Lessons from Parly report on missing billions from diamond revenue

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Prof. Gudyanga

Mukasiri Sibanda

Led by Honourable Themba Mliswa, the Parliament Portfolio Committee on Mines and Energy (PPCME) produced a report on its findings and recommendations concerning the allegedly missing $15 billion Marange diamond revenue.

Although the figure of $15 billion has been factually proven as an incorrect tally of Zimbabwe’s diamond earnings from the time, there is enough public interest in this saga to justify serious interrogation of the report and pick valuable lessons that can help citizens to pressure government and mining companies to improve the management of national mineral wealth for the benefit of the majority.

In a country where citizens are generally starved of information concerning the management of the country’s mineral wealth, the Parly report, fittingly, should have helped to lift the veil of secrecy in the diamond sector. The reason why Kimberly Process public statistics on diamond production and sales should be reformed to ensure greater transparency in the diamond industry.

The Parliament report shows diamond production by volume — slightly over 51 million carats and gross diamond revenue — approximately $2,4 billion dollars from 2006 to 2017. During the same period, approximately $300 million royalties were paid to government as diamond royalty.

Godwill Masimirembwa

Evidently, the Parly report missed the opportunity to share detailed information to help the public to have a better understanding of what really transpired in the sector. The Parly report failed to disclose the contracts or mining agreements for all the entities that were mining diamonds in Marange.

No contract disclosures

Contract disclosure creates opportunities for citizens to assess if the terms and conditions of mining deals are fair or not.  A precedent would have been set to avert future losses linked with bad mining agreements as secrecy intensifies corruption risks.

By promoting contract transparency, Zimbabwe would have joined other resource rich countries in Africa like DRC and Guinea which publicly disclose mining agreements

In terms of production data, there was need to show how much how was produced by each entity that was operating in Marange.

In addition, the diamond production and export data by volume and value was supposed to be disaggregated to show the quality of diamonds produced and value fetched by different categories of diamonds (gemstones, semi-precious and industrial diamonds).

Such levels of disclosure are helpful for the public to see the percentage of gem and semi-precious diamonds that were produced and marketed from Marange from 2006 to 2017. Consequently, making it easier for the public to raise red flags concerning possible loss of revenue from smuggling of gem and semi quality diamonds which are highly valuable as opposed to industrial diamonds.

To gain a better understanding of the importance of such levels of transparency, the May 2016 report produced by USAID Strategic Economic Research and Analysis Unit (SERA), titled Gap Analysis Of Mineral Revenue Disclosure And Information Needs of Various Stakeholders noted that “. . .According to the 2011 midterm national budget statement, 18 percent gem quality diamonds are produced from alluvial diamonds in Marange and the remainder being industrial diamonds. This contrasts sharply with analysed data from Zimstat which shows that industrial diamonds account for nearly 99 percent of production.”

Illicit Financial Flows

As expected, figures concerning illicit financial flows are subject to disputes. What is clear though is, regardless of the exact money involved, the nation failed to get a fair share of benefit from Marange diamonds. The Parly report noted that they were mixed submissions concerning the missing $15 billion revenue.

People like Masimirembwa, who were directly involved in Marange diamond operations argued that the figure was unrealistic.  Godwill Masimirembwa is the former board chairperson of Zimbabwe Mining Development Company, a state-owned enterprise which had no less than 50 percent shareholding in all the six entities that mined diamonds in Marange except for Anjin.

Rushway,  the permanent secretary of the Ministry of Defence, argued that the missing 15 billion was used as a ruse to take over diamond mining concessions from entities that were operating in Marange. Farai Maguwu of Centre for Natural Resource Governance suggested that the $15 billion loss was understated, may be $50 billion was syphoned.

The Auditor General’s reports, overshadowed by the then  President’s assertion that the country lost $15 billion diamond revenue, offers a stern reminder to the public, Auditor General’s reports can be useful tools to hold government and companies accountable. For example, the Auditor General’s 2014 Narrative Report on State Enterprises and Parastatals among other findings noted that joint venture partners had not met their obligation of paying agreed capital contributions as highlighted (bottom):

Anjin Investment Private Limited’s contribution could not be verified as the entity failed to furnish its financial records. This should have prompted government to order a special audit in line with Section 309 (2) (b) of the Constitution.

The Parly report noted that it was impossible to recover the alleged missing $15 billion based on evidence presented. In fact, the report quoted brutal remarks by Former Permanent Secretary of Mines, Professor Francis Gudyanga “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.”

Whistle blowers

Commendably, the Parly report recommended a whistle blowing facility which can be handy to get finer details of what really transpired, bring culprits to book and recover the stolen diamond revenue.

Zimbabwe Republic Police (ZRP) Minerals and Border Control Unit (MBCU) managed to recover 2 800 carats from 2013 to 2017. It would have been useful to disclose the value of the recovered diamonds. More importantly, police and informants need to be properly incentivised to curb smuggling of diamonds and other minerals.

The lessons

How well we learn lessons from the missing billions is key to ensure that mineral wealth plays a propulsive role to broad based socio-economic development. If government is sincere on fighting corruption, then urgently embracing mineral revenue transparency reforms like Extractive Industry Transparency Initiative (EITI) is an important benchmark. Anything short indicates that the Marange curse will continue to haunt Zimbabwe.

 

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