THE SECOND REPORT OF THE PROTFOLIO COMMITTEE ON MINES AND ENERGY ON THE DIAMOND SECTOR IN ZIMBABWE FOR THE PERIOD 2009 – 2016
(S.C. 15, 2018)
In 2016 the Former President of Zimbabwe, Cde Robert Mugabe made announcement to the nation, during his birthday interview, that over 15 billion dollars’ worth of diamond revenues could not be accounted for, at a time the country was experiencing severe liquidity challenges and economic contraction. In line with Section 160 of the Standing Orders of Parliament, read together with section 119 (2) of the Constitution, the Committee on Mines and Energy conducted an enquiry to get a deeper understanding of the diamond sector in Zimbabwe focusing on the investors and investments made, the monitoring and tracking systems on production and revenues, the marketing of the diamonds as well as the legal and policy frameworks regulating the industry. The discovery of diamonds in Marange created a huge expectation among the ordinary citizens to the extent that the industry would contribute towards the eradication of the triple challenges facing the country, namely, unemployment, poverty and economic recession. The enquiry will outline the challenges experienced and the lessons learnt so that the diamond sector can emerge from the murky waters and take its place among the key minerals that will make meaningful economic and social contribution in the country.
In order to understand how the alleged fifteen billion worth of revenues could not be accounted for, the Committee engaged various stakeholders, mainly through oral evidence sessions held between February and May 2018. The commitment of the Committee was evidenced throughout enquiry with one oral evidence session lasting for a period of ten (10) hours. The Committee had an opportunity to engage the following stakeholders:
2.1 Hon W. Chitando – Minister of Mines and Mining Development;
2.2 Hon W. Chidhakwa – Former Minister of Mines and Mining Development;
2.3 Hon Dr. O. Mpofu – Former Minister of Mines and Mining Development;
2.4 Hon Dr. S. Sekeramayi – Forrmer Minister of Defence;
2.5 Dr I. Chombo – Former Minister of Home Affairs;
2.6 Mr D. Mutasa – Former Minister of State Security,
2.7 Mr G. Matanga – Commissioner General of Police;
2.8 Ambassador I. Moyo – Director General of Central Intelligence Organisation;
2.9 Mr H. Bonyongwe – Former Director of General of Central Intelligence Organisation;
2.10 Professor F. Gudyanga and Mr P. Mupazviriho -Former Permanent Secretaries of Mines and Mining Development;
2.11 Mr M. Munodawafa – Permanent Secretary of Mines and Mining Development
2.12 Mr M. Matshiya – Permanent Secretary of Home Affairs and Culture;
2.13 Mr M. Rushwaya – Permanent Secretary of Defence;
2.14 Ms F. Mazani – Zimbabwe Revenue Authority [ZIMRA] Commissioner General;
2.15 Former joint venture partners of Zimbabwe Mining Development Corporation (ZMDC), that include, Mbada, Canadile Miners, Anjin, DMC, Kusena, Rera Diamonds and Gye Nyame;
2.16 DTZ OZGEO Company,
2.17 The Board of Rio-Zim and Management of Murowa Diamonds,
2.18 Mr G. Masimirembwa and Mr D. Murangari, former and serving board Chairperson of ZMDC respectively,
2.19 Management of ZMDC,
2.20 Board and management of the Minerals Marketing Corporation of Zimbabwe (MMCZ),
2.21 Board Members of Sino-Zim who were in partnership with ZMDC ;
2.22 President of Chamber of Mines – Mr Manhando
2.23 Officials from the Ministry of Finance;
2.24 Former and serving members of the Border Control and Minerals Unit,
2.25 Former and serving members of the Zimbabwe Republic Police;
2.26 Civil Society including Mr F. Maguwu from Center for Natural Resource Governance and Mr S. Mtisi the Global Kimberly Process (KP) Civil Society Coordinator and;
2.27 The Mining community in Chiadzwa represented by the Marange Development Community Trust.
The Committee managed to conduct an on-site visit to Murowa Diamonds located in Zvishavane in April 2018 inorder to get an appreciation of security and accounting systems at the mine.
The Committee encountered challenges in securing the attendance of the following people: Mr Farai Mutamangira, Dr A. Chihuri, Mr T. Biti and Former President of Zimbabwe Mr R. Mugabe. Dr Chihuri could not attend because he was indisposed whilst Mr Mutamangira was not able to attend citing client-privilege confidentiality. The Committee sought legal advice on his submissions and was advised that the privilege he sought to rely on was not absolute and his appearance before Parliament will be dealt with at an appropriate time in the future as the inquiry conducted by the conduct did not exhaust all the sticking issues. Mr T. Biti, former Minister of Finance was also unavailable during the period of the enquiry due to other commitments. The Former President His Excellency Cde R.G. Mugabe was unable to attend at the appointed hour and the Committee was due to meet to consider summoning him as a measure of last resort but after consultations with the Hon Speaker, he was recused from attending.
During the enquiry some witnesses were either hostile or fearful and hence were unwilling to disclose information, such as those from the ZRP, CIO and the Former Minister of Mines and Mines Development, Dr Mpofu. The Committee observed that serving members of ZRP were unwilling to disclose information for fear of losing their jobs, especially in the wake of a police shake up that took place in January 2018, where several senior police officers were retired from service.
3.1 Diamond Revenues
3.1.1 Official Diamond Revenues from 2009 – 2015
The Committee was informed by the MMCZ that for the period 2006 to 2017, the country produced just over 51 million carats of diamonds, with a value of approximately 2, 4 billion dollars. Out of that figure, Government received approximately 300 million dollars in the form of royalties. This is in sharp contrast to the projections that were made by Dr O. Mpofu in 2011, after Zimbabwe was allowed to trade its diamonds formally – that on an annual basis the country would generate diamond revenues worth 2 billion dollars. The Committee noted that projections by Dr Mpofu created a lot of excitement and expectation among the ordinary citizens that the diamond sector was going to play a critical role in the transformation of the ailing economy.
3.1.2 The Alleged Missing Fifteen Billion Diamond Revenues
The Committee received diverse opinions on the question of the alleged missing 15 billion dollar revenues from the stakeholders in diamond industry. Some witnesses that included the Permanent Secretary of Defence, Mr Rushwaya and former Board Chair of ZMDC, Mr Masimirembwa disputed the assertion made by the Former President of Zimbabwe, His Execellency Cde R.G. Mugabe that over 15 billion worth of revenues had disappeared. According to Mr Masimirembwa …”the Former President was using it figuratively. I want to say myself that it is an impossibility. There is no way Zimbabwe sold diamonds worth 15 billion dollars”. Mr Rushwaya, in a separate session with the Committee, highlighted that the 15 billion loss of revenue was not feasible …”whoever gave the former President that figure should scientifically explain what method he used because if you go by the world standards, he can vouch for me as an accountant, 14 billion dollars the world over for one year, it is difficult to reach but you were saying the leakages for 15 billion dollars in Zimbabwe. Even if every inch had diamonds, we could not get to that stage”. According to Mr Rushwaya, the 15 billion dollars assertion was used as an excuse by the Ministry of Mines to take over concessions owned by the various diamond companies.
On the other hand, there were witnesses that firmly believed that the statement by the former President had a measure of truth in that diamonds worth 15 billion dollars or more could have disappeared. According to Mr Kurotwi and civil society represented by Mr Maguwu and Mr Mtisi, the country lost substantial diamond revenues due to smuggling, undervaluation and lack of exploration of the Marange area. Mr Masimirembwa admitted before the Committee that no exploration had been done to determine the value of the diamonds in Chiadzwa, before the signing of the joint venture agreements.
3.1.3 Recovery of the alleged Missing Fifteen Billion Diamond Revenues
The Committee noted that it would be difficult for the country to recover the missing diamonds revenues from the evidence that it received from the stakeholders. The former Permanent Secretary of Mines, Professor Gudyanga informed the Committee that the truth will never come out on the missing diamond revenues. He stated that “ 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”. In essence, Professor Gudyanga was acknowledging that the country lost revenues, and the recovery and accounting of such money will require the support of both international and local law enforcement agencies given the intricacies involved in the diamond sector.
Mr Munodawafa, the current Permanent Secretary of Mines and Mining Development, informed the Committee that the Auditor General had been engaged to conduct a forensic audit on the joint venture companies that were operating in Marange. The exercise proved difficult because the joint venture companies could not be located. However, some of the joint venture companies attended the Committees hearings and they indicated that they were willing to have their books audited by the Auditor General. It is the Committee’s position that the Ministry of Mines and the Auditor General have been complacent in conducting a forensic audit to determine the revenue loses that may have been suffered by the country.
Civil society on the other hand represented by Mr Maguwu recommended that Government needed to engage countries and cities such as Dubai, China and India, where the country’s diamonds were marketed, to ascertain the value and losses Zimbabwe might have suffered. The second option was for the country to take their case to the United Nations or the International Criminal Court for redress.
3.2 Smuggling and Leakages of Diamonds
It was clear during the Committee’s enquiry that the country has lost and continues to lose its diamonds through smuggling and leakages. This was attributed to a number of factors that include the porous border lines, shortage of vehicles for the police to conduct effective surveillance, non-intrusive gadgets for searching, modern scanners and drone technology to monitor the Chiadzwa area. Despite the presence of the police, there are still incidences of illegal mining by panners. The Minerals and Border Control Unit (MBCU), informed the Committee that for the period 2013 to 2017, they recovered approximately 2 800 carats and a few convictions have been made. The MBCU expressed disappointment in the manner in which diamond cases were handled by the Police because most of the accused were acquitted as a result of loopholes in the Precious Stones and Trade Act.
According Mr Maguwu and Mr Mtisi, the diamonds that are unaccounted for are usually smuggled into South Africa and Mozambique. This was facilitated by a well organised syndicate comprising of well-known Lebanese diamond dealers some of whom are stationed in Mutare.
3.3 The Illegal Miners
The MBCU acknowledged that illegal mining activities continued to take place in Marange. The problem was exacerbated by villagers who were harbouring the panners, popularly known as Gwejas. On the other hand, the Marange Community Development Trust accused the police of allowing the gwejas to operate under their watch, after paying a bribe to the law enforcement agency. It was clear to the Committee that diamonds continue to be traded on the black market.
3.4 Security Sector Involvement in Diamond Mining
The police, army and the Central Intelligence Organisation (CIO) were given diamond concessions after the formalisation of mining operations in Marange in 2009. The police, army and CIO operated under companies known as Gye Nyame, Anjin and Kusena consecutively. The Committee was informed that the rationale for giving concessions to the security sector, was to finance some of the operations, due to the economic and budgetary constraints that the country had been going through. These were the findings of the Committee on the different arms of the security sector:
3.4.1 The Zimbabwe Republic Police
Section 219 of the Constitution clearly outlines that the ZRP has to operate in the professional manner, uphold the Constitution, maintain law and order as well as protect and secure the lives and property of the citizens of the Zimbabwe. In 2006, following the diamond rush in Chiadzwa, the police were called in to assist in restoring law and order, which they did to a great extent, paving the way for formal mining operations. However, from 2009, when the police acquired a concession, its presence in Marange was fraught with a number of anomalies. Firstly, there was no formal agreement recognising the diamond concession given to the police. The police could not supply documents showing the terms and conditions of the operation. During the oral evidence sessions, the Committee was informed that the police entered into a joint venture agreement with some Ghanaians and Zimbabwean partners. One of the local partners, Mr Munyeza, outlined that the partnership agreement was fraught with acts of intimidation and opaqueness on the part of the police. Mr Munyeza further accused the police of deliberately causing the deportation of the Ghanaians and of pushing out the local partners so that they could solely own the company. At one stage Mr Munyeza was abducted by the police and in order to secure his release, he was forced to surrender the keys to a safe securing the diamonds owned by Gye Nyame. The diamonds that were taken forcibly by the police could not be accounted for.
Secondly, the former Minister of Home Affairs, Dr Chombo, and the Permanent Secretary of Home Affairs, Mr Matshiya, outlined to the Committee that they are not aware of the existence and operations of Gye Nyame. The Secretary of Home Affairs is accountable for all departments that fall under his purview and unfortunately he could not account for the operations of the police as they relate Gye Nyame. It was clear to the Committee that the company was and was to some extent personalised with strong ties to the former Commissioner General, Dr A. Chihuri. All police representatives on the Board appointments, were done by the former Commissioner General, without the approval of the Permanent Secretary or Minister of Home Affairs.
The Committee also noted that those who were appointed by the former Commissioner General to serve on Gye Nyame were very defensive or ignorant on why they were appointed to serve on the Board. High ranking officials in the Police Service that include the deputy Commissioners Mr Matibiri, Ms Shambare and Mr Sibanda were not confident and articulate in their submissions about the existence and operations of Gye Nyame. Although the Permanent Secretary and Minister of Home Affairs claimed they were not aware of the operations and existence of Gye Nyame, the Committee was concerned this matter was in the public domain, which should have prompted them to take action. The written submissions by the Former Commissioner General Dr A. Chihuri pointed to the fact that Permanent Secretary of Home Affairs was briefed about the concessions. There is, therefore, a possibility of misleading Parliament by either of the parties. As such, charges of contempt of Parliament may be preferred against either of the parties should it become clear that there was a deliberate intention to mislead the Committee. This is not the end of the inquiry and accountability of the parties shall be demanded in due course. Suffice at this juncture to state that the administration of Gye Nyame as a concession leaves a lot to be desired and it was not consistent with the basic principles of public administration and corporate governance.
Retired Officer Commanding Support Unit, Mr Tanyanyiwa told the Committee that the “the Minister of Mines and Mining Development had requested police officers to safeguard Ministry officials during a process of hand-takeover of mines by the Ministry of Mines and Mining Development. No court order. Just an instruction from the Ministry of Mines”. The Committee noted with concern that the police were abused by the Ministry of Mines of achieve their unclear intended objectives. The Ministry of Mines was not willing to allow the judiciary to handle this conflict.
3.4.2 The Central Intelligence Organisation (CIO)
The CIO had a diamond concession operating under the name Kusena for the period 2011 to 2015. The company produced approximately 13 thousands carats worth about one million dollars. According to the former director General of CIO, Major General Bonyongwe, Kusena was not a viable entity and it was later they surrendered it to ZMDC, its joint venture partner. The CIO never benefited from the diamonds proceeds and all the revenues were in the custody of ZMDC. The areas of concern for the Committee were Kusena’s links with Sam Pa, a Chinese business magnate who is associated with shady deals and was placed under house arrest by the Chinese government. Major General Boyongwe highlighted that the CIO’s association with Sam Pa were above board, because during the lifespan of Kusena, Sam Pa was not a convicted criminal or accused of any corrupt activities. It is the Committee’s position that the CIO has the responsibility to safeguard the interest of the country through vetting of security threats posed by individuals or companies coming into Zimbabwe. The Committee observed that the operations of Kusena were not very transparent, as evidenced by the Board Members under Sino Zim, who could not explain the capitalisation and the operations of the diamond concession. The operations and the joint venture partners were known only by the Former Director General of CIO, Major General and a few other officials.
3.4.3 The Zimbabwe National Army
Anjin was one of the biggest players in the Marange area. The company started operating in 2010 and from its inception to 2015, produced approximately 9 million carats which generated about 332 million dollars in revenue. Out of that figure 62 million dollars went to government as royalties and 86 million dollars was spent under corporate social responsibility programs. The management of Anjin and Mr Rushwaya felt hard done by the hostile takeover by the government, given the vast investments made by the company, in the form of establishment of the mine, the purchase of equipment and machinery and through various corporate social responsibility programs. The company also managed to make investments in the construction of Golden Peacock in Mutare and Long Chen plaza, a shopping complex in Harare. The Committee observed that Anjin had its own shortcomings particularly the fact that it has never had its books audited and in that the full amount of investment, as per agreement had not been made. However, the company tried to operate within company regulations. The Committee was satisfied with the accountability procedures that were put in place by Anjin. Unlike the Permanent Secretary of Home Affairs, the Permanent Secretary for Defence proved to the Committee that he received regular briefs and on top of the situation. For the Permanent Secretary of Home Affairs, there was prima facie evidence of dereliction of duty, something that must not be allowed in the public administration.
3.5 Protection and Security of Investments in Zimbabwe
In the new political dispensation ushered in November 2017, Government has declared that Zimbabwe is open for business. It’s the Committee’s position that this mantra should be supported by investor friendly policies that include the protection and security of investments made into Zimbabwe. The joint venture partners of ZMDC were very bitter on what they went through as a result of the consolidation process. The views of the investors can be summed up in the words of Dr Kurotwi, from Canadile miners who said “In as far as investors are concerned…; Zimbabwe is a lion’s den. Investors will come at their own peril because there is no guarantee that when you invest you will get your money back. I am a victim of that and it has taken me almost 10 years to recover what we had invested genuinely”. The Ministry of Mines was accused of having flouted the investment agreements and for not respecting the laws of the country during the hostile takeover. In the case of Anjin and Mbada, their investment agreements did not have a time frame in which the Special Grants would expire. Their operations would continue as long as they paid the statutory fees and at the time of the take over the statutory obligations had been paid. As for DTZ OZGEO and Rera, their special grants had not expired but Government took them over. It is the Committee’s position that such kind of treatment of investors will only scare away investment.
As the Committee noted, it is very important that investors are protected in line with section 71 of the Constitution on Property Rights. Furthermore, investors should be protected from any acts of corruption in order to secure a license or protect their investments. One investor, Mr Kurotwi claimed the loss of a diamond concession as a result of failing to pay a bribe to Dr Mpofu, the former Minister of Mines and Mining Development. Furthermore, the Committee was told that some investors were forced to pay legal fees to Mr Mutamangira for unknown services. The Committee believes the Law Society of Zimbabwe and the Zimbabwe Anti-Corruption Commission must investigate the payments made to Mr. Mutamangira. Incidences of corruption should be dealt with in the possible way, in order to create a conducive environment to attract investment.
3.6 Executive Accountability on the Diamond Mining Operations
The Committee was disappointed by the former Minister of Mines and Mining Development, Dr O. Mpofu, for failing to respond to issues pertaining to the diamond industry during his term of office. In the same vein the non-appearance by the Former Head of State His Excellency Cde R.G Mugabe, to answer questions on the missing 15 billion diamond revenues, heightens the perception that both may have been complicit on this issue. Section 88 of the Constitution highlights that “Executive authority derives from the people of Zimbabwe and must be exercised in accordance with this Constitution”. As such it is important that the Executive responds to matters raised by Parliament as the legislature represents the people. Going forward, it is the Committee’s position that all members of the Executive should respond and be held accountable for their actions. At the same time Parliament should not be cowed into exercising this constitutional obligation. Where members of the Executive are not willing to be transparent and accountable to the people, the President of Zimbabwe should not hesitate to invoke section 108 (1) (b) which talks about the removal from office of a Cabinet Minister.
3.7 Indigenisation of the Diamond Sector
The Committee received a presentation from the President of Chamber of Mines, Mr Manhando, where he highlighted that the diamond sector together the platinum industry should not continue to be regulated by the indigenisation laws which called for 51:49 percent shareholding in favour of the indigenous people. During the Committee’s visit to Murowa in April 2018, the Rio-Zim board and its management clearly outlined that they needed 125 million dollars to capitalise and expand their operations in the next 3 years, without which the company might be forced to close its operations in the next 18 months. This capital could not be secured as long as the indigenisation regulations were in place. The indigenisation regulations were the major cause why Rio Tinto International pulled out from Zimbabwe.
3.8 Human Rights and Corporate Social Responsibility in Marange
The Committee had an opportunity to meet with representative of the mining community in Chiadzwa. They highlighted some of the challenges that were experiencing which included restricted movement of persons, dust and water pollution, lack of local enterprise development and harassment of villagers by state security agents. The concerns of the community need to be taken into consideration as this will also assist in minimising incidences of illegal mining by panners in the area.
3.9 Legitimacy of Zimbabwe Consolidated Diamond Companies
The Committee noted that the ZCDC was born out of a violent and disturbing corporate background. According to Mr Rushwaya,”the Minister (of Mines) could have acted under improper advice because definitely that was a moment of madness because we just saw the police armed to close down the operation without any consultation done to other parties”. Armed police, using AK 47 rifles were deployed into Marange to force the closure of these mines. All the joint venture partners as well as DTZ OZGEO which was not in a joint venture agreement with ZMDC narrated to the Committee of their harrowing experiences during the violent take over by ZMDC. The operation by the police while it sought to secure the mines created other challenges, which included destruction of existing infrastructure that had been invested by the companies such as security systems. Furthermore, some companies such as Mbada lost diamonds and diamond ore which were on site during the melee. It is the Committee’s position that the establishment and existence of ZCDC was compromised because of this unpalatable background. It will be difficult to legitimise its operations given such a tainted background. The Chairman of ZMDC, Mr Murangari, told the Committee that they were not in support of the consolidation process and the formation of ZCDC was a decision made by the Ministry. There was no Board resolution by ZMDC to allow for the formation of ZCDC.
In view of the above, the Committee makes the following recommendations;
Resolution Action Timeline
1. The forensic audit should be conducted as a matter of urgency on all the companies that were operating in Marange. The Permanent Secretary of Mines and the Auditor General, should engage in earnest all the joint venture partners that were involved in mining of diamonds in Marange. By August 2018
2. The Police should be given adequate resources that include vehicles and surveillance equipment to monitor and reduce incidences of smuggling of diamonds. The Ministry of Finance should give adequate budgetary support to the police for effective monitoring and surveillance activities in Marange. By December 2018
3. An investigation should be conducted on the diamonds and revenues produced by Gye Nyame ZACC should investigate the operations of the Gye Nyame so that that all those who abused office and engaged in shady deals are prosecuted. July 2018
4. Monies paid by MMCZ, Marange Resources and Canadile Miners for legal services to Mr Farai Mutamangira which were not specified need to be interrogated. The Law Society of Zimbabwe, Auditor General, the Zimbabwe Anti-Corruption Commission should investigate monies paid to Mr F Mutamangira for legal services that are not specified. By 31 August 2018
5. The indigenisation threshold on the diamond sector should be removed. The Minister of Finance should remove the 51/49 percent threshold on the diamond and platinum sectors in order to attract investment.
6. Regular lifestyle audits should be conducted on Minister of Mines, its officials and parastatals under the Ministry in order to curb corruption. The Minister of Mines should appoint an independent body to conduct regular lifestyle audits on persons working at the Ministry and parastatals under the Ministry.
7. Officials from the Ministry of Mines, ZMDC and its subsidiaries should declare their interests and assets on assumption of office or during their term of office to curb corruption. The Minister of Mines should ensure employees at the Ministry, ZMDC and its subsidiaries declare their interests and assets during or at commencement of work.
8. ZCDC should be allowed to re-enter into partnerships again, moreso in the new dispensation where Zimbabwe is now open for business. The Minister of Mines should allow investors to come into the Marange area, to boost production and capacitate the operations of ZCDC. With Immediate Effect.
9. DTZ OZGEO should be restored its claim given that it is not within the Marange area and has never been in joint partnership with ZMDC. ZMDC should focus its energy on the Marange diamond deposits because the area has not be fully explored or exploited. Concessions in Chimanimani should be given back to the former owners. December 2018
10. Members of the Executive should be held liable for their actions whilst in Office and even after they leave office. The President, His Excellency E.D. Mnangagwa should not hesitate to invoke section 108 (1)(a) of the Constitution read together section 106 (2)(c) in order to curb corruption and abuse of power by Members of the Cabinet. On-going.
11. The Former President His Excellency Cde R.G. Mugabe needs to clear the air on the missing 15 billion dollars’ worth of revenue. Closure on the alleged missing 15 billion diamond revenues is possible if the former President clears the air on the context he made the assertion that the country lost such an amount. The 9th Parliament must pursue the matter to the logical conclusion. –
12. A whistle blowers policy or law should be put in place to encourage and protect persons who desire to divulge information that is of national importance. The Minister of Finance should put in place a policy that will protect whistle-blowers so that the country will not continue to loose revenues through illicit financial flows, smuggling and other forms of corruption.
By December 2018
13. ZCDC needs to be assessed by a Kimberly Process Review Team to ascertain if it’s still abiding by the KP requirements. The Ministry of Mines need to invite the KP review team given the formation of ZCDC in 2015, to assess if it is compliant with KPCS requirements. By December 2018
The lustre of the diamond industry in Zimbabwe has been damaged due to shady deals and operations. The new Minister of Mines, Hon Chitando has a tall order to ensure that transparency and accountability is inculcated into the industry. The new strides made by the Minister of Mines to announce proceeds of diamonds sales whenever an auction is conducted should be commended. However, there are a number of unresolved issues that still need to be resolved so that the diamond industry can contribute meaningfully to the growth and development of this country.