ZIMBABWE The inaugural Zimbabwe Diamond Conference was a watershed moment in the history of the country s burgeoning diamond mining sector. Organised at the Elephant Hills Resort in Victoria Falls on November 12-13 by the Zimbabwe ministry of mines and mining development, the conference featured an elite panel comprising heads of state, pan-african government representatives, as well as influential leaders of the international diamond industry. The conference sought to highlight Zimbabwe s potential as one of the world s major new sources of rough. It also provided a platform to demonstrate the steps taken by the local diamond sector in harnessing the country s mineral wealth for socio-economic growth. The summit focussed on resolving the obstacles that continue to impede the free flow of rough diamonds from Zimbabwe into major markets, particularly the sanctions imposed by the United States and the European Union. More importantly, it offered an ideal meeting ground for the forging of new strategic alliances and succeeded in firmly establishing Zimbabwe on the global diamond map. Regan Luis reports. Steve Allen Dreamstime.com
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The dignitaries stand at attention for the national anthem of Zimbabwe. French novelist Victor Hugo once remarked: One can resist an invading army; but one cannot resist an idea whose time has come. The notion of Zimbabwe as a major diamond producing nation is one such unstoppable idea. At a time when world rough diamond supplies from primary sources are either plateauing or in decline, the advent of Zimbabwe on the global diamond scene has been likened to a gift from the Gods. In 2011, worldwide rough diamond production fell 3% in volume to 123.98 million carats and climbed 26% in value terms to $14.4 billion. Of all the rough diamonds produced globally last year, about 61% by value and 56% by volume came from Africa, informed Chaim Even- Zohar, industry expert and president of Tacy Ltd., in his opening remarks at the conference. He added that over the last four years, the rough diamonds coming out of Africa have doubled in value, but have gone up only 10% in volume. Meanwhile, global rough production between 2006 and 2011 has fallen by a whopping 30%, which means that a third of the one million diamond cutters and polishers in India have no diamonds to polish, he explained. So from the diamond industry s perspective, Zimbabwe is almost a gift from heaven, which has come at the right time, at the right place, in the right continent. We have to unlock the diamond wealth here because we all need it, Even- Zohar said. Buried treasure The journey of unlocking of Zimbabwe s diamond potential began more than a century ago when diamonds were first discovered in the Somabula Forest in 1903. Over the years, mining giant De Beers undertook several prospecting operations to map the country s diamond deposits, but the country s first major diamond mine, Murowa by Rio Tinto, came on-stream only as recently as 2004. A year later, chaos ensued in Marange as nearly 30,000 people descended on the alluvial fields following the discovery of diamonds. In the following years, Zimbabwe was in the news for alleged human rights violations committed by the state military which was in charge of guarding the local mining areas. The situation led to an impasse in the Kimberley Process (KP) and resulted in an embargo on rough exports from Zimbabwe for the country s failure in meeting minimum KP standards. It was only at the KP plenary held in Kinshasa in November 2011 that Zimbabwe was allowed to export diamonds following an agreement brokered by the EU. 48
COVERSTORY The Zimbabwe Diamond Conference takes place at an opportune time when the country is proudly ranked among the world s biggest diamond producers and we draw confidence from experts reports predicting that Zimbabwe will continue playing a significant role. Today, more than 150 kimberlites are known to exist in Zimbabwe, and the Marange diamond fields in Chiadzwa have one of the highest concentrations of alluvial diamonds in the world. According to Kimberley Process (KP) statistics for 2011, Zimbabwe was the world s fifth-largest rough diamond producer in volume terms and the seventh-biggest in value terms. Last year, Zimbabwe s diamond output rose 0.8% to 8.5 million carats, but shot up 40% to $476.21 million. The average value of the country s diamond production went up from $40.28 per carat in 2011 to $56.01 per carat in 2012. The Marange diamond fields in Chiadzwa are located close to the eastern border with Mozambique. The area currently has four KP-compliant diamond producing operations that are run by Mbada Diamonds, Marange Resources, Diamond Mining Corporation and Anjin Investments, each of which has the capacity to produce between 1.5 million carats and 2 million carats per month. In the southwest corner of the country, Rio Tinto s Murowa diamond mine produced 0.37 million carats in 2011, and has yielded more than one million carats since it began operations around eight years ago. Industry analysts predict that in the next 3-4 years Zimbabwe s diamond production could double the current global output and easily contribute 30% of the world s rough supply by volume and 25% by value. President Robert Mugabe, who inaugurated the two-day conference which saw more than 350 participants, stated, The Zimbabwe Diamond Conference takes place at an opportune time when the country is proudly ranked among the world s biggest diamond producers and we draw confidence from experts reports predicting that Zimbabwe will continue playing a significant role in the future development of the world diamond industry. It is imperative to mention that the government has committed itself to the observance of international standards attached to diamond mining, storage and trading. The government of Zimbabwe has recently accelerated the formulation of attendant policy and legislation, namely, the Diamond Policy and now the Diamond Bill, which is still in progress, to further assure the global diamond industry that government takes seriously good governance in the extraction and eventual trading of diamonds, Mugabe added. Zimbabwe has vast reserves of mineral wealth, including platinum, chrome, copper, coal and gold, however, the diamond sector is the largest contributor to its economy. In the first nine months of 2012, the diamond industry accounted for 49
Map No. 4210 Rev. 1 UNITED NATIONS January 2004 The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations. Department of Peacekeeping Operations Cartographic Section Cahora Bassa 27 28 Lusaka 29 30 Dam Luangwa Zumbo 31 32 33 34 ZIMBABWE Kafue Kanyemba Cahora Mazabuka Albufeira de Bassa Namwala Cahora Bassa 16 Chirundu 16 Monze Makuti MOZAMBIQUE Tete Kariba Muzarabani ZAMBIA Kariba Dam MASHONALAND Choma LakeKariba Centenary Karoi Mount Darwin Mulobezi Mhangura Changara Siyakobvu MASHONALAND CENTRAL 17 17 Kalomo Zave Masuku WEST Kildonan Bindura Shamva Siabuwa Sesheke Maamba Glendale Mutoko Chinhoyi Kazungula Binga NAMIBIA Livingstone Lake Harare Manyame Kasane Victoria 18 Falls Victoria Falls Gokwe Chitungwiza Marondera 18 Nyanga Catandica Kachikau Matetsi Chegutu Kamativi Hwange Dahlia Kadoma Rusape Pandamatenga (Gwayi River) Hwedza Dete Nyazura Lupane Kwekwe Manica Redcliff Chivhu 19 MIDLANDS Mutare 19 MATABELELAND Mvuma Chimoio MANICALAND Lago Eastnor Gweru Chicamba NORTH Inyati Shurugwi Hot Springs BOTSWANA Gutu Chimanimani Glenclova Dombé Bulawayo 20 Masvingo Birchenough 20 Chipinge Nata Esigodini Zvishavane Lake Bridge Mutirikwi Plumtree Espungabera National capital Mosetse MASVINGO Provincial capital Makgadikgadi Pan Antelope Gwanda Town, village Mine Nandi Mill 21 Major airport Triangle Francistown West Nicholson Chiredzi International boundary Rutenga MATABELELAND Mbizi Provincial boundary Main road SOUTH Makado ZIMBABWE Secondary road Thuli Railroad 22 Selebi-Pikwe Beitbridge 22 0 50 100 150 km Malvernia Messina 0 50 100 mi SOUTH AFRICA 26 27 28 29 30 31 Zambezi Linyanti Chobe Gwayi Kafue Nata Shangani Gwayi Shashe Sengwa Limpopo Sanyati Zambezi Munyati Umzingwani Runde Hunyani L. Chivero Limpopo Mutirikwi Manisi MASHONALAND EAST Save Runde Mazoe Save Odzi MOZAMBIQUE Zambèze Rio Revuè Rio Buzi The Marange diamond concessions lie on the country's eastern border with Mozambique. about 45% of the total earnings received from mining. Of the $1.9 billion mining revenue that Zimbabwe earned between 2006 and October 2012, around 96% was received after the country s first public auction of diamonds that was supervised by the Kimberley Process Certification Scheme (KPCS). Zimbabwe is ready to claim its position on the global platform, said Markets like China and the US are moving towards the Zimbabwe type of goods because there is steady consumer demand for lower quality goods. Zimbabwe minister of mines and mining development, Obert Mpofu. Had it not been for sanctions imposed on companies in Chiadzwa by the US and EU, these numbers would have been much higher, Mpofu added. The continuing global economic malaise and the resulting downward shift in consumer demand for jewellery couldn t have come at a better time for Zimbabwe, whose rough diamond production from Marange is typically on the lower end of the quality scale. To keep up with increasing diamond prices, jewellers are simply putting in cheaper diamonds while maintaining the same sticker price of the jewellery. Markets like China and the US are moving towards the Zimbabwe type of goods because there is steady consumer demand for lower quality goods, and ultimately that s what counts, Even-Zohar said in his presentation. A joint study by Even-Zohar and Pranay Narvekar, an industry expert and partner at Pharos Beam Consulting, reveals that the world polished diamond production is around 33 million carats per year (1.2 billion stones). Zimbabwe s production represents about 8-10% of global polished demand. So if Zimbabwe s production goes up to 20 million carats, the country will account for 18% of the polished in this specific category, noted Even-Zohar. Of the four demand drivers for diamond consumption investment, brand/lifestyle, emotion, and fashion Zimbabwe s diamonds are primarily in the latter category, which is a significant growth area, he added. It is an ironic situation where the most attractive market for Marange goods, the US, is the very same country to ban them. Elephant in the room The morning session on day two of the Zimbabwe Diamond Conference saw an animated discussion on the topic of sanctions imposed on the local diamond mining companies by the United States Office of Foreign Assets Control (OFAC) and the European Union. Although Zimbabwe s diamonds are fully KP-compliant, mining companies say they cannot get the best value for their goods owing to negative buyer perception resulting from these sanctions, which also deter insurance companies and couriers United Nations 50
COVERSTORY (Clockwise from top) More than 350 participants registered for the conference; the KP monitor for Zimbabwe Abbey Chikane lends a keen ear to the proceedings; the two-day event had standing room only. from dealing in these diamonds. As a result, Zimbabwe s rough is sold up to 25% lower in value, some experts pointed out. In 2003, US President George W. Bush issued an executive order imposing sanctions against specifically identified individuals and entities in Zimbabwe for undermining the country s democratic processes or institutions. The sanctions prohibit US citizens from doing business with individuals and companies on the OFAC list. They also enable the US government to freeze cheques, drafts, bank accounts, securities, letters of credit, bills of sales and wire transfers, if related towards payment for Zimbabwean diamonds. This leaves Zimbabwe s diamond industry in a precarious position, given that the US is still the world s biggest consumer of diamonds and that the bulk of the diamond trade is carried out in US dollars. Some of the names on the OFAC list include Robert Mugabe, Obert Mpofu, Marange Resources, Mbada Diamonds, Minerals Marketing Corporation of Zimbabwe, Zimbabwe Mining Development Corporation (ZMDC), and Oryx Diamonds. The ZMDC is the state-owned mining investment arm and owns a 50% or greater interest in every single diamond mining company active in Marange, thereby bringing all diamonds originating from the region under the purview of the OFAC. Mbada Diamonds chairman Robert Mhlanga stated, Mbada Diamonds is placed under sanctions and prohibited from commercial independence and free interface in the global diamond industry. We cannot trade our diamonds freely. Under the US OFAC sanctions, the corporate faces extreme difficulty in movement of its funds, acquisition of plant and technology, favourable prices for our product, and access to clientele. The impact of sanctions is not only felt by the sanctioned company but more precisely and devastatingly by the ordinary people of Zimbabwe. The debate witnessed enthusiastic crowd participation, with a number of questions aimed directly at a US embassy representative as well as the current chair of the Kimberley Process, Gillian Milovanovic, who holds the position on behalf of the US. 51
Since it is the mission of the Kimberley Process to make sure that there are no conflict diamonds anymore, this (US sanctions) is an issue that the chair has to tackle, because if ignored, it may lead to the smuggling of diamonds, and the KP may end up creating what it wants to avoid. Today, except for a few cases, the global diamond industry is almost conflictfree. Zimbabwe is now on the verge of producing nearly 10-15% of world rough output, then I think that the fact that you cannot pay for, insure, or ship the diamonds properly as a consequence of the sanctions actually may end up creating conflict diamonds, noted Peter Meeus, chairman of the Dubai Diamond Exchange and one of the key organisers of the conference. Since it is the mission of the Kimberley Process to make sure that there are no conflict diamonds anymore, this is an issue that the chair has to tackle, because if ignored, it may lead to the smuggling of diamonds, and the KP may end up creating what it wants to avoid, Meeus added. In response, Milovanovic stated that she was there to represent the KP and not the US government and that she was not in a position to go into issues of bilateral relations. I would like to be clear about two issues that are consistently conflated and seen as essentially the same thing. Zimbabwe is, in fact, like every other member of the KP the country has shown itself to be compliant. It is therefore entitled to issue KP certificates as well as trade and export diamonds. With all the respect that I owe to everyone distressed by the situation in which they may find themselves, the KP and the criteria for being found compliant is an entirely separate issue from the sanctions issue, which is a bilateral matter. I would like to stress that compliance with the KPCS is unrelated to the issue of US sanctions, Milovanovic said. ZMDC chairman Goodwills Masimirembwa remarked, The question that remains unanswered is how are members of the KPCS supposed to do business with Zimbabwe when every (Clockwise from top right) Chaim Even-Zohar, Ahmed bin Sulayem, Eli Izhakoff and an Mbada Diamonds official pose for the camera; the grounds and entrance of the Elephant Hills Resort in Victoria Falls, the conference venue. 52
COVERSTORY time they want to move money, it will be blocked by the OFAC of the US. What the KP chair is saying is that you do business with Zimbabwe at your own peril. Abbey Chikane, the KP monitor for Zimbabwe, saw the KP chair s refusal to act on the matter of US sanctions as a conflict of interest, even going so far as to suggest a recusal. Historically, within the Kimberley Process there has always been an understanding that the chair is required to facilitate a consensual agreement among the participants. And in the event that the chair of her country is conflicted, automatically you are bound to have a deadlock on matters of this nature, because if the chair was not necessarily of the US, you would have had the chair of the KP negotiating an arrangement with the US. The danger of having a chairmanship that is not effective to facilitate that consensual agreement is that the KP is likely to be disintegrated or fragmented. If it were in business, when you are the chair of a particular company board and you are conflicted, automatically you are supposed to recuse yourself, Chikane said. The official US response to the issue of sanctions came from Michael Gonzales, the political and economic chief at the US Embassy in Harare: The sanctions that are in place from the US do not apply to the entire country of Zimbabwe. The US fundamentally believes that Zimbabwe is open for business and so we re thrilled to see business conferences like this where companies from around the world want to take advantage, in partnership with the people of Zimbabwe, of the opportunities that exist here. There are sanctions on about 123 individuals from the Zimbabwe government, the ruling party as well as parastatal organisations responsible for undermining of the rule of law and democratic institutions that this country has seen for the past decade. They have nothing to do with the Kimberley Process, and nothing to do with Marange in terms of why the sanctions were imposed. Two of the state-owned assets that are subjected to those restrictions include the Zimbabwe President Robert Mugabe addressing the delegates at the conference. The question that remains unanswered is how are members of the KPCS supposed to do business with Zimbabwe when every time they want to move money, it will be blocked by the OFAC of the US. 53
(From left) Ahmed bin Sulayem, Thabo Mbeki, Robert Mugabe, Obert Mpofu and Gillian Milovanovic were among the chief guests. Our industry today is in a bad shape, and if there are sanctions on the movement of diamonds from a very large source, the speculative trend that we would see in the next few years would be fatal to the industry. ZMDC and the Minerals and Marketing Corporation of Zimbabwe and that s why diamonds coming out of Zimbabwe are caught up in sanctions. And so, the message is that corporate leaders and captains of industry such as yourselves can engage with the leadership of Zimbabwe across party lines and emphasise the need for maintaining the rule of law, the constitutional obligations of the state institutions, and as that happens, as we see progress in terms of Zimbabwean officials honouring their obligations, then there will be no further rationale to maintain restrictions. Vasant Mehta, the past chairman of the Gem & Jewellery Export Promotion Council (GJEPC) and vice president of the International Diamond Manufacturers Association, (IDMA), warned that Zimbabwe s exclusion by the US could end up doing irreparable damage to the diamond industry. Mehta noted, I m so glad that the US Embassy representative is here at a diamond conference because these are political issues being discussed. The global diamond industry is ready to accept Zimbabwe as a new member of the family after the way they have behaved in the last few years in the KP system. There were times when many of us had doubts about Zimbabwe, given the allegations of human rights abuses, etc. But in the past two years I have attended every KP meeting and it has been certified by independent observers, including some from the US that the Zimbabwe industry is now within the guidelines set by the KPCS. I don t understand exclusion of Zimbabwe s diamonds from the US because we need those diamonds. Our industry today is in a bad shape, and if there are sanctions on the movement of diamonds from a very large source, the speculative trend that we would see in the next few years would be fatal to the industry. I urge the KP chair and the US Embassy representative to please take this message from the industry when they go back to America. World Diamond Council (WDC) president Eli Izhakoff weighed in with an offer to petition the US and EU authorities to lift sanctions on Zimbabwe. It s in the vital interest of the WDC that diamonds from Zimbabwe must be allowed to be exported for the reason that we cannot have two types of diamonds legitimate and illegitimate because these diamonds will eventually find their way to the market and then we ll be accused of dealing with illegal diamonds. We cannot afford to have any more confusion in the industry today. 54
COVERSTORY I will engage with OFAC of the US Treasury and their equivalent in the European Union to lift sanctions on diamonds from Zimbabwe, provided I get an approval from the WDC board of directors, Izhakoff said. Ahmed bin Sulayem, executive chairman of the Dubai Multi Commodities Centre (DMCC), stated: Dubai is perfectly positioned, from an organisational as well as from a geographical viewpoint, to cooperate with the diamond producing nations in Africa. In the case of Zimbabwe, we are sharing our resources, ingenuity and initiative to assist Zimbabwe in removing the obstacles that are currently impeding diamond exports from the country. We are hopeful and confident that this conference, attended by so many major policy and decision makers in the international diamond industry, will lead to a resourceful solution to the country s rough diamond export conundrum and play a pivotal role in advancing the Zimbabwean diamond industry and its national interests. The dark cloud of sanctions hanging over Zimbabwe does, in fact, have a silver lining. The EU surprised everyone in July this year when it announced that it would lift most sanctions on Zimbabwean leaders and institutions after the country holds a peaceful and credible referendum on a new constitution. Chikane noted, The reason why the EU is considering moving on the issue of sanctions is partly because it has been monitoring the situation and they are satisfied that there is progress. And we expect that in March 2013 there may be a change in that position. One assumes that at some point the US would also reconsider its position and support Zimbabwe, especially since diamonds from this country are meant to support economic development and build government institutions, which would help to bring greater political, economic and social stability. Ad astra per aspera The government of Zimbabwe identifies diamonds as a strategic mineral resource and is trying to ensure the sustainable development of the diamond industry. The diamond companies have also been active in employment creation, human capital development, and infrastructure development, including building houses for people displaced by mining activities. Proceeds from diamond sales have allowed the government to channel much needed funding into productive and Vasant Mehta (left) and Chaim Even- Zohar listen closely to the speakers. One assumes that at some point the US would also reconsider its position and support Zimbabwe, especially since diamonds from this country are meant to support economic development and build government institutions, which would help to bring greater political, economic and social stability. 55
Eli Izhakoff said that pending WDC board approval, he will engage the US Treasury and the European Community to lift sanctions on diamonds from Zimbabwe, to preserve the integrity of the KP system. Mining companies operating in the Marange area have invested millions of dollars in housing, water and sanitation, road construction, schools, hospitals and other physical and social infrastructure for the benefit of local communities. social sectors and contribute towards the country s socio-economic growth. As the country KP Monitor, I have been witnessing tremendous changes and improvement in the mining landscape in the country. Today, all diamond mines in Zimbabwe have reached international standards and stand as a model for many diamond producing countries, Chikane said. Echoing this positive sentiment was South Africa s minister of mineral resources, Susan Shabangu: Let me take this opportunity to commend the government of Zimbabwe and the diamond industry for taking the necessary steps and convincing the international community that indeed it complies with the KP statute obligations. It is my pleasure to note that today Zimbabwe is trading in its diamonds in line with decisions taken at the KP plenary held in Kinshasa in November 2011. This offers a great opportunity for the Zimbabwean government to harness its natural mineral endowments and to be a catalyst for a thriving industry that serves to contribute to the national developmental agenda. After protracted engagements with participants and observers as well as the government of Zimbabwe, the KP has reached full consensus over Zimbabwe. In addition, all production from compliant mining operations in the Marange diamond fields which have achieved KP verification can be exported. Already more than $420 million from the diamond trade has been paid to the fiscus of the Zimbabwe government, Chikane informed. Mining companies operating in the Marange area have invested millions of dollars in housing, water and sanitation, road construction, schools, hospitals and other physical and social infrastructure for the benefit of local communities. Most importantly, these companies have created jobs for the locals. Zimbabwe s diamond industry has played its part in the social, political and economic stability of this country, Chikane added. Mbada Diamonds is the biggest contributor to the Zimbabwe national fiscus and has managed to contribute more in 18 months than the entire Zimbabwe mining sector has since 1980. Over the past three years the company has constructed houses for relocated families, built schools and road networks, provided clean drinking water, invested in education through scholarships, and distributed food. Similar initiatives are being carried out by the Chinese-owned mining company 56
COVERSTORY Anjin Investments Pvt. Ltd., which owns a sizeable number of concessions in the Marange diamond fields. Today, Anjin s operations match those of the best mining companies in the world. We have made huge investments in the Marange area of around $400 million as we believe the region has sufficient resources to turn around the fortunes of this country. This is a shared resource that can benefit not just government but even the communities around us. Our investment in Chiadzwa has created 900 jobs and is sustaining in excess of 4,500 families. The company has spent more than $72 million on corporate social responsibility activities, including the building of houses, water purification plants, schools, clinics, and roads, said Munyaradzi Machacha, director of Anjin Investments Pvt. Ltd. The KP s most recent monitoring report on mining in the Marange region notes positive trends with respect to the mining capabilities of the new ventures, state-ofthe-art security systems, local civil society organisations and the press obtaining access to Marange, and a continuing decline in the number of security incidents related to artisanal miners operating in the tenure areas. This is to be commended, and it is our hope, as chair, that this trend will continue, Milovanovic said. Zimbabwe s diamonds are important not just for the local economy, but may be crucial to staving off unemployment in large cutting and polishing centres like India. Vasant Mehta remarked, In the last five years, diamond production has fallen by 30% and India has been severely affected. Africa holds the key to the world rough diamond supply as it accounts for more than half of the global production. With the discovery of diamonds in the Marange region, Zimbabwe has the potential to achieve 20% of world production as experts have predicted. Today, India has the expertise and capability to cut and polish the entire rough output from Zimbabwe, particularly stones from Marange. Zimbabwe has saved the Indian diamond industry and especially small diamond manufacturers from sitting idle in very difficult times. If Botswana is a shining example of how to use diamonds for a country s progress and welfare, then the journey to prosperity for the people of Zimbabwe can never be stopped. Indian companies were among the first to recognise Zimbabwe s importance as a major diamond source, and have fostered strong trade relations by regularly participating in diamond tenders held in the capital Harare. In his speech, GJEPC chairman Vipul Shah highlighted the close cooperation between both the sides: India and Zimbabwe share perfect synergies but the foremost is the synergy of determining their destiny in diamonds. This trade relationship has matured in recent times through proactive actions on the part of the Zimbabwean government and the Indian diamond industry. I want to assure you on behalf of the Indian diamond industry that we will carry the torch forward and put it on a firm pedestal. This conference will go a long way in nurturing the relationship that has been built with trust and goodwill. Beneficiation dos and don ts Amid the euphoria surrounding Zimbabwe s new-found diamond wealth, Vipul Shah (left) and WFDB president Ernest Blom share a light moment in between sessions. there were some words of wisdom from the former president of South Africa, Thabo Mbeki, who gave an insightful speech on the perils of mismanaging the precious resource. I must emphasise that as Africans we must remain especially vigilant that the export of African diamonds does not open or widen yet another window to the immensely pernicious illicit outflows of capital from Africa, he said. Mbeki called on Zimbabwe s political leadership to ensure that the diamond mining industry is not governed by predatory elite which uses its access to state power to enrich itself, against the interests of the people as a whole, acting in collusion with the mining companies. He added, The government of Zimbabwe must put in place a progressive and long-term policy about the management of this important natural resource. Together, as a billion Africans, we believe that the Zimbabwe diamonds will help to achieve these important objectives which would benefit our continent as a whole. Both the Zimbabwe political leadership and the world political powers owe a sacred obligation to the peoples of Zimbabwe and Africa to ensure that this country s diamonds serve as the people s best friend! In an endeavour to promote local diamond beneficiation, the Zimbabwe government introduced a quota system which stipulates that 10% of all locally produced diamonds are to be cut and polished in the country. However, only 0.1% of diamonds produced in the country in 2011 were cut and polished locally. Mugabe said, Measures to address this anomaly are being put in place in addition to exploring avenues to encourage investment in this area. The local diamond industry is, therefore, inherent with growth opportunities spanning the entire spectrum of the diamond value chain, that includes exploration, mining, beneficiation and value addition, and trading. Government, 57
South Africa's former President Thabo Mbeki gave an insightful speech. therefore, remains committed to promoting local beneficiation and value addition of Zimbabwean diamonds and the sustainable growth of the diamond downstream industry. While most Zimbabwe leaders championed the cause of diamond beneficiation, some weren t so sure of the outcome. Industry expert Even- Zohar warned that if not done correctly, beneficiation may end up doing more harm than good. The most important single determining factor for locational beneficiation is transportation costs, which matter a lot for platinum, gold, etc. But in diamonds, you don t have transportation costs, and so beneficiation must take place where it s most cost-effective. Why would you spend $100 per carat for cutting a stone in Zimbabwe if you can do it for $15 in China? Beneficiation must make economic sense, because otherwise it won t get you anywhere. Zimbabwe must leverage its rough for beneficiation and should not get into non-economic situations like South Africa and Botswana where diamond cutting factories are running at losses, Even-Zohar observed. The Zimbabwe Diamond Conference was an eye-opener for many of the participants, who perhaps previously viewed the country only through the prism of its problems surrounding Marange or the KP stalemate. If managed correctly, Zimbabwe s diamond resources could become a catalyst for turning around its economic fortunes, but more importantly, they could help change perceptions about the nation itself. Consumers should come to recognise and regard Zimbabwean diamonds in an altogether positive light as a resource that is helping to improve the lives and prospects of an entire nation. That is a narrative that we the members of the US diamond trade would be delighted to propagate in our country s jewellery market, said Reuven Kaufman, president of the New York Diamond Dealers Club. DMCC s Bin Sulayem remarked: Whether you like it or not, Africa will be the next superpower. We have seen the Chinese dragon, we have seen the Indian tiger, and it s time to see the African lion! India & Zimbabwe Are Natural Allies Goodwills Masimirembwa, chairman of the Zimbabwean Minerals Development Corporation (ZMDC), the state-owned mining investment arm, told Solitaire that his firm was seeking ties with Indian companies in establishing joint ventures in mining, exploration, as well as cutting and polishing. What activities is the ZMDC engaged in? The ZMDC is the investment arm of the government of Zimbabwe in the mining sector. The ZMDC owns a 50% shareholding in each of the companies mining diamonds in Marange. Besides diamonds, we have concessions in various minerals like platinum, gold, silver, etc., and we look for investors to team up with us on a 50:50 shareholding basis. We have the resources and our partners bring in the investment, mining and marketing expertise. Apart from taxes and royalties, the dividends that accrue to the ZMDC are then fed into the national budget, thereby making that revenue available to the people of Zimbabwe for schools, hospitals, etc. Could you give us some indication of the diamond resources available in Zimbabwe? We have 1.8 million hectares of diamondiferous ground, so there is urgent need for exploration. What I can say without 58
COVERSTORY doubt is that the four companies which are currently mining diamonds (Mbada Diamonds, Marange Resources, Diamond Mining Corporation and Anjin Investments), have a capacity to produce at least 1.5 million carats of rough diamonds every month, and they have a long lifespan. Out of the 1.8 million hectares, we have allocated only 80,000 hectares; that s where mining is taking place, so the rest of the ground is still available for exploration. If you look at the extent of the alluvial mining area in the Marange diamond fields, we are yet to make a major find. The diamonds are there and we want to explore them. We will find them and be in business forever. What opportunities are available for Indian companies wanting to partner with the ZMDC? First of all, India is our all-weather friend! India buys a lot of our diamonds, particularly the gem and industrial quality goods. Our biggest market for diamonds is India, so we are already in business with several people from there. More importantly, what we would want to see at ZMDC is may be to get into joint ventures with respect to the actual mining of diamonds. I am aware that we have just concluded a joint venture agreement for cutting and polishing with a major Indian company, Goenka Diamonds. And more Indian companies are welcome to partner with us in cutting and polishing. Our role at ZMDC is to guarantee the supply of cuttable material for the factory that we will jointly establish. We are also looking at gold as Zimbabwe has so much of it. And with India being the world s largest consumer of gold, we believe there are a lot of prospects for us to enter into joint ventures with Indian companies. Can you elaborate on the equal ownership structure? The investor will appoint the chief executive officer, while the ZMDC will chair the board of directors. We will have some more positions on the board, but the deputy chair will be that of the investor. So we ll have 50:50 representation on the board of directors, but the most senior manager of the company the CEO or managing director will be that of the investor. We have done very well with our existing investor partners, who have been able to repatriate their profits. And with multicurrency in Zimbabwe, you cannot lose because we use US dollars, South African rands, and many other currencies of the world in doing our business. Zimbabwe s diamonds are most suited to a low-cost cutting centre like India. However, Indian companies aren t allowed to sell polished diamonds originating from Marange in their biggest market, the United States, due to existing sanctions. Do you see this as a problem going forward? That is precisely what has come out in this conference. America has now realised that they are not able to stop the sale of rough diamonds from Zimbabwe to other countries, so they are now trying to punish manufacturers. If we stand as a united force, America will eventually abandon this route of sanctions. If you look at Surat and the rest of the Indian cutting and polishing industry, it s under threat from America for absolutely no reason. Our diamonds are clean they are not blood diamonds. So there is no justifiable reason why Indian manufacturers should be punished by America for buying rough diamonds from Zimbabwe. We should stand together as we have done so far and continue fighting this injustice. I have no doubt that America will relent. How will the Zimbabwe Diamond Conference change things? At this conference, diamond manufacturers are saying to the US, Why on earth are you punishing people who are involved in legitimate business? These are significant players in the industry who have congregated here and all of them in unison are saying that what America is doing is wrong. So it is that momentum that we must continue. We should expose the sanctions as being wrong and hateful not only to Zimbabwe but also, in this instance, to the people of India. Zimbabwe has the capacity to produce millions and millions of carats of diamonds, and if a significant portion of it goes to India for polishing, then you will sustain those jobs and uplift your economy, while benefitting Zimbabwe at the same time. Equally, those in the jewellery industry in America will benefit. In a cynical way, these sanctions are hurting everyone, while we just want to do clean business. America is busy supporting Britain in a bilateral dispute between Zimbabwe over land reforms; it has nothing to do with human rights. So this momentum must be kept to fight against the sanctions. We must have the spirit of Gandhi in us to say we are right and we will succeed. Do you see Indian companies as being major investors in Zimbabwe s diamond mining sector? We see India as Zimbabwe s natural ally; our historical backgrounds are the same. We have been oppressed and we survived very harsh conditions under British rule. We must now survive these sanctions from America. The wellestablished Indian diamond manufacturing industry is hungry for the raw materials that Zimbabwe possesses. Hence, our common interest is to ensure that Zimbabwe s diamond resource is exploited to the fullest. My appeal to Indian investors is that they must continue to buy from Zimbabwe and develop the existing relationships. At a second level, we should be able to establish beneficiation factories in this country that will still leave enough quantities of rough to be exported to India and sustain Indian manufacturing companies there. At present, only 10% of our diamond output is reserved for local beneficiation. Then on a third level, let us see if we can find a concession and have a joint venture in terms of a diamond mining operation. We are open to our friends from India to come and engage with us to exploit Zimbabwe s resources together. 59