Where is the missing $15 billion from Marange diamonds? This is an eminent question that is likely to be asked in any public discussion on the Marange diamonds. A state owned enterprise, the Zimbabwe Consolidated Diamond Company (ZCDC) was created under the guise of promoting greater transparency and accountability in the management of Marange diamonds.
The 8th Parliament of Zimbabwe through the Portfolio Committee on Mines and Energy (PCME) is one of the stakeholders that have sought to hold the government and ZCDC accountable. Public hearings have been conducted at Parliament targeting the ZCDC and its parent the Ministry of Mines and Mining Development (MMMD).
Currently, ZCDC is mining concessions that were previously held by Marange Resources and Diamond Mining Company (DMC). ZCDC has not been able to start mining operations in diamond concessions owned by Mbada diamonds, Anjin and Jinan due to a February 2016 contested consolidation of diamond companies which has since spilled into the courts.
By Tinashe Lenin Chisaira and Mukasiri Sibanda
Arguably, the role of Parliament as a critical stakeholder in the governance of mineral resources has been a contentious one among civil society and development partners. Of course, Zimbabwe’s challenging political economy where the executive has a well-documented history of whipping Parliament into line is the fodder which many critics use. The PCME has however, been handy in some instances. The widely acclaimed Chindori Chininga Report (October, 2013) on Marange diamonds is a case in point.
To gain first hand appreciation of what is happening in Marange after the contentious consolidation of diamond mines, the PCME, with the support of the Zimbabwe Environmental Law Association (ZELA) visited Marange and Arda Transau on 13 and 14 January 2017. Parliament had to get clearance to conduct the field visit. Regrettably, the clearance constrained the hand of PPCME to interact with the affected community members and the workers.
The tour commenced with a meeting between the legislators, journalists and the ZCDC management and staff at the ZCDC Boardroom at Chiadzwa. The team went through safety and security presentations from the ZCDC Head of Security.
The ZCDC mining processes are divided into portals. The first port of call for the parliamentarians was Portal Q, which is the area that was formerly mined by DMC. There the participants witnessed earth movers and Lorries extracting the ore for transportations to the mining processing plants. The plants themselves are not connected to the national power grid, hence they use diesel powered generators.
The ZCDC management indicated that they were working towards the connection to the national grid. They said they were using up to 20,000 liters of diesel per day to run generators to power the mining processes. This is not desirable both for feasibility reasons and for environmental considerations especially huge carbon imprint of such an operation. ZCDC indicated that ZESA was stonewalling their efforts to get connected to the power grid.
Most of the equipment being used by ZCDC is on a ‘for hire’ basis, which is an expensive move for the company. There were questions raised about the sustainability of depending on hired machinery instead of purchasing own equipment. Members of the PPC expressed concern that equipment hiring is prone to corruption, especially if there is no oversight over procurement procedures and systems.
There were various issue updates that surrounded the tour. For instance, the acting ZCDC CEO Ridge Nyashanu took the legislators through the mission, vision and core values of the ZCDC Company. He also reiterated the challenges facing the company, namely the court proceedings. On top of that there seemed to be challenges in raising capital, having to hire expensive equipment, water shortages, high security costs, legacy issues as well as absence of a reliable skills base.
He also indicated those mines that had not been secured by ZCDC due to court challenges were being protected by the Zimbabwe Republic police (ZRP) Support Unit under an operation code named “Operation Chengetedzai Upfumi”. Procurement contracting is needed to prevent corruption, inefficiencies and leakages of resources which have impacted on the profitability of ZCDC’s operations. Ultimately, accruable benefits to the state such as corporate income tax and dividends will be hurt by corrupt procurement practices.
In terms of geological challenges, the company was yet to identify the kimberlite pipeswhich would be the actual source of the diamonds. At the moment there is only alluvial mining taking place at the Chiadzwa/Marange diamond fields.
Prof Gudyanga who is both the Permanent Secretary to the Ministry of Mines and Mining Development and an ex-officio Chair of the ZCDC gave an update on the status of ZCDC before the tour. He highlighted some of the challenges that were being faced by the company.
Among the challenges were the legal challenges faced by the company were as follows:
- Legal Challenges
ZCDC faced legal challenges from companies who were operating the mines before their licenses failed to be renewed by the Minister of Mines, Hon. Walter Chidhakwa in February 2016. ZCDC had already won court cases against DMC and Mbada Diamonds. However, there was still an outstanding challenge from Anjin and Jinan. Through bilateral discussions held between the Zimbabwean and Chinese governments, Anjin and Jinan are expected to drop their court challenge.
It is remarkable to note that government has sought the alternative dispute resolution route aside from litigation to resolve the disputes around diamond mining claims. The court process by nature is long, costly and can rapture relationships with investors in this case. This is the route that should have been pursed diligently from the outset.
Notably, the protracted legal disputes have caused a sharp drop in diamond production which has a telling effect on foreign currency shortages. Diamond export earnings could have eased the foreign currency crises that is hurting socio-economic development. Already, the Zimbabwe Medical Association (ZMA) has issued a stress call on low stock levels for essential drugs caused by foreign currency shortages.
- Relocations of Villagers from mining areas
ZCDC announced the intention of completing the relocations of people from the mining areas. However, this was said to be hampered by lack of financial resources as the company was just operating two mine portals.
However, a relocation plan must be put in place, an open plan with clear targets to allow communities to monitors the relocation exercise. The ideal scenario is that relocations under Free Prior Informed Consent (FPIC) should precede mining activities. However, it looks like ZCDC is looking to raise funds for relocation from the proceeds of mining activities. Potentially, this might escalate community rights violation if cash flow challenges are experienced and from other competition priorities like capitalization.
There were plans for former employees of the previous diamond mining companies to be absorbed into ZCDC. This was pending the outcome of the ongoing legal proceedings.
There is need for disclosure of the numbers of employees that were affected by the consolidation and the total debt ZCDC has accrued as a result. It will be interesting for CSOs to carry out a study focusing on socio-economic impact of consolidation focusing on affected workers to show the human cost often overshadowed by economic considerations
- Diamond Exploration
The mining taking place was mainly for alluvial diamonds. A huge investment is being made by ZCDC towards geological surveys and mapping underground pipes.
It is clear that ZCDC is facing capitalization challenges. Given the high costs associated with exploration, it is hard to see a situation where meaningful diamond exploration of diamonds can be undertaken by ZCDC. Therefore, ZCDC must prioritise the engagement of a sound technical and financial partner to explore and exploit diamonds in Marange.
- Consolidation and ZCDC’s legal status
The permanent secretary explained that there is a misconception that ZCDC is an initiative to consolidate the diamond companies that were operating in Marange. Rather, the consolidation process refers to the mines. It was also explained that ZCDC was registered under the Companies Act (Cap 24:03).
On the denial by Prof Gudyanga that ZCDC was neither a successor company to neither the previous diamond miners nor a consolidation of their business, there arises many questions about the real status of the company. The absence of an act of parliament makes it questionable as to what sort of a parastatal it is. Furthermore, if it is a private company, then there will be questions over the way it got the license over the diamond, which are supposed to be strategic for the economic development of the nation.
ZCDC’s annual diamond production for 2016 stood at 963,000 carats against the targeted production of 1.3 million carats. In 2015, diamond in Marange stood at 2.3 million carats. This was caused by ZCDC’s failure to mine diamond concession owned by Mbada, Anjin and Jinan due to the legal disputes.
2016, diamond production in Marange fell by 59%, from 2.3 million carats in 2015 to 953 000 carats in 2016. Considering the peak diamond production of more than 12 million carats in 2012, the Marange diamond wealth now ominously looks like a squandered opportunity. ZCDC is not living up to its promise on improving transparency and accountability. As an example, diamond production statistics are not disaggregated to show gem, semi-precious and industrial diamonds. Disclosure of disaggregated diamond production data is very important as high valued gem quality diamonds are highly susceptible to theft, smuggling and undervaluation.
- ZCDC’s expansion plans
The company was trying to optimize production at the mines sites which it currently operates. Then there were plans to start mining at the Mbada and DTZ claims. In terms of capitalization, the company was working towards purchasing equipment, refurbishments as well as getting connected to the national power grid instead of using diesel fueled generators for power.
- Security of diamonds
Another key issue shared concerned security of the diamonds. ZCDC was developing a product tracing system that will track the diamonds from the mine to the sorting house. There was also remote monitoring of production processes with different security teams expected to produce occasional reports separately from each other. There were also plans for the use of drones to monitor the mining and production processes.
CSR and Community Enterprise Development
ZCDC indicated that as part of their Corporate Social Responsibility (CSR) programmes, the company is buying vegetables and chickens from the community for its canteen. In addition, ZCDC would want to build a university a hospital among other community social investments the company is making.
ZCDC must however have a clear and open CSR policy which can be monitored by the communities and Civil Society Organisations (CSOs). Whilst the act of buying vegetables and chickens from the host community is good, ZCDC can do more to help with community enterprise development. For instance, all the goods and services that are not complex and technical should be given to the local communities
Currently, ZCDC is employing 440 workers comprising of 401 males and 39 females.
In sectors such as Finance there was just one female to 12 men, in engineering there was 1 woman to 78 men. The percentage of locals employed by ZCDC is 49.7%.
Gender disparities in terms of employment opportunities are quite glaring and most likely widen inequality gap between men and women. Women labour constitutes roughly 9% of the total employees at ZCDC. Whilst it has been generally alleged that women to lack the technical skills needed in the mining sector, it is shocking to note that even the finance department has huge gender disparity, 1 female and 12 men. It is difficult to argue that there is shortage of skilled women in the market
ARDA TRANSAU VISIT
On the 14th of January which was Day 2 of the tour, the PPC visited Arda Transau. This is an area where the villagers from the Chiadzwa/Marange area were relocated to. ARDA Transau is situated about 20 kilometers from Mutare, the Manicaland provincial capital.
Parliamentary team managed to meet and hear the concerns of the relocated villagers. The major concerns included the following:
- Overcrowding. Most of the families reported being settled in one-family quarters together with elder children and their families as well. This led to lack of privacy and outbreak of water-borne diseases. Recently communities bury one person every week.
- Inadequate health and school facilities. Villagers indicated that there was just a single doctor and a single nurse at the Arda Transau clinic. These were supposed to cater for a community of over 5000 people.
- Inadequate land for cultivation. The team observed that each family was allocated a mere 1 hectare for housing, livestock kraals and cultivation.
- Unfulfilled promises. These mainly centered on an irrigation project which has not been developed since the relocation began around 2009. Even when it will be completed each family will only be allocated half a hectare. This is hardly adequate for just subsistence agriculture, not to mention commercial.
Concerns from the villagers were gathered by parliament for future redress. The team also managed to visit the places where ZCDC itself settled 23 families in December 29016. The area’s roads have not been serviced and the health facilities were situated about 10 kilometers away, which was hardly adequate for the community. ZCDC indicated 18 of the 23 families had received disturbance allowances but the relocated families indicated they were still awaiting receipt of the said funds. The PPC asked questions on whether ZCDC had a relocation plan and had standardized amenities before relocating communities.
ZCDC indicated that they had no resources and once resources become available they will work on a relocation plan. ZCDC was asked how many more families needed to be relocated and indicated that approximately 400 families. Families relocated in 2011 indicated that in fact ZCDC must halt any plans to bring more people to Arda Transau because their married children who had been promised housing never received any and decided to occupy some houses that remained unallocated. In fact, the families claim that the Mutare District Administrator now claims that their children are illegal occupiers from Mutare who unlawfully much to their shock. The lack of a relocation policy left Arda Transau communities in sad situation.
AND IN CONCLUSION…
Mineral resource governance challenges are still festering in Marange. Zimbabwe’s diamond mining industry is well known for an executive-reported missing US$15 billion. Transparency and accountability is still a great challenge as the public is in dark with regards to the quality footprint of diamond production. Alluvial diamond mining boon is gone judging by the production which has plummeted to 953 000 carats from the pick production of 12 million carats in 2012.
A stern remainder that minerals are a finite asset and the opportunity must never be squandered. Clearly, ZCDC’s capacity to undertake much needed exploration, mining of conglomerate and kimberlites is questionable. The state enterprise is in need of a sound financial and technical partner to turn around the rot in Marange. Community engagement and local development initiatives being undertaken by ZCDC are a mockery especially when compared with the likes of Zimplats. It now remains to be seen how the Portfolio Committee on Mines and Energy will use the knowledge and experience gained through the field visit to further its oversight role in the management of Marange diamond resources and reverse the curse.
[Mukasiri Sibanda (@mukasiri) is an economic governance officer. He is interested in mineral resource governance. He blogs at www.mukasirisibanda.wordpress.com .Lenin Tinashe Chisaira (@LeninChisaira) is a lawyer and activist. He writes on economic and environmental justice, human rights and leftist democracy. He blogs onwww.cdetinashe.blogspot.com . Mukasiri and Lenin work with the Zimbabwe Environmental law Association