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sharing in governance of extractive industries

Anjin Return: An Acid Test For The New Dispensation

In the rear-view mirror of Zimbabwe’s political and socio-economic narrative, Mugabe image looms large. But is the windshield clear enough for accelerated progress? One important clue which can help to unravel this puzzle relates to how the new government is managing the country’s mineral wealth- platinum, diamonds, lithium and gold among others.

Of all minerals, developments in the diamond sector warrants a close examination. This is hardly surprising though. Diamonds, because of their characteristics, items of high value which are easy to carry makes the stones attractive to criminals. Money laundering risk exposure in the trade of diamonds is well articulated by the 2013 Financial Action Task Force (FATF) report .

Early this year, the blog I wrote on mineral revenue transparency reforms: priorities for the new govern... made an interesting analogy centred on 2017 “Operation Restore Legacy” and 2008 “0peration Hakudzokwi” (no return to artisanal mining) in Marange. In both instances, the army moved in to restore order. In the end, the army gained significant stake in diamond mining and government. The army had a 40% stake in one of the biggest diamond mining companies operating in Marange, Anjin diamonds. The remaining stake was owned by Anhui Foreign Economic Construction (Group) Co Ltd (Afec) from China and 10% stake owned by Zimbabwe Mining Development Company (ZMDC).

Unarguably, the army’s involvement in Marange did not deliver any tangible development outcome, the $100 million defence college being the only exception. Likewise, the army gained key positions in the new government. Key office positions among other include the offices of the vice president, minister of agriculture and minister of foreign affairs and trade.

The history of Anjin’s diamond mining activities is quite murky. From the Auditor General’s 2011 report, it can be gleaned ZMDC was not committed to recover money from the proceeds of disposing 40% equity in Anjin to the army. In her 2016 report, the Auditor General failed to verify Anjin’s diamond earnings because the company could not avail its audited books. During the peak period diamond exports by value and volume, in 2012,  the former Minister of Finance, Tendai Biti singled out Anjin for not paying taxes. Zimbabwe exported 14,957,648.98 carats worthy $740,998,088.16 in 20...  In July 2017, the Independent Newspaper reported that Chinese investors syphoned US$2....

Arguing that the nation was not fairly benefiting from her rich Marange alluvial diamonds, easy pickings, not so difficult to mine, government decided to consolidate the diamond mines in 2015. A process made easy because of the expired mining rights for all the seven diamond mining companies that operated in Marange. Government then saw it fit not to renew the expired mining rights. All this was done under the former Minister of Mines, Chidhakwa.

Some argued that the move was to constrain the Lacoste faction that was deemed to be profiting from Marange diamonds through the army’s involvement. Lacoste was a ZANU PF faction allegedly led by Mnangagwa which was backed by the army and war veterans that was contesting with the G40 faction backed by the first lady, Grace Mugabe, to take over from Mugabe.

Chidhakwa, however, maintained that the main objective of forming ZCDC was to bring transparency and accountability in the management of Marange diamonds. That said, the objective was tainted by poor corporate governance as the Ministry of Mines through its former Permanent Secretary, Francis Gudyanga, baby seated state owned enterprise-ZCDC as the chairman of the ZCDC board.

On 20 April 2018, the Zimbabwe Environmental Law Association (ZELA) accompanied EU Ambassadors during their field visit to ZCDC diamond mining operations in Marange. One interesting observation was the fresh fence erected on Anjin diamond’s concession, air strip clearance and the presence of the Chinese on the ground.  A worrisome development. Is Anjin coming back?

A colleague and mentor Shamiso Mtisi remarked that the involvement of the army in business is not a challenge. In other countries, for instance the army is an active player in the economy. What matters is a strong dosage of transparency and accountability which is critical to deliver benefits to citizens and not to a few powerful individuals.

To win public trust and confidence, government must move with speed to align mining legislation with Section 315 (2) (c) of the Constitution to deliver transparency and accountability in the negotiation of mining contracts as well as performance monitoring of the mining contracts. In addition, government must urgently embrace the Extractive Industry Transparency Initiative (EITI) to enable the public to track various taxes paid to government institutions by mining companies. Transparency and accountability reforms in the mining sector are a key indicators to whether government is committed to curb corruption, to abide by the Constitution and to leverage the country’s abundant mineral wealth for socio-economic turnaround.

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