Mining booms, but where is Zimbabwe's diamond revenue going?

Jun 10, 2011

The discovery of diamonds in Zimbabwe has given the Mugabe government a lifeline just when its options were running out, with the rest of the economy on its knees and the country cut off from most international finance.

But there is little sign of the country as a whole benefiting from its new-found diamond wealth. Where is the money going?

Discouragingly, it is not clear who to even pose this question to. The minister of finance says the amounts of diamond revenue that the minister of mine has publicly announced haven't got to his coffers yet! The minister of mines says there is no problem, everything is under control and above board; he doesn't understand why his ministerial colleague is making such a dramatic fuss. And so you know it is likely going to be the umpteenth example of how Zimbabwe has become adept at snatching failure and defeat from the jaws of success and victory.

As Zimbabwe crafts its first-ever diamond regulation bill, the two ministers are fighting over who should have the upper hand in control of this sector. The ZANU-PF minister of mines, Obert Mpofu, is accused of being a direct beneficiary of dodgy diamond deals, and also of covering up or looking the other way while the rest of the ZANU-PF hierachy and its foreign partners have a free-for-all in the diamond fields. The MDC minister of mines, Tendai Biti, refuses to allow practices that had become business-as-usual when ZANU-PF ruled single-handedly, but with ZANU-PF still controlling all the instruments of effective power, it is not hard for them to bypass the MDC minister.

The minister of mines has just given a selective breakdown of Zimbabwe's mining revenue. He suggests that mining is experiencing a boom, contributing 20% to GDP in 2010 versus 4% the year before, and 65 percent of the country's total exports..

According to a June 8 Herald report of a speech Mpofu made, the country earned US$1,7 billion from mineral exports in 2010. The minister 'said the increase in exports was attributable to increased gold exports after the liberalisation of the mining industry and firming gold prices.'
Other figures given:

* 13 tonnes of gold are expected this year, from 9,6 tonnes in 2010.

* Chrome output increased from 194 000 tonnes in 2009 to 517 000 tonnes in 2010.

* Ferrochrome production also increased from 72 223 tonnes in 2009 to 154 000 tonnes in 2010.

*Coal production rose from 1,6 million tonnes in 2009 to 2,7 million tonnes last year.

* "Nickel output remains low," at 6,1 million tonnes from one company, the other major nickel company having gone broke.

All very well, but where are the diamond figures?! The Herald's report of Mpofu's speech surprisingly mentions diamonds in only an off-handed way:

Exports were also significantly increased by shipments of ferrochrome and diamonds as a result of the certification of Zimbabwe by the Kimberley Process. While there is huge potential of output from the Chiadzwa diamonds the potential remains constrained by the impasse with the Kimberley Process.
Significant output is also expected from the country's two kimberlitic operations in Murowa and Beitbridge with potential for two million carats a year.
 No figures on recent and current production, or dollar figures of revenues earned!

While Kimberly Process certification of Zimbabwe's diamonds remains an on-going international political battle, there was a Kimberly-approved approved auction in January 2011. A total of five diamond auctions have been held so far, with the country no wiser about the total earned. 'Auction' suggests an open process of accepting bids, but in fact these are no longer open to the public. 

According to the Zimbabwe Reporter, an auction was held in August 2010 and earned US$30 million. A non-public auction held the following month is said to have raised US$11 million, of which the minister of finance says US9million made it to his ministry, with no one having explained what happened to the other US$2 million.

Both ministers appear to be engaged in a public battle, waged through leaks to respectively sympathetic media, to get their version of events across to a confused public.

Through the Kimberly Process, Western governments have been trying to put pressure to influence how the country's diamond revenue is accounted for and spent, but predictably the Mugabe government bristles at this and resists this. The IMF, owed money by Zimbabwe, is also trying to ensure diamond revenues go in part to pay off the country's loan arrears.     

There is a lot of heated talk about diamonds in Zimbabwe, but very little light on how the country is benefiting from them, and to what extent. Yet this is a resource that some have estimated to be capable of earning revenue of $1 billion-$1.7 billion a year for a country that is currently virtually broke.

In his speech, Mpofu mentioned how mining has changed the fortunes of countries like Botswana, Chile and Brazil. Yet he didn't also mention that these are countries that have strict systems in place in order for mining proceeds to benefit those nations than to go astray as appears to be the case in Zimbabwe. Mpofu might as well have mentioned oil-rich countries like Gabon, Equitorial Guinea and Nigeria, where much of the billions of dollar in revenue every year magically disappear into thin air. 


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