Zim crafting diamond policy amid controversies

23 Mar, 2018 - 00:03 0 Views

eBusiness Weekly

Taurai Mangudhla
Government is crafting a policy to regulate the diamond mining sector as part of measures to ensure the country benefits from the precious stones, President Emerson Mnangagwa said on Monday.

Addressing Zimbabwean professionals living in Rwanda, President Mnangagwa said the move followed the revisions made to the Indigenisation Act which removed stipulations on local shareholding in multilateral companies operating in the various economic sectors except for diamonds and platinum.

“We are crafting a diamond industry policy after looking at Namibia, Botswana and Angola which are some of the countries that produce diamond.

President Mnangagwa said the government had learnt some vital lessons from the chaotic manner in which companies that were mining diamonds in the Chiadzwa area of Marange were operating as they were not being transparent with the revenue that they were generating.

“We did not know how the industry worked,” he said.
“A lot of things happened. So now we are re-looking (at) the policy with regards the sector.”

About seven companies were mining diamonds in Chiadzwa until the government discovered that they were not declaring all the revenue that they were generating from their operations and ordered them to cease operations.

QUESTIONS have also emerged over key human resource appointments at the Zimbabwe Consolidated Diamond Mining Company (ZCDC) as accusations fly the Ministry of Mines, then led by Walter Chidhakwa and his permanent secretary Professor Francis Gudyanga, threw corporate governance best practices out the window in order to appoint their cronies at the diamond miner.

ZCDC was formed in March 2015 after merging diamond miners that had been operating in Marange in order to ensure transparency, accountability and optimal commercial exploitation and marketing of diamonds, lack of which had prejudiced the country of billions.

Prior to consolidation, Anjin, Diamond Mining Company, Jinan, Mbada Diamonds, Gye-Nyame, Kusena and Marange Resources had been extracting diamonds in the Chiadzwa on the basis of special grants.

A forensic audit on companies that operated prior to the consolidation suffered a still birth due to lack of data.

While the merging of the diamond companies was seen as the right move, the execution left a lot to be desired with at least 16 former employees and potential and interviewees suffering heavy losses, some taking a huge knock on their careers.

After being hired by ZCDC, a number of managers allege they were booted out after some polygraphic tests whose results remain a secret to make way for new personnel handpicked by the former permanent secretary professor Gudyanga.

Gudyannga and Chidhakwa stand accused of abuse of office charges in a separate matter that is before the courts.

They allege ZCDC closed the door on a 15 member team comprising experts with global diamond experience jointly amounting to 127 years, according to an independent human resources analysis only to make way for executives whose combined diamond experience is 10 years.

This has also brought into sharp focus, Government’s commitment towards remodelling the country’s diamond sector with a view to maximise value by employing the right expertise to catch-up with the international best practices.

Business Weekly is in possession of a number of CVs of candidates who applied for vacancies at ZCDC including those who were hired and later fired. Others were offered jobs but refused to take the risk after witnessing a wave of dismissals at the company.

Recently Business Weekly reported Zimbabwe could still be losing millions of dollars’ worth of potential revenue from diamonds, through leaks orchestrated by a closely knit syndicate according to a recent intelligence report.

Below are excerpts of an interview Business Weekly had with ZCDC CEO Dr Morris Mpofu (MM) over the human resources and partnership with Kenako

TM: Questions have been raised on the retrenchments and or dismissal of 15 workers who arguably had more experience in diamonds than the current team. What was the rationale for the change in management? I also understand polygraphic tests were done prior to the dismissals, why was there such a test and is it legal?
MM: Understandably the current ZCDC management cannot authoritatively comment on the experience and performance of the 15 workers who were dismissed prior to its engagement. Neither can we comment on the legality of the methods used at that point in time. However, with regard to the experience, expertise and exposure of the current management team, ZCDC advises that a proper skills assessment was done during the Corporate Diagnosis. In that regard, specific human resources management and development techniques have been applied to ensure that management and leadership excellence is achieved to effectively carry out the ZCDC mandate.

Zimbabwe Consolidated Diamond Company (ZCDC) took steps to recruit qualified and experienced personnel to ensure operational efficiency and production effectiveness. In 2017, the management team crafted a new business strategy under the Diamond Mining Business Model (DMBM. The skilling of the company and the operationalisation of the DMBM yielded positive results. The Company has continued to attract highly experienced and qualified personnel in its management team with executives having an aggregate experience, expertise and exposure in mining and diamonds exceeding two hundred years. The executives have so far been able to build the appropriate middle management and operational teams required to operationalise the Company strategy.
To this end ZCDC now boasts of the right-mix and best-fit of requisite skills in the entire diamond value chain which include geology, mining, processing and diamond value management. The current trend in the growth of production speaks volumes in the ZCDC leadership capabilities.

ZCDC also took the initiative to implement change management programs to establish the requisite corporate culture that will be conducive for business growth. All key employees from Operators up to the Executives were taken through the change management process to ensure that there is paradigm shift and adapting to the new business strategy.

TM: Lastly, you said your diamond cleaning partnership with Kenako improved gem/near gem from 10 percent to 44 percent. Is this not too high compared to previous management and why are your rates that high compared to what was obtaining before?
MM: Following the Corporate Diagnosis and assessment of legacy challenges, ZCDC noted that one of the primary reasons for loss of diamond value and under-pricing was that diamonds were tendered for sale without proper cleaning and effective value management.
In 2017, ZCDC embarked on a project to enhance the value of its diamonds through effective Diamond Value Management (DVM). Diamond Value Management entails an analysis of the systems, processes, procedures and stages through which the diamond goes through, from the time it is mined to the time it is sold as a rough diamond, and ensuring that value is maximized at each stage along that value chain.
This process involves investing in exploration to guide mine planning and diamond grades, advancing processing technology to avoid diamond breakage, building capacity in sorting, cleaning and valuation to bring out the true qualities and value of the diamonds. This process facilitates an enabling marketing framework that promotes price discovery through competitive sales.

Through cooperation with local and international stakeholders and partners, ZCDC implemented a host of measures aimed at addressing bottlenecks in downstream DVM processes. Through these initiatives, ZCDC has seen the quality of its rough diamonds improving.

Following effective DVM processes from cleaning, sorting and valuation, ZCDC achieved significant improvement in the quality mix of its diamonds with overall Gem/Near gem content improving from 10% at the mine to around 44%. It is evident that special attention to cleaning the diamonds with advanced and extended acid cleaning removes the coating which often conceals the diamond’s true qualities, without this enhanced cleaning approach, a gem quality diamond can easily be mistakenly classified as an industrial diamond hence fetching a lower price than its intrinsic value.

Unlike other standard commodities with known prices and price indices, diamond pricing is prone to a lot of subjectivity. Due to the subjective nature of diamond pricing, the characteristics of the market that one attracts plays a significant role in the prices that are eventually paid.

In contrast to polished diamonds which have some price index priced according to the 4Cs, Colour, Clarity, Carats and Cut, the pricing of rough diamonds is a derivative of price estimates of the end product which is the jewellery.
Diamond jewellery products are often sold as art through auctions which tend to have significant pricing variances from historical sales depending on the sale conditions and type of market.

Against this background, ZCDC saw it fit to create an international brand with the potential to attract a wider array of international buyers. ZCDC has since embarked on a marketing and rebranding exercise informed by various benchmarking exercises and stakeholder engagements.

Additional reporting by New Ziana

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