The diamond trade has always been a murky business, long tainted with a history of colonialism in Africa and not known for its transparency. So often used in conjunction with the word ‘blood’, diamond industries, when not managed correctly, have shown a pervasive ability to become serious sources of conflict and civil strife. Or as Zimbabwe’s Minister of Finance, Tendai Biti, recently opined: “put simply, there are times when resources like diamonds, instead of being a blessing, can become a curse".
Biti, talking about Zimbabwe’s Marange diamond deposits, was conveying a stance that has almost become something of an economic and political faux pas in a climate where the negative aspects of diamond discoveries tend to be downplayed. Having discovered the lucrative alluvial diamond deposits in the Marange area, Zimbabwe’s economic forecasters rubbed their hands in glee at the prospect of a steady flow of investment in the mines. Yet such joy has been quickly blighted by a burgeoning illegal diamond trade, raising concerns that the Marange diamonds are now becoming a curse.
For a vast number of Zimbabweans, the diamonds were believed to be a God-sent resource meant to bail the country out of a devastating economic meltdown. But, it seems this resource has come with massive misfortunes which have seen the country sliding deeper into crisis. There are accusations and counter-accusations over who is benefiting from the diamond resources, but still no answers. The diamond controversy has sucked in both political and economic elites, as well as ordinary people. And the controversy seems to be far from over.
The diamonds threaten to tear apart an already shaky coalition government formed in 2009 after the 2008 elections. Internationally, the diamonds threaten the future of the international diamond trade watchdog, the Kimberly Certification Process Scheme (KCPS), as members fail to agree on the fate of the Marange diamonds.
Biti, of Tsvangirai's Movement for Democratic Change (MDC), has clashed with his Mines and Mining Development counterpart, Obert Mpofu, of Mugabe's Zanu-PF, over the lack of transparency in handling the diamond revenue.
There was a public spat early this year between Biti and Mpofu with the former accusing the latter of clandestinely selling the diamonds. Biti alleged that more than $300 million raised from the selling of diamonds was not properly accounted for.
Controversy has dogged Marange diamonds since their discovery about six years ago. The diamonds drew more than 30,000 illegal miners from all parts of the country to Marange between 2005 and 2008. But the illegal miners were violently removed from the diamond-rich area in November 2008 by heavily armed security during an operation with the codename Operation Hakudzokwi. With human rights groups suggesting that dozens of panners were killed during the brutal crackdown, the international community was quick to condemn the operation. After the illegal diamond miners were pushed out, formal mining continued, albeit under the shadow of Operation Hakudzokwi.
Today, even with the presence of the heavily armed soldiers and police in the diamond fields, theft of diamonds continues, raising suspicion that senior government and security officials are involved in the smuggling syndicates. The recent arrest of two men in India, in possession of diamonds originating from Marange worth millions of dollars, piled pressure on the government to act on diamond smuggling. India’s Revenue Intelligence Directorate arrested the two Indian nationals for allegedly smuggling $2 million worth of diamonds from Zimbabwe’s Marange fields.
The two were caught with a consignment of 48,663 carats of rough diamonds without Kimberley Process certificates. They had allegedly smuggled the diamonds from Zimbabwe through Kenya to Mumbai and were caught trying to sell the precious stones in Surat. Pressure groups in Zimbabwe called for the resignation of the Minister of Mines and Mining Development, accusing him of being involved in the diamond smuggling. Fears continue to abound that proceeds from the illegal diamond trade might be used to finance Zanu PF’s campaign ahead of the next elections.
But even with this controversy, the new chairman of the Kimberley Process, Mathieu Yamba cleared Marange diamonds for export, amid strong protests from the USA and the EU. KPCS members have been unable to reach consensus on Zimbabwe’s trade future, and last year a proposed agreement was shot down, with mainly Western Kimberley Process members raising concerns about ongoing human rights abuses.
In June this year, Yamba, a Democratic Republic of Congo (DRC) national, subsequently reported that consensus had in fact not been achieved but however added, that should the parties fail to reach consensus, diamond exports from Marange shall continue until the administrative decision was passed.
The USA has objected to Yamba’s decision to allow the exports. The EU is also against Yamba’s decision to grant Zimbabwe the green light to trade in its gems. The EU high representative for Foreign Affairs, Catherine Ashton, issued a statement just after Yamba’s June 24 decision, saying Marange diamonds should not be traded on the international market.
The EU considers that any agreement needs to provide sufficiently credible basis to bring the whole Marange mining area into compliance,” Ashton said.
This has to be done through proper application of the KP procedures. The EU notes that consensus is necessary for diamonds from Marange to be traded under the KP Certification Scheme.
Campaigner for the NGO Global Witness Elly Harrowell also told Mining Weekly Online that this decision made by Yamba was ‘worrying’.
Members of the Kimberley Process working group for monitoring met in Dubai early this year to discuss the issue of Marange diamonds.
Among the sticking points at the meeting was the appointment of a new monitor for Marange to replace Abbey Chikane who resigned from the position in January this year. Zimbabwe said it was not happy with attempts by the Kimberley Process to appoint a British national as the new monitor.
The controversy surrounding the Marange diamonds deepened this week amid revelation by Minister Biti that proceeds from the diamonds trade had not been remitted to the Treasury.
Presenting the Mid-Term Fiscal Policy on July 26, Biti raised concerns over the disparities between the prevailing international diamond prices and the revenue declared through sales of diamonds to the government by diamond companies in Zimbabwe. “Zimbabwe diamonds continue to be arrested by problems associated with the Kimberly Process Certification Scheme as well as internal issues of transparency and accountability. In general terms, 18 percent of the alluvial diamonds mined at Marange are gem quality and 23 percent of Zimbabwe’s kimberlite diamonds are gem quality. For the past 12 months, the price of gems has ranged between US$5,000 for top quality gems and US$1,300 for low-grade gems. The average price for industrial diamonds has been at least US$200.”
He added: “The reality of Zimbabwe’s situation is that there is no connection between Zimbabwe’s income from diamonds, its output and international prices. Between January and June 2011, Zimbabwe exported 716 958, 50 carats from its alluvial diamond mines in Marange (Marange diamond 357 816, 80 and Mbada diamond 359 138, 70 carats)”.
“However during the first half of 2011, only US$103, 9 million of diamond export shipments were accounted for. Despite the huge production at Marange in 2011, no payment has been received by the Treasury for income earned between 1 January and 30 June 2011. The only payment made in February 2011 was on account 0f 2010 diamond production”.
Biti said it was therefore imperative and urgent that the government concluded its work on the Diamond Revenue Bill.
This bill, he said, would create a proper legal framework dealing with the audit trail of all diamond revenue, its sharing and distribution as well as the role of the Zimbabwe Revenue Authority at both production and marketing levels.
Furthermore, it is important that the international community recognises compliance levels attained by the Zimbabwean companies and hence accord Zimbabwe the right of selling its diamonds within Kimberly Process Certification framework,” he added.
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