Roses are red, violets are blue, can you follow the trail of diamond revenue?
Any hopes that money from the sale of Zimbabwe’s diamonds will be used to build new schools, provide the hospitals with medicine or improve the service delivery of local councils have been dashed, following a report published by Global Witness on Valentines Day.
Diamonds: A Good Deal for Zimbabwe? reveals that several directors of one of the largest mining companies operating in Zimbabwe’s controversial Marange diamond fields are drawn from the military and police, and highlights the risk that off-budget funding of the security sector could be used to finance violence in any future election.
Anjin and Mdada
Since 2008, two mining companies have been awarded claims under questionable circumstances, Anjin and Mdada. Anjin is a joint venture between a Zimbabwean firm, Matt Bronze, and a Chinese construction company, Anhui Foreign Economic Construction Group. Its key beneficiaries reads like a who’s who of retired and serving security officers.
“Control by the military and police over a major diamond mining company creates opportunities for off-budget funding of the security sector,” reads the report. “There is a real risk of these revenues being used to finance violence during a future election.”
The report highlighted the problem of allowing the direct control of such funds to be held by the Ministry of Defence saying that it directly cut across the democratic process.
“It enables the Zimbabwean military to set and fund their own agenda, with little control exercised by elected politicians. Diamond revenues should flow into the Ministry of Finance, which would allow the Zimbabwean Cabinet to decide on its public expenditure priorities,” reads the report.
Dodgy company structure
Mdada is a joint venture between a South African company and the state-owned Zimbabwe Minerals Development Corporation. Global Witness revealed that 25 percent of Mdada was given to a company linked to a man who is widely recognized as President Robert Mugabe’s former pilot. The company, Transfrontier, has an opaque company structure based in tax havens.
Although the beneficiaries of the company are unknown, it is named as a sister company by a South African firm, Liparm Corporation, headed by former Air Vice Marshal Robert Mhlanga, a prosecution witness in Morgan Tsvangirai’s 2003 treason trial.
“Corporate anonymity and the use of secrecy jurisdictions can be used to hide the true beneficiaries of business deals and have the potential to conceal corruption and tax avoidance,” said a senior campaigner from Global Witness, Nick Donovan.
The organization has called on the government and Mbada to publish all contracts and details of revenue flows to allay such fears. It also highlighted that the increase in the company’s concession area followed irregularities that Global Witness noted in a previous report. These included a refusal to hold a public and transparent tenderingprocess, a failure to properly register33
Mbada as a company in Zimbabwe,inadequate due diligenceinvestigations into Mbada, and afailure to properly appoint ZMDCmembers to the joint venture board.
“Zimbabwe desperately needs diamond revenues for health and education services, not AK 47s and flash cars for the elite,” said Donovan. “Diamond mining companies must not be used as an off-budget cash cow by Zanu (PF) loyalists in the military and police. If the next election is accompanied by violence there’s a real risk that any bloodshed will be funded by diamond revenues.”
With the Kimberly Process’ recent approval of unlimited diamond exports by Mdada, and the decision yet to be made about whether to award the same rights to Anjin, Global Witness registered its concern that there was lack of accountability in the supply chain. There have been countless reports of human rights abuses at the diamond mining fields and outrage over the KP’s failure to acknowledge the ongoing issues of abuse and corruption.
“Given the failures of the KP, the diamond industry urgently needs to implement a system of ‘supply chain due diligence’ in order to give consumers the confidence to buy diamonds without any risk that they fund human rights abuses,” said Donovan.
Following several visits to the country, KP monitors noted that there were five independent diamond processing plants associated with Anjin and a further two under construction. Anjin has claimed that it is the largest diamond company in the world, but this claim has not been verified. When fully operational its capacity is expected to reach two million carats a month. The Chinese firm, AFEC, is involved in construction projects all over the world and is currently building a National Defence College in Zimbabwe. The deal came under criticism from the MDC Finance Minster TendaiBiti because the $98 million loan used to finance the building is to be repaid using revenues from Anjin. He questioned in parliament whether, in the face of the country’s escalating debt, it was wise to, “borrow funds for non-production investments”.
The KP team’s most recent visit to Anjin was in November 2011. The following report made no reference to the ownership of the company or its partner. It was also silent on the involvement of security personnel in the management. Global Witness’ main concern is, however, the KP’s refusal to address the flow of diamond revenues, saying that it focused more on the flow of the actual diamonds.
Zimbabwe is in desperate need of money to repair its health system, improve education and a host of other services for its people. The country’s 2012 budget specified that additional spending would occur if the Treasury received the $600 million from diamond revenue promised by the Zanu (PF) Minister of Mines. Accurate records of exactly how much money has been made from diamonds are notoriously hard to come by.
Global Witness recommended that the government should address the involvement of security personnel in diamond companies by passing legislation that would ban them from being owners or subsidiaries of companies in the sector. It also called for an audit into the concessions granted in Marange and the publication of all of the beneficial owners of Mdada and Anjin. It encouraged consumers not to buy diamonds from Zimbabwe until it was possible to ascertain whether the revue generated was not being used to fund state-sanctioned violence. In the longer term, it called on the government to design a new concession allocation procedure that had the public’s interests at its core.Post published in: News