eBusiness Weekly
Zimbabwe’s diamond industry is starting to come right, but the Zimbabwe Consolidated Diamond Company not only has to get things right, and get them right fast, but also show that it has got them right.
Because of the murky past, there are going to be suspicions and there are going to be people who were pushed out for dishonesty, or at least fairly well-founded suspicions of dishonesty, to be making claims about their successors. Indeed there is floating around an “intelligence report” that all is not well, although nothing in the way of proof has been offered.
The ZCDC thus needs to have everything out in the open, and one way to ensure this to have recent high-quality audit reports available. In any case an independent audit firm should be able, in its first investigation of the company and its finances, to recommend best-practice procedures and solutions that if adhered to ensure everyone that the company is being properly run.
Audit reports are not so much there to catch thieves and the corrupt, although they will if there are such people are around. Most of the value of a decent audit report, as most large companies know, is to get things right so that accounts are meaningful and transparent and, with the useful by-product, that thieving and financial manipulation are either impossible or will be detected very quickly.
Companies listed on the ZSE are bound by the listing rules and regulations to issue annual reports within three months of the close of a financial year, backed by a report of a firm of reputable auditors. This is so shareholders can be assured that the accounts are properly presented and that any oddities have been explained, while any deficiencies, which are usually minor, have been addressed.
Most companies on the ZSE find that every year their auditors have through professional diligence are to recommend changes and upgrades while still able to certify the company’s accounts as an accurate reflection of its financial state. There is nothing detrimental about such advice. Indeed with most ZSE companies there are never allegations of dishonesty and audit reports are basically combine this fact with suggestions, and sometimes quite a long list of suggestions, for upgrading financial systems and information.
The same sort of requirements are needed for a private company about to go public. People and institutions invited to buy shares want to separate the sales talk from the facts, and they want those financial facts to be accurate.
The ZCDC is not a listed company. But the people of Zimbabwe are major owners and so, in a sense, shareholders. They want to know what is going on, what has been done to fix what everyone admits were serious problems, and to be sure that the new management is seeking and following the best advice possible to ensure that holes have been plugged and that the company’s accounts and financial statements reflect the laid down best international practices.
An annual report to the people would allow management to explain its decisions, hopes and plans, but again these would be backed by accounting facts that have been checked.
Diamond mining is always a tricky industry. The industry mines small high value stones that have a lot of value the second they are picked up or dug out of a matrix. A rough diamond is a stone in the soil and does not require smelting or anything much more than a wash to have immediate value. The value obviously increases after cutting and polishing, but gemstones give security managers very severe headaches. Anyone with keys to a safe can walk out with a bag.
In Zimbabwe the problem is more difficult because the largest diamond field is an alluvial field spread over a large area of a well-populated part of the country. Most countries have life a lot easier, either mining diamonds from the kimberlite pipes, which means something like a conventional mine that is easy to rope off, or like Namibia extracting alluvial diamonds from a field in the oldest and driest desert on earth, where security fencing can wall off a large area and make stealing and smuggling very difficult.
But this is no reason for the new ZCDC management to be oversensitive to suggestions or criticism. It needs to accept that it must not only be competent and honest, but be willing to show everyone who is interested that it is so.
Even the debate on how diamonds are to be processed, and whether this should be done in Zimbabwe as some urge or in Botswana, as is being actively investigated, can be a transparent debate built around checklists on agreed criteria.
Investigations into the past will probably continue for years and each new set of accusations will require someone to dig around and finally clear or condemn.
But what ZCDC can do now is have a line drawn with everything after that moment conforming to top standards set by independent experts, and as much as possible of events and accounts decided before at least cleared, so investigations can be narrowed down to the essentials.
