On Friday, 17 May 2019, seven Executive managers of the Zimbabwe Consolidated Diamond Company (ZCDC) were dismissed by the ZCDC Board. Although granular reasons were not given, the Board highlighted the need to rebuild public and market confidence in the diamond mining operations of ZCDC. There is no doubt that given how it was founded and its record and the history of the Marange diamonds , ZCDC need to build public and market confidence. Without digging deeper to understand what triggered this move, which is of course necessary, the Zimbabwe Environmental Law Association (ZELA) has taken the initiative to share critical steps that can be taken to build public and market confidence in the management of Marange diamonds by the ZCDC. ZELA is a lead public interest law organisation whose thrust is to influence legal, policy and institutional reforms which deliver good governance, transparency and accountability in the natural resources sector at the national, regional and international level. Internationally, ZELA is involved in monitoring diamond mining and trade through its participation in the Kimberley Process Certification Scheme on diamonds.
Whilst a raft of policy and legal reforms to ensure good mineral resource governance are long overdue, transparency and public participation must not be undermined. Zimbabwe now has a new Diamond Policy, although sadly this has not yet been publicly shared. Further, communities affected by the diamond mining and citizens in general, were not consulted during the formulation of the Policy and this is unconstitutional – Section 13 (2) of the Constitution on National Development. Therefore, to build public confidence, Parliament Portfolio Committee on Mines and Mining Development must conduct public hearings to harvest the views of communities affected by diamond mining activities in particular and the citizens in general. Ministry of Mines must be open to public dialogue with civil society and industry, to unpack the contents of the Diamond Policy to stimulate robust public debate.
Transparency and Accountability
It is an open secret that ZCDC was created because of the consolidation of former diamond mines in Marange with the objective of promoting transparency and accountability in the management of Marange diamonds. The latest report from the Office of the Auditor General (OAG) revealed that ZCDC failed a transparency test. ZCDC’s audited annual reports are lagging by one year – ZCDC 2017’s books were not part of the OAG’s 2018 narrative report on state enterprises and parastatals.
Unlike the Minerals Marketing Corporation of Zimbabwe (MMCZ), ZCDC’s audited financial statements are not found on the company’s website. Notably, ZCDC’s predecessor and parent company in Marange, the Zimbabwe Development Corporation (ZMDC) started to release its audited financial statements in 2013 as part of the International Monetary Fund’s (IMF) Staff Monitored Programme (SMP). Therefore, ZCDC must urgently put on its website its annual audited financial statements and make sure that its books are timely audited.
Diamond production and export figures must be disaggregated to show the quality footprint, gem, near gem and industrial diamonds. Such a move will allow the public to have better insights on the performance of gem and near gem quality diamonds which are highly valuable and highly susceptible to theft and undervaluation. Another drainage of public confidence is that diamond statistics from various government institutions, MMCZ and Zimbabwe National Statics Agency for instance on exports by volume and value are different. This information asymmetry is part of the findings of research carried out by ZELA in 2013, Tacking the Trends: An Assessment of Diamond Mining Sector Tax Contribution to Treasury with Particular Reference to Marange Diamond Fields. When data from different government institutions on the same subject matter differs, public confidence is eroded.
Public confidence without transparency is a fruitless exercise. Government must move with speed to implement the Extractive Industries Transparency Initiative (EITI), a policy position taken by the 2019 National Budget Statement. EITI is a global best practice when it comes to transparency in the mining sector which promote the public disclosure of revenues, contracts and recently commodity transparency as part of its new Standard.
ZMDC has signed a number of contracts with a number of investors as part of its Joint Venture Initiatives. One of the ways of building public trust and confience is making these contracts available to the citizens in line with section 62 of the constitution. Contracts are a key component of mineral resource governance. Currently these contracts are not in the public domain and this creates unnecessary suspicion.
Decriminalise artisanal diamond mining to end violence
Last year, ZCDC announced that it is ready to support artisanal diamond mining in Marange to empower communities and reduce conflict between the company’s security guards and artisanal miners. No tangible development has been made to date on decriminalising artisanal diamond mining. Violent conflicts are frequently experienced, and this discolours the Marange diamonds in the world market. Therefore, steps must be taken quickly to decriminalise artisanal diamond mining to enable co-existence of large-scale mining and artisanal mining in the diamond sector. After all, artisanal mining might be crucial to mop up some diamonds that cannot be economically exploited by large scale mining operations because of geological factors. However, in doing this, compliance with KP minimum requirements and best practices on promoting artisanal diamond mining and trade should be adhered to in order to promote public and market confidence in Marange diamonds.
The return of Anjin Investments must be conditional
Government announced that Anjin Investments along with Alrosa, are the two foreign companies from China and Russia respectively that will mine diamonds in Zimbabwe in addition to ZCDC and Murowa diamonds. It is good for sure to open Zimbabwe for business to attract much needed foreign direct investment, technology and skills to unlock the diamond sector’s potential. However, care must be taken to ensure that any investor must be guided and given mining concessions that are conditional on adopting of responsible sourcing principles including respect for human rights, community investments, disclosure of revenues and payment of royalties and other mining taxes. A look at Anjin Investments’ previous record in Marange for example shows several red flags. OAG failed to verify payments made to government like depletion fees by Anjin Investments because the entity’s books were never audited. The former Minister of Finance, Tendai Biti once singled out Anjin Investments for failing to pay taxes to government. Parliament reports noted that investments made by Anjin in the diamond sector could not be easily verified. It is therefore necessary to ensure that responsible investments are attracted in the mining sector and close space for investors which have a murky past.