Financing Terror: Zimbabwe and the Return of the Blood Diamond
Remarks by Roger Bate to African policymakers meeting, Cape Town, South Africa

 

Introduction

For a bankrupt country in the middle of hyperinflation, the discovery of a major diamond deposit in Zimbabwe in June 2006 should have been good news. Instead it has provided sustenance to a volatile and violent political elite that suppresses the majority. The power sharing/coalition government in Zimbabwe came into effect three years ago, and it provided a unique opportunity for progress – donors were willing to help in limited ways. The Southern African Development Community (SADC) was prepared to oppose the elite of ZANU PF, which seemed determined to undermine the coalition functionality, while sustaining its façade. Unfortunately the discovery of diamonds has allowed ZANU PF’s elite to bypass normal checks and balances. One can see from the increased wealth of the elite in Harare, Zimbabwe’s capital, that progress is being made, but it is advancement for a very few, and it is every inch the worst manifestations of the resource curse. With elections likely within a year, it has to be hoped that the diamond wealth will not finance a new ZANU wave of violence, and plunge Zimbabwe back into the dark days of the middle of the last decade. That is the hope, but the likelihood is that mayhem will return come the next election. 

Background 

Major new alluvial diamond deposits are rare, but in the Manicaland Province in the far east of Zimbabwe, about 60 miles south west of the town of Mutare, the Marange diamond field was found in June 2001. The South African diamond group De Beers had been searching the area of Marange for fifteen years and in 2001 they found low value alluvial stones. De Beers' exploration certificate expired on March 28 2006 and because of the political uncertainty of that time De Beers did not renew. Exploration was taken up by UK company, African Consolidated Resources (ACR). According to Human Rights Watch, ACR, through its four Zimbabwean subsidiaries, registered exploration claims over the Marange diamond fields giving it “exclusive rights to explore and search for diamonds and other precious stones in Marange district”.

When ACR discovered higher value diamonds, it lodged the finding as required by law and asked assistance from the ZANU PF Zimbabwean government to remove local villagers who were digging in the area that by law were allotted to ACR.

But as it had done with white owned farms in 2000, in 2006 it did with white-owned mines – ZANU PF played the race card. In effect ZANU PF claimed the land was public and that anyone could dig there. What followed was a diamond rush, with perhaps up to 20,000 illegal artisanal miners; a free for all that resulted in poor mining practices, random acts of violence and increasing corrupt oversight by Zimbabwe’s military elite. 

Confusion reigned. ACR’s claim was upheld on September 19th 2006 by Zimbabwe’s Mining Commissioner, so ACR started to prepare fencing of its property, but within weeks the Minerals Marketing Corporation of Zimbabwe (MMCZ) claimed authority over the area. In November 2006 the police deployed over 600 officers to the Marange area and drove off or arrested over 9000 artisinal miners – Human Rights Watch said the police action was “marked by human rights abuses, corruption, extortion and smuggling”. 

The police presence was not continuous, but regular swoops by police meant that illegal miners were at risk. But with no other options in a broken economy, and with hopeful miners drawn from other neighboring countries, by October 2008 there were up to 35,000 people mining illegally in the area. 

Then the army and Central Intelligence Organization (CIO), ZANU PF’s secret police, launched a series of raids and increased their continuous presence in the area to both drive out illegal miners and to restore some order to the location. But according to Human Rights Watch it also did this so that well connected army units could profit from the mining (recall that this occurred at a time when the economy was at its worst). HRW claimed that the army and CIO killed at least 214 miners, and by the end of November 2008 it had forced some of the miners (including women and children) to remain and work for them.

February 2009 saw the power-sharing coalition government being formed between Mugabe’s ZANU PF and the Movement for Democratic Change (MDC) run by Morgan Tsvangirai. While ZANU retained control over the armed forces and CIO, MDC controlled the police and key ministries, such as finance, education and health. 

The bottom had been reached in terms of human suffering across Zimbabwe and from the nadir of end of 2008 to today the overall situation in the country has improved.

When it came to the Marange fields, HRW claimed that the new coalition could “generate significant amounts of revenue from diamonds, perhaps as much as $ 200 million per month, if Marange and the other mining centers were managed in a transparent and accountable manner”. 

In 2009, the Partnership Africa Canada, another activist group, produced a report called Diamonds and Clubs which explained how the “involvement of ZANU PF elite in the country’s diamond resources is the latest chapter in a long continuum by which the violent expropriation and manipulation of economic resources have been used for their political and economic gain”. 

ZANU PF had benefited from the diamond trade in the late 1990s. In 1998 ZANU PF sent troops, what can only be described as mercenaries, to support the regime of Laurent Kabila in DR Congo, extracting diamonds as their payment.  So when diamonds were discovered at Marange, ZANU knew how they would be able to take advantage of it – even though legal claims had been filed by foreign companies to extract the diamonds. 

When white owned farms were illegally designated to Mugabe’s cronies, it was the armed thugs, some of whom were war veterans, who squatted on the farms, threatening the farmers, their families and especially their black work force, which ultimately caused the farms to be abandoned by white owners for fear of their lives and that of their staff. ZANU PF used the same tactics with the mines. By condoning illegal mining, ZANU once again played the populist card, saying it was helping the downtrodden and poor. At the same time once the legitimate claims were threatened and the foreign legal owners asked for assistance, the ZANU military elites either took over entire mining sites, or took a cut of mining revenue, whilst restoring order.

After a while nearly all the illegal miners were forcibly removed, often dumped outside the zone, with nothing, not even the mining gear they had brought in.

ZANU PF had expropriated white owned mines before. General Solomon Mujuru, late husband of current ZANU PF deputy Prime Minister Joyce Mujuru, was a key player in such action. In 1998 a private company, Bubye Minerals, purchased River Ranch mine, which is close to the South African border. Bubye was extracting 30,000 carats a month from River Ranch but expected significant increases. The mine was forcibly taken over by Mujuru after Bubye staff were imprisoned and threatened. Mujuru did not declare its production, but Zimbabwean sources claim extraction accelerated , none of which was declared to Treasury, until 2009, and even then accounts differ on the amounts. 

Kimberly Process investigates

With reports of this type of flagrant disregard for property rights, rule of law, and good mining practices reaching government officials in Europe, the Kimberly Process was asked to investigate the Marange Fields. Importantly, HRW had been a participant in the Kimberly Process Certification Scheme (KPCS or KP). The KP is a coalition of over 75 governments, and provides opportunities for observers and advisers, such as mining companies and political activists to question actions, even though they do not vote. All participants claim to want to limit mining in conflict areas and to stop the proceeds of illegal mining financing bloodshed. HRW and Global Witness, another activist human rights group, demanded that Marange’s fields were run in accordance with KP rules. HRW wanted KP to be observed to “ensure that individuals involved in smuggling return their ill-gotten gains, and act to prevent any further abuse in both the extraction and onward sale of Marange diamonds”. 

So in May 2007 a team from KP flew over the site and started conducting reviews of mining practice.In July 2009 a KP report implicated the Zimbabwe Government in human rights violations and senior officials as directly benefiting from the diamonds mined in Marange. The Financial Gazette claimed the report referred to “unacceptable and horrific violence against civilians by authorities in and around” the diamond fields. The KP investigators were hoping the Zimbabwe government would acknowledge the problems and improve matters before the KP was forced to institute a partial or total ban on sales from Marange.

At the annual KP meeting in November 2009 Zimbabwe was given 6 months to fulfill requirements, notably withdrawing the army from Marange. 

So far so good, the KP was acting slower in banning diamond sales than activists would have liked, but it was at least maintaining it standards. But things deteriorated from there. On May 25th 2010, Farai Maguwu, the head of the Centre for Research and Development in Mutare met with Abbey Chikane, a KP monitor and former chairman of the South African Diamond Board. Maguwu explained to Chikane the abuses taking place and the smuggling of diamonds out of Marange. But rather than a robust KP response to ZANU PF’s excess, within a month Maguwu was detained in jail and Chikane published a report for KP largely exonerating ZANU PF and claiming that Marange was living up to required KP standards – it later transpired that KP officials were routinely obstructed in visiting key sites and did not even visit the entire Marange area.  

In addition ZANU PF and KP reached a deal to allow auctions of Marange stones to be undertaken in St Petersburg, Russia in summer 2010.  900,000 carats were sold valued at $46 million. Buyers included those from Russia, Belgium, India, Israel, Lebanon and UAE. The sale was not attended by most EU countries and US. 

A key reason the sale went through is because Mugabe cleverly had threatened to sell the stones on the black market if KP did not provide authorization. The thesis is that since the Marange fields are so vast and massive sales from the fields could undermine the regulated diamond market overseen by KP, it is possible that the threat cowed KP into allowing more limited and controlled sales to go ahead.   While KP denies it has done anything wrong, it is the opinion of several political activists inside and outside of Zimbabwe that I spoke with, that KP was directly at fault.

In March last year, Mathieu Yamba of the DRC took over as KP Chairman and announced that Zimbabwe was compliant with KP rules and hence allowed further sales of stones, now totaling over four million carats. The EU opposed the decision saying it had been taken without due process, but the South African Government backed the sales, and subsequent sales have taken place. 

The BBC Panorama program broadcast on August 8th last year, covered two torture camps operating out of the Marange fields. The KP representative, Nick Westcott, interviewed on the show, claimed they were unaware of the claims of violence and torture of forced labor at the camps. This seems astonishing given all the reports from groups like Global Witness and Human Rights Watch. Soon after Global Witness, which had help found the KP, withdrew from it entirely.

On a Knife Edge

And that brings us close to the present, and I’ll get to the specific situation in Marange in a moment. But the whole situation in Zimbabwe is on a knife edge. While no outsider wants any Zimbabweans to suffer or starve, there is an uneasy tension between economic improvement benefiting all of society, and increasing wealth of ZANU PF. After all the only reason ZANU PF allowed a coalition government was because of bankruptcy, with more money they might revert to violent control even at the cost of economic growth. 

If the economy was growing broadly, if it was already benefiting diverse sectors of the electorate, then it might prove impossible for even the violent controlling instincts of ZANU PF to be undermined. This is the position that pragmatists have taken – while ZANU PF might try to steal another election, growth would help the poorest and perhaps with MDC controlling the police, violence could be contained and a fairer election could take place. 

However, the equation changes if that growth was just in one sector controlled by ZANU PF. And that is unfortunately what appears to be occurring. While the rest of the economy is only slowly improving, the extractive industries, notably diamonds, are flourishing. And if ZANU retains most of these funds, it has no reason to relinquish further political control, in fact it is likely to take even more control.

Marange today

Over the past few weeks I have interviewed several well informed sources who are monitoring the mining sector. None wanted to be quoted on the record for fear of reprisals. The answers are summarized below, where there are contradictions or variations in responses, ranges or disagreements are discussed. Most of the analysis and forecasts are bad and bode ill for the future.   

 Is the Zimbabwe military still involved in either overseeing mining, or protecting private sector mining at Marange? 

The Zimbabwe National Army is still involved in providing security around more than 50% of Marange diamond fields.  However, the army oversees the area that has not yet been allocated to private investors. All five mining companies have their own trained security guards. Between 15-25% of the 70 000ha diamond fields have been allocated to private investors and the rest remain under the control of the military.

 Is there still violence at the mines?

Violence is still taking place in Marange although it has significantly declined since 2010. Violence is no longer systematic, but rather scales up ahead of visits by government officials and international delegations. It is also important to note that private security guards are now responsible for most cases of human rights abuses. There are two reasons for this; first, areas known to be rich in diamond deposits have been parceled out to private investors. This has prompted artisanal miners, sometimes with the support and assistance of the army, to cut perimeter fences and gain illegal entry into the company premises where they are severely assaulted if caught. Secondly, most of the private security guards are former state security agents and war veterans who have a history of committing human rights abuses. 

The Finance Minister Tendai Biti claimed that the Treasury was not receiving the vast majority of revenue it should have done in 2010-11, have things changed? 

There were diamond auctions conducted in December 2011 following the clearing of exports by the KPCS in November but statistics were not published. It is not yet clear whether all or most of the funds were transferred to Treasury, but it is likely that most have not, since nothing has changed in terms of diamond revenue transparency. The situation is even worse than in 2010 when the figures of the first diamond sales were made public. 

Does ZANU PF still control most of the flow of funds from the mines to Treasury?

Zimbabwe’s diamonds, like other natural resources dotted around the country, belong to the country’s political elites who include the military. Government departments running mining operations are staffed by political appointees who take their orders from ‘above’. There are no laws enforcing revenue transparency and accountability. As such those who wield real power within ZANU PF control the revenue flows. 

What impact on the economy is Mugabe's control of the mines having? Is it making it harder for other businesses to operate? 

The impact of ZANU PF’s control of the mines is damaging. It has deprived government of revenue that would make a significant difference in the lives of the Zimbabwean people. Further, the Economic Empowerment and Indigenization Law which is being driven by ZANU PF is meant to further enrich ZANU PF political elites by demanding that foreign owned mines cede 51% of their shares to indigenous Zimbabweans, who in this case refer to ZANU PF officials and their supporters. As was the case with land reform/white farm resettlement (starting in 2000), where land was grabbed in controversial circumstances leading to serious decline in agricultural production, unemployment and food insecurity, the indigenization law will lead to high unemployment and closure of mines.  

 Will the money ZANU PF elites are making from the mines be used against MDC (possibly in future elections)?

The national debate around diamonds has been highly political, inflammatory and divisive. The state controlled media has been consistent in explaining that diamonds will bust EU and US sanctions against ZANU PF officials, which are blamed on MDC. Diamonds have also become part of the ZANU PF rhetoric of protecting national sovereignty which it says are being threatened by MDC. It is therefore likely that in the event of an election ZANU PF will mobilize all the available resources, including diamonds, to crush the MDC.

 Are you expecting elections late this year or 2013?

Most probably elections will be held in 2013. However, there is a possibility elections can be held this year if the constitution making process is concluded in time. It is not likely that SADC will allow Zimbabwe to hold elections without major reforms that will guarantee free and fair elections. However, it is far from certain that SADC will enforce those regulations even if they “guaranteed”.

It has been reported that Chinese companies are active in Marange, how so?

There is one Chinese company in Marange, Anjin, which is now the biggest miner in the area. The other Chinese company, Sino-Zimbabwe, has been taken over by Marange Resources, a subsidiary of the Zimbabwe Mining Development Corporation (ZMDC) after the company stopped operations due to the scarcity of diamonds in their claim.

There is a close relationship between Anjin, which is linked to China’s Defense Forces, and the Zimbabwe National Army. In April 2011 China extended a loan facility of $98million for the construction of the Zimbabwe Defense Academy which will be repaid using proceeds from diamonds. This loan facility strengthens the argument that the cooperation between China and Zimbabwe is a political one and is used to strengthen Mugabe’s grip on power whilst he gives China a free hand to extract Zimbabwe’s natural resources. In 2008, shortly after Mugabe lost the general election, China dispatched a ship load of military hardware which had to be offloaded in Luanda, Angola, after South African Mine Workers Union refused to offload the consignment on the basis that it would be used by Mugabe against the Zimbabwean citizens who had rejected him. 

Conclusion

Global Witness is calling for a new international body to replace the Kimberly Process. In a statement the group claims that the Kimberly Process has "dithered around wringing their hands, and now effectively have aided and abetted the return of the blood diamond. They flunked it, dropped the ball and ordinary Zimbabweans will pay the price. It's now a myth that there are any controls over diamonds." 

The Kimberly Process was always flawed; it was never possible to control the flow of diamonds from poorly governed regions, since they are relatively easy to mine and very portable. But to provide international cover for sales of Zimbabwe’s diamonds is worse than flawed, it is immoral, and it enables the politically powerful cronies of Mugabe to keep up business as usual. This deters investors in other areas of the economy that Zimbabwe desperately requires, and lowers the chance of a sustainable recovery. 

While Global Witness may be overly optimistic about a successor to the KP, it is right about one thing, it is the poor of Zimbabwe that will suffer from the KP whitewash. Wealth is not trickling down to them, indeed they must fear that any hope of a recovery will be squashed by more election violence, probably within the next year.

 

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About the Author

 

Roger
Bate

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