Mugabe: power lies to the East

chiwengwaThe US remains the worlds biggest market for diamond jewellery, but it is China that has secured access to Zimbabwes controversial diamond fields. Khadija Sharife investigates. (Pictured: General Constantine Chiwenga Zimbabwe Defence Forces Commander)

I bumped into him when another young fellow kindly offered to liberate me of my shoes. Anxious to buy some time, I informed the fellow lets call him the Artful Dodger that he would have to purchase my shoes for ZAR50, money for the taxi home, as I could not walk barefoot in the heat.

From behind me came the sound of booming laughter. Shooing the resentful empty-handed Dodger away, the source approached me smiling.??Just call me Bob, he said, steering me to a safer corner outside South Africas Department of Home Affairs.

Like me, he was in the process of handling passport issues. After chatting about my shoes and the price they would fetch the Dodger on the streets, I commented that Bob was probably not the greatest of names for a Zimbabwean.??

‘You people have short memories,’ he said, He was a real hero once upon a time.’??While we both leaned against the frame of a shiny black burning hot jeep, slowly roasting under the sun, Bob mentioned that although he had no desire to go back to ‘some kind of hell’, he missed his country ‘like a child does his mama.’??

He had no idea as to whether the unity government between Zanu (PF) (headed by Robert Mugabe) and the Movement for Democratic Change (MDC) would be successful, given that ‘the old man was still in power and behind him, too many more just like him.’??

The strength of Zanu (PF)

According to him, the strength of Zanu (PF) was not in Mugabe but in the army and corporate executives that wanted to keep him there, so that they too could remain in power and ‘eat the money’.

These days, said Bob, Mugabe usually points to the East.??Indeed, the price of Beijing’s friendship, as in most of Africa, is resources: Specifically oil, iron ore and, in Zimbabwe’s case, diamonds.

The Shanghai Diamond Exchange (SDA), one of twenty-eight bourses globally, intends to become the world’s fifth largest by 2013. During the past year, China has become the world’s second largest diamond market, with 40 per cent of brides in major Chinese cities accepting promises of ‘forever’ in the form of diamonds only.??

But geo-strategic control of resources is less often about who has access than who doesn’t. In Zimbabwe’s case, although the US remains the world’s largest market for diamond jewellery, it is China that has directly secured the pipeline.??

This was not the case until recently, when one of the two active joint ventures (JV) Canadile, a public-private partnership between the Zimbabwe Mining Development Corporation (ZMDC) and South African company Core Mining and Minerals, was removed from the equation through the arrest of key Canadile representatives such as Lovemore Kurotwi, as well as the now suspended head of the ZMDC, Dominic Mubayiwa.??

It is alleged that Kurotwi was directly interviewed by Mugabe about the source of Canadile’s development capital said to be US$2 billion, allegedly from Israeli billionaire Beny Steinmetz via the Beny Steinmetz Group Resources (BSGR).??

Locking out the West

Although it was meant to be a secret, once the information was leaked, BSG, active in diamond-rich countries such as Botswana and Sierra Leone, issued strong statements separating itself from Canadile.??

And even though the Mubayiwa admitted that it was the minister of mines, Obert Mpofu, who had personally approved Canadile above the heads of the ZDMC, stamping out the company and seizing its equipment, appeared to be purpose enough.

If BSGR’s involvement as chief capital provider was true, openly associating with Mugabe’s regime and Zimbabwe’s ‘blood diamonds’ would certainly not be good news for the company, as the Steinmetz Diamond Group, one of the De Beers’s largest clients, remains a key global supplier of rough and manufactured diamonds to the international markets; it is also engaged in joint ventures with respectable jewellery market-makers such as Sothebys.??

BSGR however allegedly had no qualms accepting Rio Tinto’s iron-ore Simandou concession in Guinea, when the then-president and dictator of almost two decades, Lansana Cont, decided to strip Rio of half its rights.

The difference was that iron-rich Guinea is a little known country when it comes to one of the most crucial factors affecting a corporation’s financial bottom line: The Zimbabwe-focused ‘blood diamond’ fixated media.??

Nor would BSGR have had an easy time: Mugabe recently openly rejected ArcelorMittal’s proposal to purchase 53 per cent of the state’s ailing Zimbabwe Iron and Steel Company (ZISCO) due to the fact that Mittal’s head was close friends with his enemy, Britain’s Tony Blair.??

Shutting down Canadile therefore appeared to also lock out the presence of Western interests on Zimbabwe’s most crucial and easy-to-access source of wealth: Marange’s alluvial diamonds.??

Chinese military

Yet if the controversial and alleged BSGR interest had been concrete, its intentions would not have been difficult to fathom: Zimbabwe’s finance minister, Tendai Biti, has called Marange’s diamond field the biggest find of alluvial diamonds in the history of mankind. It is estimated to produce US$1 1.7 billion in revenue annually.

To date, around $1 billion in diamond revenue is thought to have been silently looted by the army and political elites at the helm of the state, through Indian, Arab and Chinese purchasers, before release into international markets through the usual industry players.??

China, for instance, present via Anjin Investments, has been mining diamonds at Chirasika for the past seven months, despite the concession only becoming active at the end of 2010. This was admitted to the Parliamentary Portfolio Committee on Mines and Energy by Mr Musukutwa, who stated in response to an MP’s query on the Chinese company, I would like to confirm there is a third company, Anjin, mining in Chiadzwa.

To date, there has been no accounting of diamonds extracted, volumes exported, or revenues remitted. Chinese employees, believed by closely connected source to be Chinese military, dressed in red uniforms, oversee operations.??

According to the UK’s Daily Mail, five Chinese people (Deng Hongyan, Jiang Zhaoyao, Zhang Hui, Zhang Shibin, and Cheng Qins) are silent beneficial partners of Grandwell Holdings, a Mauritian-based tax-free Global Business Category II (GBCII) entity the private arm of another JV with the ZDMC, Mbada Investments.

As Mubayiwa admitted to the Parliamentary Portfolio Committee of Mines and Energy, it would have been difficult to do due diligence on Grandwell because it is a paper company registered in Mauritius, one of the world’s leading secrecy jurisdictions.??

Mbada Investments is chaired by Robert Mhlanga, the Sandton-residing former personal helicopter pilot to Mugabe. Grandwell is owned by a South African company, the controversial New Reclamation, already buddy-buddy with the ZDMC through a decade of exploiting allegedly with no tender contract, renewal or monitoring Zimbabwe’s iron reserves via the Zimbabwe Iron and Steel Company (ZISCO).

Mhlanga is an old ZISCO hand, and the lead broker on the ZISCO ‘steelgate’ deal (2006), characterised by systematic looting alleged to have extended to the highest echelons of the state including Vice President Joyce Mujuru.??Mujuru’s rise to power, through an episode known as the ‘night of the long knives’ was largely at the behest of her husband, General Solomon Mujuru, Mugabe’s most feared rival within Zanu PF.

Xhead) Sold to foreigners

Like Mugabe, Mujuru has claimed ownership to Zimbabwe’s diamonds through another mine, River Ranch, illegally seized by Mujuru and Sheik Aujan. Mujuru put his power to good use by obtaining the approval of the Kimberley Process Certification Scheme (KPCS), allegedly by removing Priscilla Mupfunira, then head of Zimbabwe’s Mineral Marketing Corporation (MMCZ), which was responsible for providing KP-certification.??

His partner, Aujan, heads a company called Rani Investments based in the tax haven of Dubai, a jurisdiction on the receiving end of illegally peddled Marange diamonds. Diamonds are traded by Rani Investments through the company’s Finer Diamonds Trading Company. Although the United Arab Emirates (UAE) has banned Marange’s diamonds, according to a source, Marange diamonds may likely be channelled and sold under River Ranch’s tag.

High-ranking Zimbabwean government officials and well-connected elites are generating millions of dollars in personal income by hiring teams of diggers, revealed US diplomatic cables released by WikiLeaks.

Whether bought first by regime members or not, eventually the diamonds are sold to a mix of Belgians, Israelis, Lebanese (the largest contingent), Russians, and South Africans, stated the cable authored by US Ambassador James McGee.

Once sold to foreigners, the majority of the diamonds are smuggled to Dubai and sold at the Dubai Multi Commodities Centre Authority, a dedicated economic free-trade zone created in 2002 for the exchange of metals and commodities, most notably gold and diamonds.??

The value of Marange’s reserves are pegged at US$800 billion, labelled by a survey report from De Beers as more than eight times higher than average diamond fields at a ratio of more than 1000 carats per hundred tonnes (CPHT).

The report, prepared for De Beers by noted geologist John Ward, draws Rio Tinto’s concession in Zimbabwe’s Midland province, estimated at CPHT 120.??Gideon Gono himself stated, A reliable estimate shows that US$1.2 billion per month would be realised from diamond sales in the country, enough to solve the economic challenges the country is currently facing.??

But little of this will reach Zimbabweans. Moreover, mass evictions for families residing at Marange has begun, with the displaced to be housed at the Arda Transau Farm resettlement area.

Though diamonds have been exploited for the past four years by the Zimbabwean military and the ZMDC, not a cent had been deposited to the state’s national tax base, save for recent tithes thanks to the Kimberley Process-approved auction.

Later, Tendai Biti complained that as much US$30 million was missing from the proceeds of the KP supervised sale.??The KP definition of blood diamonds is limited to ‘rough diamonds used by rebel movements or their allies to finance armed conflicts aimed at undermining legitimate governments.’??

Xhead) Joint Operations Command

Yet the mechanisms at the helm of the diamond industry have not only locked out the MDC but have also facilitated the concentration of power and resources in the hands of Zanu (PF) through the drivers of Zimbabwe’s politics: The Joint Operations Command (JOC).

The most influential member of the JOC the secretive inside guard controlling all facets of security and intelligence is the head of the Zimbabwe Defence Forces (ZDF), General Constantine Chiwenga. It was Chiwenga who allegedly negotiated the arms-for-diamonds deal, as well as permits for Chinese nationals particularly those with links to the army to mine Marange.??

Certification is crucial for the diamond industry: As Andrei Polyyakov, spokesperson of Russia’s diamond agency Alrosa, the world’s largest diamond producer stated, If you don’t support the price, a diamond becomes a mere piece of carbon. To ensure controlled supply, Gokhran, Russia’s stockpiling agency, has set aside a budget of US$1 billion for 2010, vaulting three million carats of gem quality diamonds each month.??

The threat to undermine ‘controlled supply’ (a system of slow release created by De Beers to manufacture artificial scarcity) has already been proposed by Zimbabwe’s political elites.

Supa Mandiwanzira, a representative of Zimbabwe’s Diamond Consortium said we have the potential to destroy the whole industry by flooding the markets.??

The other alternative, strenuously backed by Zimbabwe’s KP monitor Chikane who is eager to certify Marange’s diamonds as KP-approved, is that Zimbabwe’s Zanu (PF)-controlled political economy will soon be conveniently legitimised under the guise of the unity government, and Marange’s diamonds, systematically legalised through certification.??

And yet, even if Africa produces more than 65 per cent of the world’s diamonds, valued at US$8.5 billion annually, for Bob the Zimbabwean outside Home Affairs in South Africa and others like him, some passports are still worth more than others.??

* Khadija Sharife is the southern Africa correspondent for The Africa Report

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