 2006 before the country got the Kimberley Process Certification (KPCS) to formally market its gems.

"It must be noted that before being certified by the Kimberly Process, the government of Zimbabwe through ZMDC (Zimbabwe Mining Development Corporation) built up a large stockpile of diamonds, with various reports valuing the stock at well over $1 billion and some as high as $5 billion. These will be sold off in the coming years, significantly enhancing fiscal revenues on a fiscal basis," reads the report in part.
"Production is expected to peak at 12 million carats over the next five years although it is estimated that an investment of $150 million could increase production to 15,2 million carats per year by 2018,"  the report projected.

In March 2012 the then board chairman of the Zimbabwe Mining Development Corporation (ZMDC) Godwills Masimirembwa described the Marange diamond mining as a "game changer" to the economy during an interview with CNN.

"I can safely say the Marange diamonds is a game changer if there is some fairness world over. Even with sanctions on us we can raise up to US$100 million a month. Before we started the project, we could struggle to raise a million dollars per month," said Masimirembwa then.

In the year 2012 the country earned US$684,5 million from diamonds that were exported by the four companies operating at Chiadzwa diamond fields in Marange. Of the US$684,5 million, Mbada Diamonds contributed US$308,3 million followed by Anjin with US$209,9 million, Diamond Mining Corporation US$100,8 million and Marange Resources US$236 317.

These diamond exports earnings made the mineral the second highest earning mineral for 2012 after gold which contributed more than a third of the total exports of US$782,7 million.

In terms of royalties, diamond pumped the biggest amount – US$102,7 million – into the fiscus as diamond revenue is taxed at 15 per cent as opposed to the 10 per cent levied on other minerals.
In addition to royalties, diamond mines also paid out dividends to Government that other mining companies do not pay.

The diamond sales were done locally and US$684,5 figure does not account for the business generated by the diamond buyers in the banking sector and hospitality industries.

But the decision by Mines and Mining Development Minister Walter Chidakwa to transfer the diamond sales to foreign land remains a mystery. It has come with massive losses for the country with the current US$45 million being reported by the Daily News being one.

On April 25 this year the state media reported that it had taken 30 days for Zimbabwe to receive payment for diamonds sold to Dubai merchants a period observers in the industry said was too long for such deals. The responsible Ministry downplayed the matter.

Surely, it is clear that the 2014 diamond auction sales that continue to be held in foreign lands do not favour Zimbabwe and it is time that the responsible authorities go back to the drawing board and try to establish where the rains began to beat them. Diamond auctions sales should come back to Zimbabwe.