Blood Diamonds


A leading diamond trade watchdog says £1.25 billion in diamonds has been stolen from Zimbabwe’s eastern diamond fields by president Robert Mugabe’s ruling circle and international gem dealers.

Partnership Africa Canada – a member of the Kimberley Process, the world regulatory body on the diamond trade – said alleges Zimbabwe’s gems have been plundered by the Mugabe regime.

Its report said vast earnings from Zimbabwe’s eastern Marange fields – one of the world’s biggest diamond deposits – have not reached the state treasury.

The PAC report, released to coincide with the Zimbabwe government’s conference on the diamond trade, cast a shadow over the Mugabe regime’s effort to win international respectability for its gem trade.

Zimbabwe’s president says his country turned to China to beef up its military training capabilities after what he called threats of an invasion from Western countries intending to lead to “regime change.”

President Robert Mugabe said on Friday at the opening of a Chinese-built military training academy north of Harare that “hate-filled tactics” by the West have acted as a “wake-up call” for the country to strengthen its defence. Zimbabwe received a $98m loan from China to build the sprawling complex.

China wants the loan repaid over 13 years from diamonds being mined by Chinese companies in eastern Zimbabwe.

Mugabe said the new National Defence College will act as a “think tank” on security matters under threat from Western enemies whose “adventurism went to the extent of seeking a military invasion of Zimbabwe”.

(Source)

The Kimberley Process diamond watchdog should not have cleared Zimbabwe to sell gems from its controversial Marange fields because the mining conditions remain murky, a Zimbabwean lawmaker said Wednesday.

“I think it was absolutely wrong to allow the Marange diamonds to be sold,” Edward Cross, a member of Prime Minister Morgan Tsvangirai’s MDC party, told AFP.

“I have evidence that the value and volumes of Marange diamonds are being underestimated and are being used to subvert the democratic process in Zimbabwe.”

His comments came the day after the Kimberley Process (KP), established to prevent trade in so-called “blood diamonds”, authorised the resumption of diamond sales from two sites in Marange.

The deal came after negotiations involving the World Diamond Council, Zimbabwe, the European Union, South Africa and the United States and “will remain under constant review”, said the Council, which monitors KP compliance.

It resolves a deadlock that had threatened to derail the KP, with India and China supporting a resumption of Marange sales over bitter opposition from Western nations, rights groups and the industry.

The Marange fields, one of Africa’s biggest diamond finds in decades, have been the site of gross human rights violations, according to rights groups.

President Robert Mugabe’s army cleared small-scale miners from the area in late 2008 in an operation that Human Rights Watch says killed more than 200 people.

Cross last month tabled a motion in parliament to push for the nationalisation of the Marange fields, arguing they have not been properly regulated.

“The reason for my motion in parliament was basically to have Zimbabweans control the diamond revenues. Right now what is happening is illegal in Marange,” he said.

Rights groups accuse Mugabe’s ZANU-PF party, which shares power with the MDC in a tense coalition government, of funneling profits from Marange diamonds to senior military officials and party leaders.

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Zimbabwe police and private security guards employed by mining companies in the Marange diamond fields are shooting, beating and unleashing attack dogs on poor, local unlicensed miners.

The evidence gathered by Human Rights Watch contradicts claims that areas controlled by private mining companies, instead of by the Zimbabwe government alone, are relatively free of abuses.

Over the past six months, police and private security personnel have attempted to clear the fields of local miners whom they accuse of illegally mining diamonds. Human Rights Watch research found that in many cases, the police and private security guards used excessive force against the miners. The violence follows claims, in June, by the government and the head of an international industry monitoring body that conditions in the Marange fields are sufficient for it to be allowed to resume exports of diamonds from Marange.

”Shooting defenseless miners and unleashing dogs against them is inhuman, degrading and barbaric,” said Tiseke Kasambala, senior Africa researcher at Human Rights Watch. ”The diamonds from the Marange fields are tainted with abuse.”

Local civil society activists told Human Rights Watch that the government has granted six international mining companies concessions in the Marange fields. The companies’ private security guards carry out joint patrols of the mining areas with Zimbabwe police. Local miners said that most of the companies have built electric fences around their mining concessions, while security guards with dogs regularly patrol the concessions. However, local miners are still able to reach the fields and sometimes stray into areas under the companies’ control.

Some members of the international diamond monitoring body, known as the Kimberley Process, have tried to argue that conditions in the areas controlled by joint ventures are not abusive, and that those diamonds should be certified and allowed onto international markets. But Human Rights Watch has found, on the contrary, evidence of serious abuse by private security guards patrolling the joint venture territory.

Human Rights Watch researchers interviewed 10 miners in Mutare and towns close to the Marange diamond fields who had been beaten by guards and attacked by their dogs after being caught by mine security in the past six months. During patrols, police would also fire live ammunition at the miners as they fled, the miners said.

”I was attacked by all of them,” one of the miners told Human Rights Watch. ”The dogs were biting me and I was screaming. It was terrible.”

Medical personnel who treated the miners at neighboring clinics and the main provincial hospital confirmed that they had treated wounded miners.  An official at a local clinic told Human Rights Watch that he had treated between 15 and 20 victims of dog attacks a month since April, many with serious wounds. Clinic officers also reported seeing people with gunshot wounds, including people who had been shot in the head.

Many of the miners were reluctant to report the incidents to the police, miners and local activists said, as they were afraid of being arrested for digging in the fields because they were unlicensed. The government has conducted no investigations into these abuses.

The Ministry of Mines and Development, other relevant Zimbabwe authorities, and the mining industry in Marange need to take immediate measures to stop these abuses and ensure accountability for abuses by members of the police force and the private security guards, Human Rights Watch said. At a minimum, the companies should follow internationally recognized standards on security, such as the Voluntary Principles on Security and Human Rights, investigate any allegations of abuse, and urge investigations of those acts.

Human Rights Watch urged the Kimberley Process Certification Scheme, an international body that oversees the diamond trade, to suspend all exports of diamonds from the Marange fields and asked retailers to refuse explicitly to buy Marange diamonds. The Kimberley Process has not adequately addressed the abuses in Marange.

”The ongoing abuses at Marange underscore the need for the Kimberley Process to address human rights instead of capitulating to abusive governments and irresponsible companies,” Kasambala said.

On June 23, Mathieu Yamba, the Kimberley Process chairman, announced that he had made a unilateral decision to lift the ban on exports of diamonds from the Marange fields. He took the decision even though independent monitoring, including the organization’s own investigation, had confirmed serious human rights abuses and rampant smuggling at the Marange fields. This decision, if implemented, would mean that the export of Marange diamonds is now permitted, without any monitoring for human rights abuses or credible evidence that Zimbabwe is complying with the Kimberley Process standards.

However, the Kimberley Process operates by consensus, and members such as the European Union, the United States, Israel and Canada criticized Yamba’s position. Others, such as South Africa, supported it. As a result, the organization remains deadlocked over whether to allow exports of diamonds from Marange.

”The Kimberley Process appears to have lost touch with its mission to ensure that blood diamonds don’t make their way to consumers,” Kasambala said. ”By ignoring the serious abuses taking place in Marange, it is losing credibility as a global diamond regulating body and risks misleading consumers too.”

Abuses by Police and Security Guards

Human Rights Watch interviewed miners in July, 2011, who were mauled by dogs and beaten by private security guards. They reported that the majority of incidents involved security guards working for Mbada Mining, a South African and Zimbabwean owned joint venture. The guards were identifiable by their black uniform. One miner said: ”The Mbada guards are the worst. They don’t hesitate to set the dogs upon you and they also beat you up.” Human Rights Watch was unable to interview Mbada Mining officials during the mission, because they were not reachable by phone.

In one incident, private security guards working for Mbada set four dogs on a handcuffed artisanal miner caught digging for diamonds close to the fields mined by Mbada. ”I was attacked by all of them,” said the man, who is in his 20s. ”The dogs were biting me and I was screaming.  It was terrible.”

A clinical officer in the town close to the fields told Human Rights Watch: ”We have so many people coming to the clinic with dog attacks. It’s easy to tell they’ve been bitten by dogs. You see the marks. During the week we treat around five or more miners with dog bites. They tell us that private security guards are the ones who set the dogs upon them. They say that it’s guards working for Mbada.”

Human Rights Watch’s research found that in many cases dogs were used not just to restrain the victims, but apparently deliberately to inflict as much injury as possible. One miner told Human Rights Watch that security guards would shout at the dogs to “attack” even if the miners had surrendered or stopped running.

A provincial hospital clinical officer told Human Rights Watch that he had seen at least 15 victims of dog attacks since April. In one case, the victim died from his injuries. Local miners and civil society activists reported that the numbers of dog attack victims could be much higher, but that the majority of the victims chose not to go to the hospital to receive treatment as hospitals often required a police report. Most victims preferred to recover at home without medical treatment, increasing the risk that their wounds would become infected.

Local civil society activists reported that police often carry out joint operations with private security guards in advance of visits to the fields by senior government officials or foreign delegations. For example, police and private security guards carried out operations to clear the fields of diggers in advance of visits to the fields by President Robert Mugabe in March and delegates from the African Diamond Producers Association in April. Some of the worst incidents occurred in the days before these visits.

A clinical officer at the main provincial hospital told Human Rights Watch:

”From March to June we have had many people coming to the hospital with gunshot wounds. They get shot at. Some of them have head injuries, some shot in the legs, arms, shoulders. We have one man who is in a coma. He was shot in the head about three weeks ago. There were four of them who were shot but one of them was serious because of the head injury. He was brought in by the police from Chiadzwa. They didn’t explain who he was.”

A local clinical officer described a joint operation between the police and private security guards to drive away miners in late May and early June. He told Human Rights Watch:

On the day they started the operation a lot of guys were bitten by dogs and a few came to the clinic for treatment. Three came on one day. The guys came with wounds similar to tears – not just teeth punctures. The injuries showed that the dogs were tearing the flesh and not just biting to restrain the miners. Such wounds are difficult to treat. I also treated three guys who were shot by the police. They were shot from the back and behind their legs. We tried to operate on them but their injuries were serious and we transferred them to the provincial hospital.

Testimonies

Blessing G., 21
There were six of us who went to mine in the fields. We were digging in the bush when we were caught by these private guards led by a white man. They had four dogs. One of the guards had a gun. When they saw us they released the dogs. I tried to run away and fell. My friends escaped. Three dogs attacked me. One caught me on the leg and the other one on my hand. The other dog bit me on the stomach.  I lay on the ground still begging them to call the dogs off. After two or so minutes, it felt like a long time they called off the dogs and told me, “We don’t want people like you mining illegally for the diamonds.”  I couldn’t walk for several days because of my injuries.

James T., 27
I was busy digging for the diamonds next to the Mbada area when I heard a shout, “Catch.” The guards were with a white man. There were four dogs and I was attacked by all of them. The dogs were biting me and I was screaming. One of the guards came, pulled off the dogs and then handcuffed me and then he shouted, “Attack” and the dogs came back and started biting me as I lay on the ground. It was terrible. After a few more minutes they grabbed the dogs off and marched me to their diamond base where they bandaged my wounds and then drove me out of the fields. I didn’t go for further treatment. I just went home.

Peter N., 20
During one operation we were caught by private security guards and police. There were many of us. The guards had dogs but they also had teargas, which they threw at us. We started running, and then they let the dogs loose. Many of us were bitten on that day. They had many dogs. The guards were wearing dark uniforms. The police were also there and they had guns. At some point they started shooting. I kept running but when the police started shooting I stopped and surrendered. That’s when the dogs came and started biting me. I know that some of the others were shot by the police because I saw them fall. I don’t know if anyone died.

Richard L., 22
I haven’t gone back since I was bitten by the dogs and hit by the guards. It was around May and there were around 10 or 15 of us. We were working in a syndicate with the soldiers and they had told us which area to dig for the diamonds. Suddenly we heard shouting and the security guards came running after us. They were not armed. They shouted at the dogs, “Attack” and then we all started running. I was caught by one dog. I don’t know how many dogs they were. The dogs bit me on the legs and stomach. Afterward some of the guards came and started kicking us saying we should learn not to dig for diamonds in that area. The Mbada guards are the worst. They don’t hesitate to set the dogs upon you and they also beat you up. I didn’t go to the hospital I just went home and healed by myself.

Fambai  K., 30
Going into the fields is dangerous for us these days. The soldiers are better because we now work with them. But the security guards all have dogs and they work with the police. I was attacked by dogs in June. As you can see my wounds are still fresh. I don’t know who the security guards belonged to but they wore a black uniform. Some say they are Mbada but I don’t know. The first dog caught my leg and I fell.  Then the guards came and started hitting me. They were kicking and punching me. Then another dog attacked me. I was trying to hold its mouth. It went on for a few minutes and when they saw I was bleeding they took me to a place called diamond base. They stitched me up there then handed me to the police.

(Source)

Sino-Zimbabwe Ltd. of China fired workers at its Marange diamond fields operation in Zimbabwe because the mine isn’t economically viable, the Herald reported, citing Gift Chimanikire, the deputy mines minister, and unidentified workers.

Sino-Zimbabwe entered into a joint venture to dig for gems with the state-owned Zimbabwe Mining and Development Corp. on March 11, the Harare-based newspaper said.

Mbada Mining Ltd., Marange Mineral Resources Ltd., Pure Diamonds Ltd. and Anjin Mining also mine for diamonds at the field, the Herald said. Mbada Mining and Marange Resources export gems from Marange, it said. The Herald didn’t say how many workers were employed by Sino-Zimbabwe.

(Source)

Zimbabwe must demonstrate how it will prevent diamonds from its Marange fields being smuggled over the border to Mozambique if it wants to freely export gems from the deposit, which it mines minister says is the biggest diamond discovery in a century.

Zimbabwe must “provide a credible anti-smuggling enforcement plan” that includes cooperation with the government of neighboring Mozambique, the Kimberley Process said in documents sent to Zimbabwe on Dec. 29 that were obtained by Bloomberg.

The documents were confirmed as genuine by Mathieu Yamba, current chairman of the Kimberley Process, in an interview today from Kinshasa, Democratic Republic of Congo. Zimbabwe has yet to respond, he said, declining to comment further. The Kimberley Process is an organization that includes governments and diamond industry companies and is designed to reduce the trade of diamonds used to finance conflicts.

The deposits in eastern Zimbabwe could generate $2 billion in annual export income, the state-controlled Herald newspaper cited mines minister Obert Mpofu as saying in October. Zimbabwe, a member of the Process, isn’t certified to exports the gems from the field because it has not met a standard to demonstrate that proceeds from sales aren’t financing conflict.

Mpofu declined to comment when called today.

Zimbabwe’s government must also give the Kimberley Process and the Kimberley Process Local Focal Point, a coalition of Zimbabwean civil rights organizations, “unfettered access” to the Marange diamond fields, the Process states in the documents.

Diamond Smuggling

“If abuses or smuggling continue, then we would expect the self-cessation mechanism in the KP agreement to come into play and for Zimbabwe to immediately stop exports,” Human Rights Watch Africa Researcher Tiseke Kasambala said in an e-mailed statement from Johannesburg today.

Human Rights Watch, based in New York, and Partnership Africa Canada have said that proceeds from diamond smuggling are helping to enrich allies of President Robert Mugabe and could finance a violent election campaign by his Zimbabwe African National Union-Patriotic Front party. Zanu-PF has denied benefiting from gem smuggling.

Any violation reported to the Kimberley Process Work Monitoring Group must put a stop to the export of diamonds within seven days, the Process states in the documents.

Zimbabwe must also provide a clear time line during which control of the Marange fields will be handed from the military to the police, the agreement says.

The World Diamond Council yesterday said in a statement that Zimbabwe will be able to export gems from Marange, which is also known as Chiadzwa, if an agreement can be reached with the Kimberley Process. Talks between Yamba and Zimbabwe are currently being held, the council said, giving no further details.

(Source)

Diamonds worth as much as US$ 1 billion could have been illegally mined at the Marange fields, mostly by the Zimbabwean army and the proceeds used to partly finance a campaign of violence to keep Mugabe in power while some were pocketed by members of Zimbabwe’s top military brass, ministers and President Mugabe and his wife.

While the true extent of theft of diamonds from Marange and the identities of all involved in the looting will probably never be known in the absence of an independent commission of inquiry, however, extensive investigations by ZimOnline have shown the military at the centre of a well-orchestrated scheme to siphon gems from the controversial fields (also known as Chiadzwa) for delivery on the international black market for precious stones.

According to our investigations, including interviews with well-placed sources in the army, police and at the Reserve Bank of Zimbabwe (RBZ), most of the diamonds illicitly mined at Marange from 2006 to 2008 by the Zimbabwe National Army, after it evicted illegal panners and took control of the rich alluvial deposits were largely smuggled to India and Dubai and proceeds were laundered into offshore accounts and others held at the RBZ.

The black market sales were done outside the Kimberly Process, which certifies diamonds for sale on the international market.

Investigations show that the Reserve Bank of Zimbabwe, through its governor and Mugabe’s private banker Gideon Gono, was central in facilitating the movement of proceeds from the illegal mining activities and their diversions into various accounts.

After Mugabe’s ZANU PF lost the parliamentary and presidential elections in March 2008 to Morgan Tsvangirai’s MDC, the Joint Operations Command (JOC), the secretive committee of securocrats running Zimbabwe convened to map a violent strategy to ensure that Mugabe would win the run-off presidential election.

The JOC includes the Zimbabwe Defence Forces (ZDF)’s top military commander General Constantine Chiwenga, army commander Philip Sibanda, air force commander Perence Shiri, police chief Augustine Chihuri, secret service director general Happyton Bonyongwe and prisons commander Paradzai Zimondi.

Electoral violence

What followed the committee’s meeting was probably the worst electoral violence ever seen in Zimbabwe.

Despite not being a military man, Gono sat on the JOC and ensured that money from illegal diamond proceeds was funnelled to fund a violent campaign which saw more than 220 senior army officers being deployed across the country to coordinate the campaign of violence towards the bloody presidential run-off on June 27, 2008 won by Mugabe.

Two senior army officers were posted per each district to coordinate the violence which involved ZANU PF youths, police, and ordinary soldiers.

The seniors were later rewarded handsomely with some getting as much as US$20 000 each long before Zimbabwe introduced dollarisation. Despite the foreign currency shortages then, plenty cash remained available to fund those key senior army officers central to Mugabe’s power grabbing plans.

The ensuing violence forced Morgan Tsvangirai – who analysts had tipped to win the second round ballot after defeating Mugabe in the first round vote – to withdraw from the presidential run-off. The MDC claims more than 200 of its supporters were killed, some burnt alive, while tens of thousands were left homeless or injured.

ZimOnline is also authoritatively informed that it was via money from the diamond proceeds that Gono funnelled millions of dollars to accounts held by Grace Mugabe in Malaysia and Hong Kong.

Mugabe’s wife travels frequently to Hong Kong where the first family has invested in a lavish lifestyle including a mansion in which their daughter, Bona, who has been attending university there lives.  They also own properties in Malaysia.

After her shopping trips to Harrods in the United Kingdom and choice shops in France, Italy and Spain were curtailed by European Union sanctions imposed over human rights abuses,  Mrs Mugabe had shifted her shopping sprees to Asia, particularly Hong Kong, Singapore and Malaysia.

Chiwenga and Shiri, one of Mugabe’s most trusted allies, Zimondi, the late Vitalis Zvinavashe, Chiwenga’s predecessor at the helm of the ZDF, various heads of key military brigades, senior CIO officials had handsomely benefited from the proceeds of smuggled Marange diamonds.

“The same way the military top brass used Harare as a transit route for diamonds smuggled out of the Congo when Zimbabwe deployed troops there in the late 1990s replayed itself with Marange diamonds…” said a military source, speaking on condition he was not named for fear of possible reprisals.

One retired senior Zimbabwe army official is said to have moved more than R40 million to a South African bank from proceeds of Marange diamonds sold illegally in India.  This particular official and the bank concerned, one of the major four concerned cannot be named for legal reasons.

But it is common cause that some ministers, particularly Mines Minister Obert Mpofu, who has been regularly linked to shady deals at Marange, are now fabulously rich owning vast properties around Zimbabwe which cannot be afforded by their measly salaries as government officials.

Tendai Biti, the Minister of Finance in the unity government recently complained that US$ 30 million raised sales of diamonds of Marange stones could not be accounted for.

But sources say the amount identified by Biti as missing was only the tip of the iceberg and that the Finance Minister would never be able to know the exact figure involved because of the sophisticated laundering that took place.

Private jets

On several occasions, private jets of wealthy Indians would land at Harare International Airport to pick up diamonds mined from Marange. The payments would then be done offshore. No documentation would be left making it near impossible to trace the illegal exports.

“If you consider all the rot that Mugabe has allowed his top military men to get away with, it all then explains why they want him to die in power  and their legendary resistance to Tsvangirai,” said one source close to the RBZ.

The looting of the Marange diamonds continued when the army started ceding control of the Marange fields to the Zimbabwe Mining Development Corporation (ZMDC) until the mining rights over Marange were granted to two companies, Canadile and Mbada Diamonds, both with no traceable credentials in the diamond mining trade.

But while some ZMDC officials are now in court over their alleged looting, sources say Zimbabweans should not expect the senior army officials, and other politicians who benefited from the looting of Marange diamonds to ever be seen in the dock – at least not when they are still the bedrock of Mugabe’s power.

The six ZMDC mining executives arraigned in court are accused of stealing  US$10 million from Marange proceeds through fraud and misrepresentations of diamond sales. Another US$33 million could also have been lost in the process.

These disclosures also came against a background that one of the mining companies in Chiadzwa, Canadile Miners, which has since been booted out of the contested diamond fields, has been smuggling diamonds out of Marange through Mozambique and selling them on the black market.

Ironically, government blames Canadile directors for smuggling diamonds out of the country mainly through Mozambique to sell them in the black market in Dubai, India and China, the key markets  for the Marange gems.

September fallout

Canadile was recommended to Zimbabwe Mining Development Corporation (ZMDC) executives by Mines Minister Mpofu who in turn urged Mugabe to approve its mining deal.

Mugabe and Mpofu defended the company until there was a fallout over the control of the mining and sale of the diamonds in September between Canadile deputy chairman Lovemore Kurotwi and the minister.

Mpofu was accused by Kurotwi in a meeting with Mugabe in September of soliciting for bribes. Mpofu acknowledged in a meeting with ZMDC officials on September 20 that he was accused by Kurotwi of asking for bribes, but tried to pre-empt speculation that he was receiving bribes and a lot of corrupt payments to facilitate mining deals.

Aware that people were accusing him of taking bribes and corruptly enriching himself through the Chiadzwa diamonds, Mpofu himself said there was a “plethora of rumours, insinuations and allegations being levelled against him” and the ZMDC board.

Mpofu has been on a buying spree, purchasing real estate and housing properties mainly in Harare, Bulawayo and Victoria falls. This invited suspicions from the public and members of a parliamentary portfolio committee which investigated the Marange diamonds affairs earlier this year.

Mpofu has bought one of the tallest buildings in Bulawayo – York House – and has splashed thousands of dollars on high-value properties in Victoria Falls and Bulawayo.

Two cruise boats

A document listing Mpofu’s properties shows that he bought a supermarket in Victoria Falls’ Chinotimba high density suburb, three houses in a medium-density area, two cruise boats on the Zambezi, five houses in Mkhosana high density suburb, three houses in Chinotimba, two industrial stands, one large stand in Chisuma, one big industrial stand next to Chinotimba stadium, four industrial stands on the Airport road, and four medium density plots.

Mpofu reportedly bought all these properties for cash!

Even though he has a farm and supermarkets, sources close to him say that he has no such financial capacity to buy all these properties, especially for cash. Before dollarisation, he earned largely worthless Zimbabwe dollars after the collapse of the Zimbabwe dollar in 1997. After dollarisation Mpofu – like all civil servants – earns a little more than US$300.

Mpofu has however denied he was using diamonds proceeds to buy personal properties. He said he got a US$1 million loan from the Commerciial Bank of Zimbabwe  through his company Trebo and Khays Pvt Ltd.

Documents show that Mpofu indeed got a loan from CBZ. This is contained in a facility letter dated October 26 2009. Mpofu the signed a loan agreement for and on behalf of Trebo and Khays (Pvt) Ltd with a woman named Sikhanyisiwe Mpofu, presumably his wife or daughter.

The loan agreement was signed on December 2 2009 and expired on October 31 this year by which date all the monies due should have been repaid.

Mpofu has reportedly repaid the loan, raising further questions about his sources of income which appears well beyond his means. In any event, the CBZ loan, now Jewel Bank, was very inadequate to enable Mpofu to purchase all the properties that is registered in the names of his entities and a plethora of others he has registered in the names of relatives.

The purpose of the loan was given as to finance capital expenditure requirements. However, sources said the loan was used to mask his source of income because growing suspicions he was minting at Chiadzwa, together with other politicians and their business cronies.

The security for the loan – which represented a line of credit – included: Trebo and Khays directors’ personal guarantees for all sums due supported by first mortgage bond for US$1,4 million over stand 12265A in Bulawayo; cession of insurance policy covering the mortgaged property and cession of revenue generated from property lease rental income valued at US$82 000.

Mpofu gave his address of service as Stand 123, 4th Avenue and Fife Street, Bulawayo, a hint at the various properties he owns in the Bulawayo and elsewhere. Mpofu has mansions in Harare and Bulawayo, placing himself well above the level of prosperity of an ordinary minister and even businessman.

Ministers have since last year been earning a paltry US$350 a month, after it was increased from the US$150.  Even those with farms and safari concessions seized from white farmers like Mpofu have been struggling due to lower productivity and poor management.  So there is simply no way Mpofu’s wealth could have been generated from any viable business he controls.

Massive looting

The government took over the Marange fields ostensibly to ensure revenue from the diamonds is channeled into public coffers. But those in the know say the involvement of the government and particularly the army has only helped to give a cover of legitimacy to massive looting of a key national resource.

Independent mining executives estimate that diamonds worth more than US$1 billion could have been smuggled out of the country and sold in the black market over the  years including after  the arrival of the  two dubious South African companies to partner government in the Marange diamond ventures. “Diamonds worth more than US$1 billion have been looted in Marange since 2006,” a senior mining executive said.

“The pillaging was done by the soldiers, the diamond exploration and mining companies and artisanal miners; other state security agents; politicians, dealers, crooks and criminals.”

Well places sources interviewed described the Chiadzwa diamond mining story as a tale of fraud, smuggling, bribery and outright theft. It is riddled with corruption, including buying-offs and paying-off of dodgy mining dealers, smugglers and politicians, and a scandalous waste of public funds.  The Zimbabwean public has not benefitted in a meaningful way from the Marange diamonds.

Mbada is a joint venture between the state-owned Zimbabwe Mining Development Corporation (ZMDC)’s wholly-owned subsidiary Marange Resources and South Africa’s New Reclamation Group special purpose vehicle, Grandwell Holdings registered in Mauritius.

Canadile was a joint venture between ZMDC’s Marange Resources and South Africa’s Core Mining and Minerals.

ZMDC, through Marange Resources, concluded Memoranda of Agreement with New Reclamation Group and Core Mining for exploration of the Marange diamonds in July last year. The agreements were transitory for a period of three months within which the investors were to mobilise money and equipment to fulfil certain conditions precedent.

Even though New Reclamation and Core Mining failed to fulfill their promises, especially of investing US$100 million each, they were allowed in and continued to extract and sell the diamonds mainly for their benefit. Even some basic tenets of the agreements were violated such as making retired Air Vice-Marshal Robert Mhlanga the chairman of Mbada when the agreement said the chairman would come from ZMDC.

Scrap metal dealers

During parliamentary hearings into the Chiadzwa mining issues this earlier this year, it became clear that so many things, including Mhlanga being Mbada chairman, were imposed by government for reasons never explained.

Despite all the information and credibility gaps of the individuals and companies trying to mine in Marange, the shareholders’ agreement between ZMDC and New Reclamation was signed on August 14, 2009, while the one between ZMDC and Core Mining was signed on August 14, 2009.

The companies were given permission to mine the Marange mining title which covers 66 000 hectares. There is an attempt to increase the area to cover a vast 123 000 hectares.

The companies initially shortlisted to partner ZMDC included Benny Steinmetz Group Resources Limited (BSGR), New Reclamation Group, Southern African Investment and Infrastructure Company and Namakwa Diamonds. Other companies also engaged over the diamond investment issues include Community Energy, WMJ Lotter Consultants and Elkhart Mining.

However, New Reclamation and Core Mining were chosen even though Core Mining was not even initially on the shortlist. What was surprising was that the South African companies – which had no mining experience and capacity – were chosen ahead of several other more qualified candidates.

New Reclamation Group is a scrap metal company which a dubious record, while Core Mining is a shady company whose directors have been linked to smuggling in Angola and Mozambique and other sleazy activities like mercenary operations in Sierra Leone.

South Africa’s highest competition authority, the Competition Tribunal, in 2008 fined New Reclamation R145 million for its involvement in collusion and price fixing in the ferrous and nonferrous scrap metals.

Part II: Complex plots and sub-plots

The Chiadzwa diamond mining saga has complex plots and sub-plots. It involves a chain of companies and individuals with a shady past and whose records are difficult to trace – in some cases for that reason.

The issue has its genesis in 2002 when South African diamond mining giant De Beers’ subsidiary, Kimberlitic Searches (Pvt) Ltd, was granted a four-year Exclusive Prospecting Order (EPO) in Chiadzwa. The EPO expired on March 28 2006.

Africa Consolidated Resources (ACR), which is registered in the London Stock Exchange, has been fighting ZMDC in the courts over the Chiadzwa diamond concessions. The fight has had many twists and turns and remains in the courts despite that in the last round that High Court judge, Justice Charles Hungwe had ruled in favour of ZMDC after reversing his own earlier ruling made last year.

The history of the fight between ZMDC and ACR is intriguing.

After Kimberlitic Searches’ EPO had expired, ACR proceeded to peg claims in the disputed area (EOP 1523) and applied for registration of numerous blocks of claims in the names of Canape Investments (Pvt) Ltd, Dashaloo Investments, Possession Investments, Heavy Stuff Investment and Olebile Investment.

ACR was then granted a diamond prospecting licence on April 4 2006.  On July 21 2006 a Mutare assistant mining commissioner wrote to ACR saying their claims had been cancelled because Kimberlitic Searches had already submitted an application for an extension of the EPO.

On September 15 the Mining Commissioner in Harare wrote to ACR saying the letter rescinding their claims was incorrect and that the claims were still valid.

In August 2006 the then Mines minister Amos Midzi reserved an area which included ACR claims.

In September the minister wrote to MMCZ advising them that he had reserved an area incorporating ACR claims to prevent illegal activities. He also said MMCZ must facilitate investment with local and foreign companies.

Later in the same month Midzi visited the area with MMCZ officials and addressed illegal miners telling them that MMCZ was the only authority lawfully permitted on the site.

Boxes of diamonds

In October he warned ACR to stop clearing and fencing the claims. In November the assistant mining commissioner for Mutare told ACR that he had been instructed by his head office to cancel their claims.

In January 2007 ACR chief executive Andrew Cranswick was summoned to Borrowdale police station in Harare where police seized three sealed boxes containing 129 400 carats of diamonds.

These are the diamonds the Supreme Court in January ruled should be kept at the Reserve Bank until the case is finalised. Police had seized the diamonds in violation of the Supreme Court ruling.

Mugabe and Mines Minister Mpofu defended the move, risking criminal contempt of court charges.

Mineral claims are easy to change ownership because the Mines ministry is riddled with corruption and EPOs are granted and cancelled sometimes depending on who pays the highest “facilitation fee”!

Missing US$30 ml

Before August last year, and particularly before government started mining in Marange, smuggling was the order of the day after villagers invaded Chiadzwa. A thriving diamond underworld market ran unchallenged there since the discovery of diamonds by villagers in 2006. Prior to that there were exploration companies on the ground which were also accused of smuggling as well. So smuggling has been going on for years.

However, the situation took a new and dramatic twist since government’s involvement. Public officials, including politicians, are now directly involved supposedly to protect public resources and public interest, but not much has changed. Smuggling and stealing is still rife.

There has even been controversy about the official sale of diamonds recently under the supervision of Kimberley Process Certification Scheme (KPCS). Initial reports said US$72 million worth of diamonds were sold but later government claimed it had only sold gems worth US$56 million. It was never clarified why there were two different figures.

Finance Minister Biti in July raised alarm over some US$30 million realised from diamonds which he said was never declared to Treasury. Mpofu tried to downplay the issue but it was never resolved.

It later resurfaced during internal ZMDC after the company’s directors failed to account for the figure.

Documents show that there was a recent ZMDC inquiry on the usage of US$30 million earned from diamond sales between October 2008 and April this year.

Biti had announced on July 14 during the presentation of his mid-year fiscal policy review statement in parliament that US$30 million realised from diamond sales was missing.

“According to the KPCS monitor, Zimbabwe recently sold at least US$30 million worth of diamonds from Marange which Treasury and ZIMRA (Zimbabwe Revenue Authority) have no record or knowledge of,” Biti said.

KPCS has been involved in trying to ensure Zimbabwe did not trade diamonds outside its processes. Although the KPCS has backed Zimbabwe to export diamonds, Harare’s diamond sales are still conditional and monitored. The KPCS banned Zimbabwe from selling diamonds in May after it was discovered the country was exporting gems illegally, mainly to Dubai.

Government illegally exported diamonds through the back door to Dubai, United Arab Emirates (UAE), in violation of the January Supreme Court ruling which ordered a freeze in all mining activities at the controversial Chiadzwa diamond fields.

Most of the funds obtained from the controversial Dubai diamonds sales were also wired through telegraphic transfers and received through the RBZ, some through CBZ Bank and  ABC Bank in Zimbabwe while some of the money was simply stashed offshore.

Evidence show that some of the beneficiaries of the diamond transactions were ZMDC’s Sandawana Mines and Lesley Faye Marsh Jewellers (Pvt) Ltd which trade as Premier Diamonds. It is not clear to whom Premier really belongs to.

Hot air

Mpofu has denied that the US$30 million money had vanished and dismissed Biti’s statement as “hot air” but failed to produce evidence to rebut the finance Minister’s claims.

Mpofu said a forensic audit of diamonds mined in the controversial Marange fields was under way and would prove Biti wrong.

But investigations showed  that Biti was right after all, except that the figure he mentioned was only the “tip of the iceberg”, according to some key sources.

ZMDC documents say the company’s management recently told board members that ZMDC had sold diamonds worth US$30 million between October 2008 and April 2010.

However, when the board demanded documents to support the assertion and account for the money, the records only showed revenues amounting to US$22 584 347.11. The difference of US$7 415 653.89 was not accounted for.

The issue of how Mbada and Canadile came into the fray has always been simmering.

Documents at hand show that after a due diligence between August 4-6 last year by ZMDC’s select board committee, which included the company’s executive Dominic Mubaiwa, board chairperson Gloria Mawarire, chairperson of the finance and investment committee Ashton Ndlovu, board member Mark Tsomondo and company secretary Tichaona Muhonde, shareholders’ agreements were signed but so many questions remained lingering.

Mubaiwa, Mawarire, Ndlovu, Tsomondo and Muhonde were last week arrested on charges of fraud relating to this due diligence exercise and other issues, including the misappropriation of US$10 million and potentially prejudicing ZMDC of US$33 million.

Canadlie deputy chairman Lovemore Kurotwi, who is also the chairman of Core Mining, was also arrested for allegedly obtaining the diamond mining concessions in a fraudulent manner.

Kurotwi is accused of lying that Core Mining was a special purpose vehicle of global mining giant Benny Steinmetz Group Resources Limited (BSG Resources Ltd) when it was not.

Kurotwi was arrested after he recently accused Mpofu in front of Mugabe of soliciting bribes during the cutting of the controversial diamond deals.

Minutes of a meeting between Mpofu and ZMDC board members held on September 20 at the Mines ministry’s board room say that the minister confirmed that Kurotwi had personally accused him of soliciting bribes in front of Mugabe.

This, among other grounds including fraudulent misrepresentation of Core Mining and Minerals’ corporate profile and investment portfolio, was said to be the reason behind Kurotwi’s arrest.

Obedient Son

Mpofu – who signed off his letters to Mugabe as “your ever obedient son” – had initially in the meeting with ZMDC board members started with a disclaimer that there were “rumours, insinuations and allegations” of corruption levelled against him and the board.

He went on to narrate to ZMDC board members his encounter with Kurotwi in a meeting with Mugabe.

“The minister noted that in his meeting with His Excellency (Mugabe), Mr Kurotwi made a number of allegations against him and against the board members,” minutes of the September 20 meeting say.

“Mr Kurotwi alleged that the minister was being a stumbling block to the setting up of the Zimbabwe Diamond Technology Centre which he incorrectly alleges was part of the original joint venture agreement,” the minutes say.

They also say “that board members of the (Zimbabwe) Mining Development Corporation were working in cahoots with the minister against Canadile Miners, that the minister is directing the board to work against him (Kurotwi), that there were attempts from the minister to solicit bribes from him and to divide Core (Mining) shareholders and turn them against Mr Kurotwi.”

Minutes say Kurotwi had accused Mpofu of asking for bribes and trying to divide Core Mining shareholders and turn them against him as the main investor.

Kurotwi grilled

The minutes say instead of confronting Mpofu over Kurotwi’s sensational allegations, Mugabe actually turned against the Canadile and Core Mining executive, grilling him over many issues.

The fallout between Mugabe and Mpofu on the one hand and Kurotwi on the other mostly exposed Mugabe because as he had staked his reputation as president in March this year, claiming the issuing of mining contracts and concessions to what government claimed were “approved strategic investors” in Marange was above board.

When MPs tried to investigate the issue earlier this year, Mugabe in March intervened personally making a spirited defence and justification of the dubious diamond mining arrangements.

“We had a list of companies applying. Finally two of them, Mbada and Canadile, were chosen. They were recommended and I was shown the papers and their proposals. The ministry (of mines) then decided that for now they were preferable to the rest. We said fine. There are the ones who there for now,” Mugabe said.

However, Mugabe’s encounter with Mpofu and Kurotwi reveals that either he just believed what he was told and did not read the “papers and proposals” he said he was shown or he was hoodwinked. It is also possible that are other unknown reasons why Mugabe defended Mbada and Canadile.

During his meeting with Mpofu and Kurotwi in September, Mugabe found himself in an invidious position.

Documents show that after Kurotwi accused Mpofu of soliciting bribes, Mugabe,  instead of confronting Mpofu over the sensational allegations, actually turned against Kurotwi and started grilling him over issues which the president himself  initially claimed were above board.

Mugabe to the defence

Mugabe asked Kurotwi about Core Mining’s corporate profile, its incorporation and whether it was true that the company was backed by BSG Resources Ltd.

Kurotwi approached Mpofu in March last year saying he was a representative of BSG Resources when he was not.

He then wrote a letter to Mpofu saying he represented Core Mining, purportedly a special purpose vehicle for BSGR which wanted to invest US$2 billion in Marange diamonds.

Kurotwi and ZMDC officials were arrested over this issue over which they are accused of fraudulent misrepresentations and prejudicing ZMDC of US$10 million and trying to defraud the company of US$33 million.

Mugabe, according to the minutes, also asked Kurotwi about his educational background and mining experience. The president also asked him how he expected Mpofu to sanction construction of the diamond centre without approval from his office, showing Mugabe is closely involved in the Chiadzwa diamond mining activities.

Mugabe also queried Kurotwi over the ownership of the land on which the diamond centre was to be built.

Further, Mugabe asked how much Core Mining had invested and why it was unable to bring the US$100 million it promised, as well as why the company had borrowed US$1,5 million from Agribank.

Minutes say Kurotwi did not give Mugabe “credible answers”. After that meeting Mugabe ordered an internal ZMDC investigation which led to the arrest of Kurotwi and five ZMDC officials.

But no one in the know about the Marange affairs expects the army of the law to be long enough to reach, Mugabe, his wife, his army generals and CIO officials who sources allege looted the alluvial deposits the most.

(Source)

Zimbabwe President Robert Mugabe’s wife was among those who gained millions of dollars from illegal diamonds mined in the east of the country, according to a US cable obtained by WikiLeaks.

“High-ranking Zimbabwean government officials and well-connected elites are generating millions of dollars in personal income by hiring teams of diggers to hand-extract diamonds,” US Ambassador James McGee wrote to Washington in 2008.

“They are selling the undocumented diamonds to a mix of foreign buyers, including Belgians, Israelis, Lebanese, Russians and South Africans, who smuggle them out of the country for cutting and resale elsewhere.”

The cable then discussed a meeting with Andrew Cranswick, chief executive of the British mining firm African Consolidates Resources, that had a claim to the Chiadzwa mine revoked by the Harare government, according to McGee.

“According to Cranswick, there is a small group of high-ranking Zimbabwean officials who have been extracting tremendous diamond profits from Chiadzwa,” it said, naming Mugabe’s wife Grace and Central Bank governor Gideon Gono.

The Chiadzwa mine is in the Marange district of eastern Zimbabwe.

The diplomatic message, released on Wednesday, said the diamond site had attracted a “swarm of several thousand local diggers” and “the police response has been violent, with a handful of homicides reported each week”.

Other Zimbabwean government officials implicated in the siphoning of diamonds from the Marange fields include Vice President Joyce Mujuru and the head of the army, General Constantine Chiwenga, said the cable.

International regulator the Kimberley Process barred the sale of Marange diamonds in November 2009 following reports of human rights abuses by the army at the mine.

A monitor appointed by the watchdog in July partially lifted the ban, saying Zimbabwe had ceased abuses by the military, which seized control of the Marange fields in late 2008 and forced out tens of thousands of small-scale miners.

However following an auction in August it was again suspended.

(Source)

Abbey Chikane, the out of control and all sorts Kimberley Process (KP) Monitor for Zimbabwe, has reportedly returned to that country on his own initiative last week and has cleared a batch of Marange diamonds for export. KP did not approve the resumption of such exports and the Working Group on Monitoring (WGM) had not sanctioned Chikane’s mission.

The fate of Zimbabwe’s diamond exports were not decided on at the recent KP Plenary in Jerusalem and therefore the WGM had not sanctioned another mission to country.

Diamond industry sources confirmed to IDEX Online that Chikane had gone back to Zimbabwe on his own and had certified diamonds.

The diamonds had reportedly not left Zimbabwe at the time of writing and it was unclear as to where the diamonds might be headed. Indian industry sources said they were closely watching the situation and were trying to ascertain exactly what was happening on the ground in Zimbabwe.

The value, volume and source of the diamonds that have been reportedly cleared for export by Chikane are also not known at this time.

Stephane Chardon, chairman of the WGM, said, “I am not aware of Mr. Chikane’s personal travel plans.” When asked whether goods had indeed been certified in Zimbabwe, Chardon replied, “Not by the Kimberley Process.” He went on to say, “The KP is in close contact with all the major stakeholders involved in this issue and we are working towards a negotiated settlement.” He declined further comment.

The country has three different stockpiles of goods. Diamonds mined in 2007-2009 by illegal miners, diamonds mined by Canadile and Mbada since that time and until May 28, 2010 when Chikane made his first mission to Zimbabwe and goods mined since the last auction in September.

Diamonds mined between the end of May and mid-September were approved for exports and were auctioned in two batches – in August and in September.

(Source)

The price of an impasse on the thorny issue of Zimbabwe’s diamonds would be “very costly,”  Kimberley Process Chairman Boaz Hirsch said following the first day of the KP plenary meeting in Jerusalem.

Hirsch said that the KP was a “consensus-based process” that had faced challenges in the past, before Zimbabwe became a hot-button topic.  As examples, he cited “special regimes” in other African countries and in Brazil.

When asked if a solution on Zimbabwe could be reached during the four days of the KP plenary, Hirsch said he hoped so, but that he was looking for action rather than declarations.

When it came to Zimbabwe, Hirsch explained, a third franchisee had recently started operating. Hirsch said that conditions “within the fence” were fairly well understood and that the KP was essentially conducting probes – taking material from the review mission and translating it from the review mission to the level of a working community.

“Hopefully by consensus,” Hirsch added.

The KP chair asked those present how could progress be measured and deemed “sufficient.”

When asked where the KP had seen advancement on the issue of Zimbabwe diamonds, Hirsch said he preferred not to go into details but that KP Monitor for Zimbabwe Abbey Chikane had said that diamond mining operations “within the fence” were “good quality.”

Asked to clarify his position that an impasse on Zimbabwe would be “costly,” Hirsch explained that an impasse meant uncertainty, which he said was bad for any industry (Hirsch also serves as Israel’s Deputy Minister of Industry, Trade, and Labor.) Uncertainty, he said, could affect investment and/or exports.

“At the end of the day, when you have a process based on consensus and it’s lacking, it’s bad for the situation,” he said.

Hirsch said that the four days of the conference would have ups and downs – like a roller coaster, he said, and some would enjoy the ride more than others.  He added that he would like to see a course set for the implementation of policy, efforts, and endeavours of all parties to continue to everyone’s satisfaction.

The Kimberley Process comes to assist in creating prosperity, and that should be an item on the agenda, Hirsch stressed. “The KP wants to see diamonds serving to leverage the welfare of the people of Zimbabwe,” he said.

What legacy would Israel leave as outgoing KP chair? Hirsch said Israel should be remembered as a “vigilant” chair that spared no effort, and said that he wanted to know that when he left at the end of December, Israel had done its best to “enhance and strengthen KP credibility.”

Hirsch also reframed the current Kimberley Process role as a “preventive” one. Bloody wars being financed by conflict diamonds make dramatic headlines, he explained, making it easier for the KP to prove it was needed.

However, he said, the KP had been successful in preventing trade in conflict diamonds, making its own role a preventive one. “I would rather prevent bloodshed before it occurs than after,” he declared.

When asked how the KP viewed harsh rhetoric and threats of self-suspension, Hirsch said that while some of the rhetoric was disturbing, he put more stress on actions.

(Source)

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