MPOFU & ZIMBABWE`S DIAMONDS

The Ministry of Mines and mining companies in Marange were recently accused by a Parliamentary Committee of being evasive and hiding information about their activities. Legislators from Zanu (PF) and MDC-T who sit the committee on mines and energy found that witnesses were unwilling to give information out of fear of reprisals. The committee, which presented its report to Parliament this month, accused Mines Minister Obert Mpofu of making illegal board appointments to subsidiaries of the Zimbabwe Mining Development Corporation in order to have direct influence over their activities.

“The ZMDC Act empowers the minister to appoint the ZMDC board members only and not those of the subsidiary companies,” said the committee, adding that this was one of the reasons why the ZMDC Board had little control over its subsidiaries - Mbada, Anjin and DMC. Individuals said to have been unilaterally appointed by Mpofu included Obey Chimuka, Ashton Ndlovu, Cougan Matanhire and Dr Mhlanga.

The report said that in January 2010 Mbada Diamonds attempted to auction its diamonds in violation of both national and international law. “Out of the 10 directors of Mbada Diamonds only two, Dr Mhlanga and Mr. Kassel, admitted having knowledge of the attempted auction,” the report said. Legislators were of the opinion that relevant government institutions probably knew about the auction but because of fear of reprisals they would not admit it. “Two meetings were held in camera upon request from the witnesses. During the data gathering process, the committee noted with concern that there was no free flow of information because some of the witnesses were too defensive or uncooperative or unwilling to attend the committee’s meetings,” the report noted.

The Committee managed to gain entry into Marange in 2012, two years after it had begun its activities. “The committee failed to conduct a public hearing with the community living in Chiadzwa and was advised that it was inappropriate due to security reasons. However, the committee managed to visit Arda Transau where some of the re-located communities were now living,” the report said. There are serious discrepancies between what government receives from the sector and what diamond mining companies claim to have remitted to Treasury. “Mbada Diamonds claims it remitted a dividend of over $117 million which is far above what Treasury received for the combined period of 2011 and 2012,” the report said.

Currently, diamonds are sold at below 25 percent of the normal price. As a result of financial restrictions, a number of loopholes have been created leading to fiscal leakages and promotion of corruption. “The committee observed with concern that the true value of investments made into the country cannot be ascertained in the absence of a proper valuation from government agencies. It is possible for these companies to finance their operations from the proceeds of the mining operations which is in violation of the Companies Act. There is also concern about the manner in which certain equipment was brought into the country. “For instance in 2010, ZMDC was given a directive to purchase equipment at Hot Springs that belonged to J W Lotter for R5,6 million and ZIMRA was paid $46,000. However, the owner of the equipment demanded a further $125,000 for transport charges and yet under normal circumstances when duty is paid it includes transport,” the report said.

Mbada Diamonds informed the committee that it had made investments worth $185 million. However, ZMDC in its due diligence report expressed reservations on this matter. The Committee noted with concern that the relationship between government and civil society groups working in Chiadzwa was still very shaky. It is estimated that Zimbabwe now has the capacity to supply 25 percent of the global diamond market.