Zimbabwe tells gem producers to cease operations

IOL pic feb23 zmdc 2649401 REUTERS Zimbabwean Mines and Mining Development Minister Walter Chidhakwa. File picture: Philimon Bulawayo, Reuters

Harare - South African investors have been urged to come clean on their involvement in Zimbabwe’s diamond mining industry as President Robert Mugabe yesterday ordered all gem producers in eastern Zimbabwe to halt operations.

Mugabe closed the operations after the investors failed to agree to be bundled into a single state diamond mining company.

The government is pushing through a policy to merge all diamond mining firms in the country into one company, a development that economists and analysts say will heighten operating and regulatory uncertainty in the country.

New company

The policy will enable the state to own half the shares of the new company, which would operate as Consolidated Diamond Company.

Zimbabwe’s diamond mining industry has been dogged by controversy over the past few years and there are fears that some South African investors may have been caught up in the latest development.

Mines and Mining Development Minister Walter Chidhakwa said the diamond mining companies had refused to participate in the consolidation process.

“The involvement of South African companies in Zimbabwe’s diamond mining industry has never been clear from the onset. They know it is a controversial area and they have not been open about their involvement or otherwise,” an official said yesterday.

South Africa’s Ambassador to Zimbabwe, Vusi Mavimbela, was not immediately available for comment.

South Africa has resource investors in Zimbabwe, including Impala Platinum, Aquarius Platinum, Metallon Gold and Anglo Platinum.

Companies that are involved in diamond mining in Marange include Marange Resources, Diamond Mining Corporation), Jinan, Mbada and Anjin, where state-owned companies such as the Zimbabwe Mining Development Company (ZMDC) have significant shareholding.

It remains unclear if there are South African investors in these companies.

Chidhakwa said that “the government is taking over the mines in Chiadzwa and Chimanimani”, all situated in eastern Zimbabwe.

There was a massive diamond rush when alluvial diamonds were discovered in 2008, leading to protests and allegations over the government’s treatment of alleged illegal mining of diamonds by individuals hard pressed by the country’s economic meltdown.

In 2013, Kate Hoey, who chaired the British all-party parliamentary grouping on Zimbabwe, castigated Old Mutual for alleged irregular involvement in Zimbabwe’s diamond mining. She slammed Old Mutual for partnering with a company that was on the sanctions list.

Concerned

The British parliamentarians were concerned that Old Mutual’s indirectly owned 1.5 percent stake in Mbada Diamonds through a 6 percent interest in one of Mbada Diamonds’ parent companies, New Reclamation Group, was in contravention of the policy on sanctions against Mugabe’s administration.

New Reclamation Group owned a significant 25 percent stake in Mbada Diamonds, while the ZMDC had a massive 50 percent stake in the diamond producer.

At the time, Old Mutual said the company’s “holding” in the Zimbabwean diamond mining firm was “legal and we would never knowingly take action” that was against the UK’s policy on sanctions against Mugabe and his Zanu-PF party.

Shut down

Chidhakwa called on diamond producers in Zimbabwe to “stop all operations and shut down all processes” and “immediately vacate the mining areas without any items”.

The companies would also be required to “co-operate in hand-over and takeover of all diamond products” at the mine.

BMI Research, a Fitch group company, said in a report released on Friday that “the combination of endemic corruption, weak rule of law, restrictions on foreign investment”, were making Zimbabwe “an unattractive operating environment” for foreign firms.

“Intellectual property rights are also poorly enforced. The operating environment in Zimbabwe will remain challenging over the medium term. An uncertain indigenisation policy is perhaps the most pressing policy-related concern for foreign investors and the enforcement of such policies is often subject to political bias,” analysts at BMI said.

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