US$1 billion Marange diamonds looted

diamonds_marangeILLEGAL diamond diggers at Marange before the army chased them away
HARARE -- Diamonds worth as much as US$ 1 billion could have been illegally mined at the Marange fields, mostly by the Zimbabwean army and the proceeds used to partly finance a campaign of violence to keep Mugabe in power while some were pocketed by members of Zimbab

While the true extent of theft of diamonds from Marange and the identities of all involved in the looting will probably never be known in the absence of an independent commission of inquiry, however, extensive investigations by ZimOnline have shown the military at the center of a well-orchestrated scheme to siphon gems from the controversial fields (also known as Chiadzwa) for delivery on the international black market for precious stones.

According to our investigations, including interviews with well-placed sources in the army, police and at the Reserve Bank of Zimbabwe (RBZ), most of the diamonds illicitly mined at Marange from 2006 to 2008 by the Zimbabwe National Army, after it evicted illegal panners and took control of the rich alluvial deposits were largely smuggled to India and Dubai and proceeds were laundered into offshore accounts and others held at the RBZ.

The black market sales were done outside the Kimberly Process, which certifies diamonds for sale on the international market.

Investigations show that the Reserve Bank of Zimbabwe, through its governor and Mugabes private banker Gideon Gono, was central in facilitating the movement of proceeds from the illegal mining activities and their diversions into various accounts.

After Mugabes ZANU PF lost the parliamentary and presidential elections in March 2008 to Morgan Tsvangirais MDC, the Joint Operations Command (JOC), the secretive committee of securocrats running Zimbabwe convened to map a violent strategy to ensure that Mugabe would win the run-off presidential election.

The JOC includes the Zimbabwe Defence Forces (ZDF)s top military commander General Constantine Chiwenga, army commander Philip Sibanda, air force commander Perence Shiri, police chief Augustine Chihuri, secret service director general Happyton Bonyongwe and prisons commander Paradzai Zimondi.

Electoral violence

What followed the committees meeting was probably the worst electoral violence ever seen in Zimbabwe.

Despite not being a military man, Gono sat on the JOC and ensured that money from illegal diamond proceeds was funnelled to fund a violent campaign which saw more than 220 senior army officers being deployed across the country to coordinate the campaign of violence towards the bloody presidential run-off on June 27, 2008 won by Mugabe.

Two senior army officers were posted per each district to coordinate the violence which involved ZANU PF youths, police, and ordinary soldiers.

The seniors were later rewarded handsomely with some getting as much as US$20 000 each long before Zimbabwe introduced dollarisation. Despite the foreign currency shortages then, plenty cash remained available to fund those key senior army officers central to Mugabes power grabbing plans.

The ensuing violence forced Morgan Tsvangirai who analysts had tipped to win the second round ballot after defeating Mugabe in the first round vote — to withdraw from the presidential run-off. The MDC claims more than 200 of its supporters were killed, some burnt alive, while tens of thousands were left homeless or injured.

ZimOnline is also authoritatively informed that it was via money from the diamond proceeds that Gono funnelled millions of dollars to accounts held by Grace Mugabe in Malaysia and Hong Kong.

Mugabes wife travels frequently to Hong Kong where the first family has invested in a lavish lifestyle including a mansion in which their daughter, Bona, who has been attending university there lives. They also own properties in Malaysia.

After her shopping trips to Harrods in the United Kingdom and choice shops in France, Italy and Spain were curtailed by European Union sanctions imposed over human rights abuses, Mrs Mugabe had shifted her shopping sprees to Asia, particularly Hong Kong, Singapore and Malaysia.

Chiwenga and Shiri, one of Mugabes most trusted allies, Zimondi, the late Vitalis Zvinavashe, Chiwengas predecessor at the helm of the ZDF, various heads of key military brigades, senior CIO officials had handsomely benefited from the proceeds of smuggled Marange diamonds.

The same way the military top brass used Harare as a transit route for diamonds smuggled out of the Congo when Zimbabwe deployed troops there in the late 1990s replayed itself with Marange diamonds…., said a military source, speaking on condition he was not named for fear of possible reprisals.

One retired senior Zimbabwe army official is said to have moved more than R40 million to a South African bank from proceeds of Marange diamonds sold illegally in India. This particular official and the bank concerned, one of the major four concerned cannot be named for legal reasons.

But it is common cause that some ministers, particularly Mines Minister Obert Mpofu, who has been regularly linked to shady deals at Marange, are now fabulously rich owning vast properties around Zimbabwe which cannot be afforded by their measly salaries as government officials.

Tendai Biti, the Minister of Finance in the unity government recently complained that US$ 30 million raised sales of diamonds of Marange stones could not be accounted for.

But sources say the amount identified by Biti as missing was only the tip of the iceberg and that the Finance Minister would never be able to know the exact figure involved because of the sophisticated laundering that took place.

Private jets

On several occasions, private jets of wealthy Indians would land at Harare International Airport to pick up diamonds mined from Marange. The payments would then be done offshore. No documentation would be left making it near impossible to trace the illegal exports.

If you consider all the rot that Mugabe has allowed his top military men to get away with, it all then explains why they want him to die in power and their legendary resistance to Tsvangirai, said one source close to the RBZ.

The looting of the Marange diamonds continued when the army started ceding control of the Marange fields to the Zimbabwe Mining Development Corporation (ZMDC) until the mining rights over Marange were granted to two companies, Canadile and Mbada Diamonds, both with no traceable credentials in the diamond mining trade.

But while some ZMDC officials are now in court over their alleged looting, sources say Zimbabweans should not expect the senior army officials, and other politicians who benefited from the looting of Marange diamonds to ever be seen in the dock at least not when they are still the bedrock of Mugabes power.

The six ZMDC mining executives arraigned in court are accused of stealing US$10 million from Marange proceeds through fraud and misrepresentations of diamond sales. Another US$33 million could also have been lost in the process.

These disclosures also came against a background that one of the mining companies in Chiadzwa, Canadile Miners, which has since been booted out of the contested diamond fields, has been smuggling diamonds out of Marange through Mozambique and selling them on the black market.

Ironically, government blames Canadile directors for smuggling diamonds out of the country mainly through Mozambique to sell them in the black market in Dubai, India and China, the key markets for the Marange gems.

September fallout

Canadile was recommended to Zimbabwe Mining Development Corporation (ZMDC) executives by Mines Minister Mpofu who in turn urged Mugabe to approve its mining deal.

Mugabe and Mpofu defended the company until there was a fallout over the control of the mining and sale of the diamonds in September between Canadile deputy chairman Lovemore Kurotwi and the minister.

Mpofu was accused by Kurotwi in a meeting with Mugabe in September of soliciting for bribes. Mpofu acknowledged in a meeting with ZMDC officials on September 20 that he was accused by Kurotwi of asking for bribes, but tried to pre-empt speculation that he was receiving bribes and a lot of corrupt payments to facilitate mining deals.

Aware that people were accusing him of taking bribes and corruptly enriching himself through the Chiadzwa diamonds, Mpofu himself said there was a plethora of rumours, insinuations and allegations being leveled against him and the ZMDC board.

Mpofu has been on a buying spree, purchasing real estate and housing properties mainly in Harare, Bulawayo and Victoria falls. This invited suspicions from the public and members of a parliamentary portfolio committee which investigated the Marange diamonds affairs earlier this year.

Mpofu has bought one of the tallest buildings in Bulawayo York House and has splashed thousands of dollars on high-value properties in Victoria Falls and Bulawayo.

Two cruise boats

A document listing Mpofus properties shows that he bought a supermarket in Victoria Falls Chinotimba high density suburb, three houses in a medium-density area, two cruise boats on the Zambezi, five houses in Mkhosana high density suburb, three houses in Chinotimba, two industrial stands, one large stand in Chisuma, one big industrial stand next to Chinotimba stadium, four industrial stands on the Airport road, and four medium density plots.

Mpofu reportedly bought all these properties for cash!

Even though he has a farm and supermarkets, sources close to him say that he has no such financial capacity to buy all these properties, especially for cash. Before dollarisation, he earned largely worthless Zimbabwe dollars after the collapse of the Zimbabwe dollar in 1997. After dollarisation Mpofu like all civil servants earns a little more than US$300.

Mpofu has however denied he was using diamonds proceeds to buy personal properties. He said he got a US$1 million loan from the Commerciial Bank of Zimbabwe through his company Trebo and Khays Pvt Ltd.

Documents show that Mpofu indeed got a loan from CBZ. This is contained in a facility letter dated October 26 2009. Mpofu the signed a loan agreement for and on behalf of Trebo and Khays (Pvt) Ltd with a woman named Sikhanyisiwe Mpofu, presumably his wife or daughter.

The loan agreement was signed on December 2 2009 and expired on October 31 this year by which date all the monies due should have been repaid.

Mpofu has reportedly repaid the loan, raising further questions about his sources of income which appears well beyond his means. In any event, the CBZ loan, now Jewel Bank, was very inadequate to enable Mpofu to purchase all the properties that is registered in the names of his entities and a plethora of others he has registered in the names of relatives.

The purpose of the loan was given as to finance capital expenditure requirements. However, sources said the loan was used to mask his source of income because growing suspicions he was minting at Chiadzwa, together with other politicians and their business cronies.

The security for the loan which represented a line of credit – included: Trebo and Khays directors personal guarantees for all sums due supported by first mortgage bond for US$1,4 million over stand 12265A in Bulawayo; cession of insurance policy covering the mortgaged property and cession of revenue generated from property lease rental income valued at US$82 000.

Mpofu gave his address of service as Stand 123, 4th Avenue and Fife Street, Bulawayo, a hint at the various properties he owns in the Bulawayo and elsewhere. Mpofu has mansions in Harare and Bulawayo, placing himself well above the level of prosperity of an ordinary minister and even businessman.

Ministers have since last year been earning a paltry US$350 a month, after it was increased from the US$150. Even those with farms and safari concessions seized from white farmers like Mpofu have been struggling due to lower productivity and poor management. So there is simply no way Mpofus wealth could have been generated from any viable business he controls.

Massive looting

The government took over the Marange fields ostensibly to ensure revenue from the diamonds is channeled into public coffers. But those in the know say the involvement of the government and particularly the army has only helped to give a cover of legitimacy to massive looting of a key national resource.

Independent mining executives estimate that diamonds worth more than US$1 billion could have been smuggled out of the country and sold in the black market over the years including after the arrival of the two dubious South African companies to partner government in the Marange diamond ventures. “Diamonds worth more than US$1 billion have been looted in Marange since 2006,” a senior mining executive said.

“The pillaging was done by the soldiers, the diamond exploration and mining companies and artisanal miners; other state security agents; politicians, dealers, crooks and criminals.”

Well places sources interviewed described the Chiadzwa diamond mining story as a tale of fraud, smuggling, bribery and outright theft. It is riddled with corruption, including buying-offs and paying-off of dodgy mining dealers, smugglers and politicians, and a scandalous waste of public funds. The Zimbabwean public has not benefitted in a meaningful way from the Marange diamonds.

Mbada is a joint venture between the state-owned Zimbabwe Mining Development Corporation (ZMDC)s wholly-owned subsidiary Marange Resources and South Africas New Reclamation Group special purpose vehicle, Grandwell Holdings registered in Mauritius.

Canadile was a joint venture between ZMDCs Marange Resources and South Africas Core Mining and Minerals.

ZMDC, through Marange Resources, concluded Memoranda of Agreement with New Reclamation Group and Core Mining for exploration of the Marange diamonds in July last year. The agreements were transitory for a period of three months within which the investors were to mobilise money and equipment to fulfill certain conditions precedent.

Even though New Reclamation and Core Mining failed to fulfill their promises, especially of investing US$100 million each, they were allowed in and continued to extract and sell the diamonds mainly for their benefit. Even some basic tenets of the agreements were violated such as making retired Air Vice-Marshal Robert Mhlanga the chairman of Mbada when the agreement said the chairman would come from ZMDC.

Scrap metal dealers

During parliamentary hearings into the Chiadzwa mining issues this earlier this year, it became clear that so many things, including Mhlanga being Mbada chairman, were imposed by government for reasons never explained.

Despite all the information and credibility gaps of the individuals and companies trying to mine in Marange, the shareholders agreement between ZMDC and New Reclamation was signed on August 14, 2009, while the one between ZMDC and Core Mining was signed on August 14, 2009.

The companies were given permission to mine the Marange mining title which covers 66 000 hectares. There is an attempt to increase the area to cover a vast 123 000 hectares.

The companies initially shortlisted to partner ZMDC included Benny Steinmetz Group Resources Limited (BSGR), New Reclamation Group, Southern African Investment and Infrastructure Company and Namakwa Diamonds. Other companies also engaged over the diamond investment issues include Community Energy, WMJ Lotter Consultants and Elkhart Mining.

However, New Reclamation and Core Mining were chosen even though Core Mining was not even initially on the shortlist. What was surprising was that the South African companies which had no mining experience and capacity – were chosen ahead of several other more qualified candidates.

New Reclamation Group is a scrap metal company which a dubious record, while Core Mining is a shady company whose directors have been linked to smuggling in Angola and Mozambique and other sleazy activities like mercenary operations in Sierra Leone.

South Africa’s highest competition authority, the Competition Tribunal, in 2008 fined New Reclamation R145 million for its involvement in collusion and price fixing in the ferrous and nonferrous scrap metals.

Part II: Complex plots and sub-plots

The Chiadzwa diamond mining saga has complex plots and sub-plots. It involves a chain of companies and individuals with a shady past and whose records are difficult to trace in some cases for that reason.

The issue has its genesis in 2002 when South African diamond mining giant De Beers subsidiary, Kimberlitic Searches (Pvt) Ltd, was granted a four-year Exclusive Prospecting Order (EPO) in Chiadzwa. The EPO expired on March 28 2006.

Africa Consolidated Resources (ACR), which is registered in the London Stock Exchange, has been fighting ZMDC in the courts over the Chiadzwa diamond concessions. The fight has had many twists and turns and remains in the courts despite that in the last round that High Court judge, Justice Charles Hungwe had ruled in favour of ZMDC after reversing his own earlier ruling made last year.

The history of the fight between ZMDC and ACR is intriguing.

After Kimberlitic Searches EPO had expired, ACR proceeded to peg claims in the disputed area (EOP 1523) and applied for registration of numerous blocks of claims in the names of Canape Investments (Pvt) Ltd, Dashaloo Investments, Possession Investments, Heavy Stuff Investment and Olebile Investment.

ACR was then granted a diamond prospecting licence on April 4 2006. On July 21 2006 a Mutare assistant mining commissioner wrote to ACR saying their claims had been cancelled because Kimberlitic Searches had already submitted an application for an extension of the EPO.

On September 15 the Mining Commissioner in Harare wrote to ACR saying the letter rescinding their claims was incorrect and that the claims were still valid.

In August 2006 the then Mines minister Amos Midzi reserved an area which included ACR claims.

In September the minister wrote to MMCZ advising them that he had reserved an area incorporating ACR claims to prevent illegal activities. He also said MMCZ must facilitate investment with local and foreign companies.

Later in the same month Midzi visited the area with MMCZ officials and addressed illegal miners telling them that MMCZ was the only authority lawfully permitted on the site.

Boxes of diamonds

In October he warned ACR to stop clearing and fencing the claims. In November the assistant mining commissioner for Mutare told ACR that he had been instructed by his head office to cancel their claims.

In January 2007 ACR chief executive Andrew Cranswick was summoned to Borrowdale police station in Harare where police seized three sealed boxes containing 129 400 carats of diamonds.

These are the diamonds the Supreme Court in January ruled should be kept at the Reserve Bank until the case is finalised. Police had seized the diamonds in violation of the Supreme Court ruling.

Mugabe and Mines Minister Mpofu defended the move, risking criminal contempt of court charges.

Mineral claims are easy to change ownership because the Mines ministry is riddled with corruption and EPOs are granted and cancelled sometimes depending on who pays the highest facilitation fee!

Missing US$30 ml

Before August last year, and particularly before government started mining in Marange, smuggling was the order of the day after villagers invaded Chiadzwa. A thriving diamond underworld market ran unchallenged there since the discovery of diamonds by villagers in 2006. Prior to that there were exploration companies on the ground which were also accused of smuggling as well. So smuggling has been going on for years.

However, the situation took a new and dramatic twist since governments involvement. Public officials, including politicians, are now directly involved supposedly to protect public resources and public interest, but not much has changed. Smuggling and stealing is still rife.

There has even been controversy about the official sale of diamonds recently under the supervision of Kimberley Process Certification Scheme (KPCS). Initial reports said US$72 million worth of diamonds were sold but later government claimed it had only sold gems worth US$56 million. It was never clarified why there were two different figures.

Finance Minister Biti in July raised alarm over some US$30 million realised from diamonds which he said was never declared to Treasury. Mpofu tried to downplay the issue but it was never resolved.

It later resurfaced during internal ZMDC after the companys directors failed to account for the figure.

Documents show that there was a recent ZMDC inquiry on the usage of US$30 million earned from diamond sales between October 2008 and April this year.

Biti had announced on July 14 during the presentation of his mid-year fiscal policy review statement in parliament that US$30 million realised from diamond sales was missing.

According to the KPCS monitor, Zimbabwe recently sold at least US$30 million worth of diamonds from Marange which Treasury and ZIMRA (Zimbabwe Revenue Authority) have no record or knowledge of, Biti said.

KPCS has been involved in trying to ensure Zimbabwe did not trade diamonds outside its processes. Although the KPCS has backed Zimbabwe to export diamonds, Harares diamond sales are still conditional and monitored. The KPCS banned Zimbabwe from selling diamonds in May after it was discovered the country was exporting gems illegally, mainly to Dubai.

Government illegally exported diamonds through the back door to Dubai, United Arab Emirates (UAE), in violation of the January Supreme Court ruling which ordered a freeze in all mining activities at the controversial Chiadzwa diamond fields.

Most of the funds obtained from the controversial Dubai diamonds sales were also wired through telegraphic transfers and received through the RBZ, some through CBZ Bank and ABC Bank in Zimbabwe while some of the money was simply stashed offshore.

Evidence show that some of the beneficiaries of the diamond transactions were ZMDCs Sandawana Mines and Lesley Faye Marsh Jewellers (Pvt) Ltd which trade as Premier Diamonds. It is not clear to whom Premier really belongs to.

Hot air

Mpofu has denied that the US$30 money had vanished and dismissed Bitis statement as hot air but failed to produce evidence to rebut the finance Ministers claims.

Mpofu said a forensic audit of diamonds mined in the controversial Marange fields was under way and would prove Biti wrong.

But investigations showed that Biti was right after all, except that the figure he mentioned was only the tip of the iceberg, according to some key sources.

ZMDC documents say the companys management recently told board members that ZMDC had sold diamonds worth US$30 million between October 2008 and April 2010.

However, when the board demanded documents to support the assertion and account for the money, the records only showed revenues amounting to US$22 584 347.11. The difference of US$7 415 653.89 was not accounted for.

The issue of how Mbada and Canadile came into the fray has always been simmering.

Documents at hand show that after a due diligence between August 4-6 last year by ZMDCs select board committee, which included the companys executive Dominic Mubaiwa, board chairperson Gloria Mawarire, chairperson of the finance and investment committee Ashton Ndlovu, board member Mark Tsomondo and company secretary Tichaona Muhonde, shareholders agreements were signed but so many questions remained lingering.

Mubaiwa, Mawarire, Ndlovu, Tsomondo and Muhonde were last week arrested on charges of fraud relating to this due diligence exercise and other issues, including the misappropriation of US$10 million and potentially prejudicing ZMDC of US$33 million.

Canadlie deputy chairman Lovemore Kurotwi, who is also the chairman of Core Mining, was also arrested for allegedly obtaining the diamond mining concessions in a fraudulent manner.

Kurotwi is accused of lying that Core Mining was a special purpose vehicle of global mining giant Benny Steinmetz Group Resources Limited (BSG Resources Ltd) when it was not.

Kurotwi was arrested after he recently accused Mpofu in front of Mugabe of soliciting bribes during the cutting of the controversial diamond deals.

Minutes of a meeting between Mpofu and ZMDC board members held on September 20 at the Mines ministrys board room say that the minister confirmed that Kurotwi had personally accused him of soliciting bribes in front of Mugabe.

This, among other grounds including fraudulent misrepresentation of Core Mining and Minerals corporate profile and investment portfolio, was said to be the reason behind Kurotwis arrest.

Obedient Son

Mpofu who signed off his letters to Mugabe as your ever obedient son had initially in the meeting with ZMDC board members started with a disclaimer that there were rumours, insinuations and allegations of corruption levelled against him and the board.

He went on to narrate to ZMDC board members his encounter with Kurotwi in a meeting with Mugabe.

The minister noted that in his meeting with His Excellency (Mugabe), Mr Kurotwi made a number of allegations against him and against the board members, minutes of the September 20 meeting say.

Mr Kurotwi alleged that the minister was being a stumbling block to the setting up of the Zimbabwe Diamond Technology Centre which he incorrectly alleges was part of the original joint venture agreement, the minutes say.

They also say that board members of the (Zimbabwe) Mining Development Corporation were working in cahoots with the minister against Canadile Miners, that the minister is directing the board to work against him (Kurotwi), that there were attempts from the minister to solicit bribes from him and to divide Core (Mining) shareholders and turn them against Mr Kurotwi.

Minutes say Kurotwi had accused Mpofu of asking for bribes and trying to divide Core Mining shareholders and turn them against him as the main investor.

Kurotwi grilled

The minutes say instead of confronting Mpofu over Kurotwis sensational allegations, Mugabe actually turned against the Canadile and Core Mining executive, grilling him over many issues.

The fallout between Mugabe and Mpofu on the one hand and Kurotwi on the other mostly exposed Mugabe because as he had staked his reputation as president in March this year, claiming the issuing of mining contracts and concessions to what government claimed were approved strategic investors in Marange was above board.

When MPs tried to investigate the issue earlier this year, Mugabe in March intervened personally making a spirited defence and justification of the dubious diamond mining arrangements.

We had a list of companies applying. Finally two of them, Mbada and Canadile, were chosen. They were recommended and I was shown the papers and their proposals. The ministry (of mines) then decided that for now they were preferable to the rest. We said fine. There are the ones who there for now, Mugabe said.

However, Mugabes encounter with Mpofu and Kurotwi reveals that either he just believed what he was told and did not read the papers and proposals he said he was shown or he was hoodwinked. It is also possible that are other unknown reasons why Mugabe defended Mbada and Canadile.

During his meeting with Mpofu and Kurotwi in September, Mugabe found himself in an invidious position.

Documents show that after Kurotwi accused Mpofu of soliciting bribes, Mugabe, instead of confronting Mpofu over the sensational allegations, actually turned against Kurotwi and started grilling him over issues which the president himself initially claimed were above board.

Mugabe to the defence

Mugabe asked Kurotwi about Core Minings corporate profile, its incorporation and whether it was true that the company was backed by BSG Resources Ltd.

Kurotwi approached Mpofu in March last year saying he was a representative of BSG Resources when he was not.

He then wrote a letter to Mpofu saying he represented Core Mining, purportedly a special purpose vehicle for BSGR which wanted to invest US$2 billion in Marange diamonds.

Kurotwi and ZMDC officials were arrested over this issue over which they are accused of fraudulent misrepresentations and prejudicing ZMDC of US$10 million and trying to defraud the company of US$33 million.

Mugabe, according to the minutes, also asked Kurotwi about his educational background and mining experience. The president also asked him how he expected Mpofu to sanction construction of the diamond centre without approval from his office, showing Mugabe is closely involved in the Chiadzwa diamond mining activities.

Mugabe also queried Kurotwi over the ownership of the land on which the diamond centre was to be built.

Further, Mugabe asked how much Core Mining had invested and why it was unable to bring the US$100 million it promised, as well as why the company had borrowed US$1,5 million from Agribank.

Minutes say Kurotwi did not give Mugabe credible answers. After that meeting Mugabe ordered an internal ZMDC investigation which led to the arrest of Kurotwi and five ZMDC officials.

But no one in the know about the Marange affairs expects the army of the law to be long enough to reach, Mugabe, his wife, his army generals and CIO officials who sources allege looted the alluvial deposits the most.

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