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Marange Diamonds: The Drama Never Ends

Introduction

Seven executive managers of the Zimbabwe Consolidated Diamond Company (ZCDC), including the Chief Executive Officer (CEO) were fired by the board on Friday 17 May 2019.  ZCDC is a State-Owned Enterprise (SOE). The entity was created in 2015 and started operations in 2016 after seven diamond mining companies were booted out in the name of bringing transparency and accountability to murky Marange diamond mining activities.

The dismissal according the board, was necessitated by the desire to restore market and public confidence following several allegations of corruption and abuse of office. Since no granular details were shared, it is important not to take things at face value. But to try to dig deeper for possible clues and to help with suggestions on what it takes to bring public confidence in the management of Marange diamonds. I shudder to say rebuilding public confidence as opined by the ZCDC’s board because from the onset, Marange diamond mining operations dismally failed to inspire public confidence.

Jobs robbed by diamond robberies

ZCDC experienced a spate of armed robberies of diamonds. We have not heard of any public report on diamonds robberies at Murowa diamonds. Consequently, one can argue that a spate of diamond robberies might have robbed the senior management of their jobs. Speaking of armed diamond robberies, could it be that ZCDC management closed loopholes for powerful and well-connected individuals who are used to looting diamonds from Marange. Perhaps out of frustration and desperation, the clique became so daring to make a statement to ZCDC by organising several armed robberies. This sounds like stretching facts a bit far, but, the former Permanent Secretary, Prof Gudyanga warned “… when it comes to diamond, there are syndicates that are very sophisticated in the country and outside the country and many people get involved. Many beneficiaries get involved to ensure that the truth never comes out”

Allegations of corruption and abuse of power

Before the board announcement on dismissal of the ZCDC senior management, the CEO was arrested for recommending diamond sales to a black listed person under Kimberly Process (KP). Allegations surfaced on abuse of power by the chief financial officer who allegedly bought 1,200 bags on cement from Lafarge on ZCDC’s account for his own personal use. Looking at the rear-view mirror, Office of the Auditor General (OAG)’s report on ZCDC’s 2016 raised several damning issues on poor corporate governance. The board must openly address steps it took to implement the OAG’s recommendations.

People feel good when hunting with their own dogs

There were strong allegations that ZCDC was created to close revenue stream for one ZANU PF faction, Lacoste, which allegedly had the military backing. ZCDC was created when Chidhakwa, allegedly aligned to Generation 40 (G40) faction in ZANU PF, oversaw the Ministry of Mines and Mining Development. The Military had a stake in one of the biggest diamond mines in Marange, Anjin Investments, which was booted out along with other entities – Mbada, Jinan, Diamond Mining Corporation (DMC), Kusena, Gye Nyame and Marange Resources. Companies like Anjin investments failed to have their books audited year in year out. The Auditor General had trouble to verify taxes paid by Anjin because of failure to produce audited financial statements. Whilst speculation was strong that factional fights created ZCDC, transparency was one of the main reasons given for creating ZCDC. Considering that Anjin’s books were never subjected to an audit, the transparency card was genuine although other motives could not be ruled out. So, when the Lacoste function emerged supreme after the November 2017 events which reshaped Zimbabwe’s political landscape, arguably, it was only a matter of time before changes were made. People feel good when hunting with their own dogs. Always, the ZCDC management which was dismissed was skating on thin political ice.

Failure to manage expectations

ZCDC mostly painted a robust outlook in terms of diamond production and earnings. Now that the country is facing severe foreign currency shortages, could it be that authorities in government were disappointed that diamonds were not bringing in the anticipated cash.  In its 5-year strategic plan, ZCDC has a target of producing 10 million carats generating annually, generating $1 billion in foreign currency, contributing $250 million in taxes to government and $20 million to Marange-Zimunya Community Share Ownership Trust.  In 2018, ZCDC surpassed its targeted diamond production, producing 2.8 million carats against 2.4 million carats. Between 2016 and 2018, ZCDC generated $22.9 million according to MMCZ. Diamonds, including gold, and platinum used to be a top performer on foreign currency earnings at one-point generation US$740 million in 2012.

Conclusion

It is too early to celebrate whether ZCDC’s board made a good move to restore market and public confidence by firing the entire ZCDC executing management aside from the chief operating officer. Parliament Portfolio Committee on Mines and Mining Development must dig to deeper to unmask real challenges at ZCDC. The board must understand that given past chronicles of corruption concerning Marange diamonds, openness is the pillar of building public confidence. Anything short will always attract speculations whether the move by the board is well intentioned or not.

 

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