Despite Restrictions, Buyers Abound for Zimbabwe's Marange Diamonds
Finance Minister Tendai Biti has pegged an increase in salaries for poorly paid civil servants to greater transparency on Marange sales
International disagreement over whether rough stones from the troubled Marange field should be exported have not stopped their international sale - least of all in the opaque semi-official Harare marketplace The diamond world remains divided over regulating diamonds from Zimbabwe’s Marange field following last week’s Kimberley Process inter-sessional meeting, but international disagreement over whether or not such rough stones should be sold without further Kimberley oversight has not kept Marange diamonds off the market. Kimberley member states such as India, eager to import Marange stones officially, say the certification stalemate is hurting average Zimbabweans by preventing Harare from filling public coffers to boost pay for teachers and other underpaid state employees. But sources close to the issue say Kimberley approval of Marange diamond exports would not have much impact on the shadowy pathways on which Marange diamonds now enter world markets – or bolster state revenues to meet public needs. President Robert Mugabe said at an African Union Summit earlier this year that US$250 million in diamond revenues would allow a pay hike for public workers. But Finance Minister Tendai Biti said no such cash flows have come into the Treasury. Biti has said he will consider raising civil servant salaries once it becomes clearer where Marange diamond revenues are going. But few really know the answer to that. Minister of Mines Obert Mpofu says the Marange field has the potential to produce US$2 billion in diamonds a year. Experts agree that the alluvial deposit is extraordinarily rich. One VOA source revealed that the field can produce 5,000 carats per hundred metric tonnes of earth with an average stone size of 5 carats. But government receipts from Marange have been less than US$500 million since the field was discovered in 2006, according to a 2010 report by the Kimberley Process monitor and Zimbabwe Deputy Mines Minister Gift Chimanikire. While smuggling remains a recognized problem, Mines Minister Mpofu blames the United States for the scarcity of treasury receipts. Mpofu told a recent Kimberley Process meeting in Kinshasa, the Democratic Republic of Congo, that the United States is “seizing all our diamond revenue in the name of sanctions on Zimbabwe.” He issued similar charges in a recent interview. “We have American companies that are exploiting and benefiting from our resources, but they want to steal resources at the same time," he said. “They’ve been interfering and they are looking for our money." Mpofu insisted: "We’re going to sell our diamonds. We’re going to trade in our diamonds. Already, we’re having people from all over the world coming to buy our diamonds.” While Mpofu accuses the United States of trying to “steal” diamond revenue through the sanctions it has imposed for nearly a decade experts say restrictions enforced by the US Treasury’s Office of Foreign Assets Control are easy for illicit traders to bypass. Zimbabwean law says all diamonds must be sold through the Minerals Marketing Corporation of Zimbabwe, which is subject to US and European sanctions. The Zimbabwe Mining Development Corporation, also under Western sanctions, has a hand in every Marange operation and is the owner of Marange Resources, which took the lead in the concession formerly worked by ousted Canadile Miners. US-based attorney Erich Ferrari, who specializes in US trade sanctions, told VOA that even if the Kimberley Process reaches a consensus on Marange, diamond buyers will still need to go around US sanctions to buy rough Marange stones. “I don’t think the [Marange] diamond trade will be utilizing the above ground economy any more than they would have been,” Ferrari said. Finance Minister Biti wrote to Minister Mpofu in April requesting that the government’s share of revenues from Marange be transferred to the Treasury. According the state-controlled  newspaper, Mpofu responded that “because of the hurtful and debilitating effect of the sanctions imposed on Zimbabwe and the determination of [the US Treasury] to seize all diamond revenue, our efforts to secure receipt of diamond sales revenue into Zimbabwe continue to be impeded.” But Ferrari asserts that such US sanctions wouldn’t stop the flow of diamond revenues given the many ways in which they can be bypassed by international players. “There is kind of an underground economy that takes place with both larger transactions and smaller transactions,” Ferrari said. “The use of underground or black market money exchangers who receive cash in payment ... and move the money around; as a result of the transaction, money originating in Zimbabwe could be transferred to Dubai and on to India or in any other fashion as part of this exchange.” Beyond this, US sanctions are only problematic when transactions are denominated in US dollars. The diamond industry mostly does business in dollars, according to Chaim Even-Zohar, president of Israeli-based consultancy Tacy Ltd., some Marange deals are being settled in South African rand and Hong Kong dollars. “It’s not hard to get the diamonds out," Even-Zohar said. "The sanctions are blamed for a lot of economic problems in Zimbabwe but that’s nonsense." He suggested little will change in how Marange gems are traded even if Kimberley clears them for exports. The main impact will be on legitimate diamond buyers who are eager to get their hands on rough stones as supplies are currently tight, driving up prices. Though Marange diamonds only fetch around 60 to 70 percent of their true value when sold into the black market, Even-Zohar says, the trade is nonetheless lucrative. “I think that last year the official exports were in the area of three to four hundred million and unofficially probably about a billion plus,” Even-Zohar said. He estimated earlier this year that around $100 million worth of diamonds or more a month were being dug out of the Marange alluvial field. Official statistics for Zimbabwe’s diamond production, imports and exports are available on the Kimberley Process Web site for 2004 through 2009. But the Ministry of Mines has not released figures for 2010. Deputy Mines Minister Gift Chimanikire said he knew of just two Marange auctions in August and September 2010 carried out under a Kimberly certification procedure which collectively amounted to some US$330 million. Companies mining in Marange have also been reticent to release any information. Kimberley Monitor Abbey Chikane’s 2010 report said Mbada Diamonds, which has the largest operation in Marange, had produced almost 4 million carats of diamonds between when it launched operations in late 2009 and May 2010. Mbada Diamonds Director David Kassel told VOA reporter Sandra Nyaira that he was “bound by confidentiality with regards to the divulging of sensitive company information” such as production numbers and the estimated capacity of Mbada’s claim. Economist Godfrey Kanyenze, director of the Labor and Economic Development Research Institute of Zimbabwe, said the government’s figures on Marange output have been challenged: “There is no clear or uncontested figure that has been proffered in respect to the revenues from Marange," Kanyenze said. “The Mines Ministry said they had given US$174 million to Treasury,” Kanyenze said. “When they were challenged by the Minister of Finance, they reduced the number to US$160 million. Even for an economist based in Harare, it is hard to ascertain what is happening.” Kanyenze said sales are known to be taking place through private channels. But data on the scope of such sales is hard to come by. Smaller-scale smuggling continues through Mozambique, but most of the big-money deals happen in Harare, sources said. One source close to the process explained the smuggling system to VOA. Potential buyers must have at least $500,000 to be considered and are vetted by agents of the Central Intelligence Organization, which reports to President Robert Mugabe. If cleared, the buyer is directed to a certain address or escorted to the offices of the Minerals Marketing Corporation of Zimbabwe and allowed to view stones. A fortified hanger at Harare International Airport is suspected of being a key location for such sales. Most foreign buyers use local intermediaries to make such deals. Trafficking continues between Marange, in eastern Zimbabwe, and Mozambique. Stones are supplied by military and police mining syndicates entrenched in Marange. Chiadzwa Community Development Trust Chairman Malvern Mudiwa said tensions are rising between military syndicates and the companies operating in Marange. The mining firms are “not comfortable” with the military, "only there for looting not protecting,” said Mudiwa. Armed soldiers and police often intimidate company security guards, while groups of miners split profits with the soldiers or police who oversee them. Finance Minister Biti and Mines Minister Mpofu remain at odds over diamond revenues that were supposed to be paid into the Treasury. Biti has been drafting diamond revenue legislation which Mpofu complains would bypass his ministry, charging that the legislation originated with Western experts, "unacceptable" to the sovereign Zimbabwean state. Mpofu told VOA that his ministry is working on its own legislation on the management of diamond revenues and that the Cabinet "directed that we proceed with that.” Mpofu said Marange diamonds have added US$200 to state coffers. But Mudiwa said neither the people of Marange - many of whom have been forcibly relocated - nor the Zimbabwean people as a whole, have benefited and will not without transparency. “For as long as all the sales, all the movement of diamonds, is just done without anyone watching, it will be a disaster as it is now,” Mudiwa said. “It won’t help the country. Even Marange itself is not benefiting even a cent out of the whole proceeds.” So as the diamond world continues to argue over Kimberley certification and compliance by firms in the rich Marange field, an elite and shadowy group continues to siphon off hundreds of millions as Zimbabwe's precious resource is pilfered on a grand scale.