||Will world prices collapse as Mugabe’s generals loot Marange?
Khadija Sharife 13 March 2012
The news from oppressed Africa may be dominated by the self-serving You Tube video by Jacob Russell, ‘Kony 2012’, seen by 80 million viewers, aiming to raise consciousness about children involuntarily soldiering for the Lords Resistance Army in oil-rich northern Uganda. But in contrast to American saviors, there are plenty of local activists needing solidarity in their struggle against tyrants.
One of these is an institution, the Centre for Research and Development in Mutare, Zimbabwe, whose offices were mysteriously burgled last week. Mutare is the closest city to the $800 billion Marange fields, described as the largest diamond find in history.
Even before Kimberly Process (KP) certification, Zimbabwe became the world’s seventh largest producer, and the KP deal apparently occurred because Zimbabwe’s Ministry of Mines threatened that world diamond markets would be flooded if KP-certification were not provided.
In any case, Zimbabwe’s main diamond trading partners, India and China (via Dubai and Israel), hold no regard for the KP, and therefore cannot be held hostage by threats of peer exclusion. Already, 30 percent of the diamonds handled in India’s key cut and polish hub, Surat, are imported from Zimbabwe.
Africa generates over 65 percent of the world’s rough stones. Until recently, a handful of companies including DeBeers (35 percent market share by value) and Russia’s Alrosa (25 percent market share) benefited from near monopolistic control, with sales dominated by the US market thanks to the deeply entrenched impact of the De Beers ‘Diamonds are forever’ advertising campaign.
Until the 1990s, DeBeers had set the inviolable rule of the diamond industry: one buyer (Central Selling Organisation) to absorb – and vault – the bulk of surplus to prevent diamonds from losing the scarcity value, artificially created via slow release onto the market.
Andrei Polyakov, spokesperson for Russia’s Alrosa – which remains 90 percent state-owned – confirmed, “If you don’t support the price, a diamond becomes a mere piece of carbon.”
The diamond merchants now face a serious crisis: losing the battle to keep stones in the Zimbabwe soil by locking down concessions. At one point, De Beers held over 45 Exclusive Prospecting Orders, and despite discovering Marange early in the game, De Beers failed to exploit the resources.
Unlike Botswana and Namibia, the generals close to Robert Mugabe who control Zimbabwe’s military refuse to play ball by controlling the supply. Intimidated by the “environment of uncertainty regarding the status and future of the concession,” De Beers opted out in 2006, when its prospecting license expired, even though DeBeers knew that at Marange, the yield was more than 1000 carats per hundred tonnes, nearly ten times higher than another large field, Rio Tinto's concession in Zimbabwe's Midland province.
According to Keiron Hodgson, a Charles Stanley Securities analyst of the diamond sector, “Zimbabwe really does have the potential to upset the applecart. Zimbabwean officials anticipate that diamond production could generate between $1 billion and $2 billion per annum to an economy that has a GDP of around $7.5 billion so I would understand the urgency to produce diamonds from Zimbabwe, but I don't think they're going to go out and produce as many as they can because they are quite price aware.”
Many others, however, fear a price collapse from an increasingly desperate Zanu(PF) ruling party which needs the revenues to fight the coming national election in Zimbabwe, and which would probably have no hesitation to loot Marange as quickly as possible in the event of a loss of state power to the Movement for Democratic Change.
The US government was previously considered the most vociferous opposition to the export of Zimbabwe’s ‘conflict’ stones, so considered because several hundred peasants were murdered by army troops in a 2007 massacre at Marange. But ever-unreliable and self-interested Washington State Department officials apparently caved to Mugabe’s wishes for KP certification, provided that African states support their bid for KP chair in 2012.
Who couped the KP?
Two years ago, Farai Maguwu, head of the Centre for Research and Development and an incoming doctoral student at the UKZN Centre for Civil Society, was arrested in Mutare by Mugabe’s government for allegedly endangering ‘national security’ by possessing information about the military’s violation of human rights at Marange.
Maguwu’s arrest appeared to be contrived: he met with the KP-appointed monitor Abbey Chikane, brother of former SA Presidency director-general Frank, who had tipped off Zimbabwean State intelligence officials in spite of claiming that the meeting was confidential. Maguwu believed, and stated publicly, that he had been ‘set up’ by Chikane.
Chikane argued that he received from Maguwu state security documents drafted by the army, while Maguwu rebuts that Chikane was fishing for said documents at the meeting.
According to Human Rights Watch, which gave Maguwu its highest award for rights advocacy in Africa, “He was imprisoned for more than a month and denied medical care to punish him. The authorities then illegally transferred him to various police cells with deplorable conditions even though he suffered from a serious health condition. Maguwu was released in early July and only finally cleared of all charges in October.”
As for Chikane, the KP did not publicly reprimand him, nor did he resign. Complained Ian Smillie, known as one of the world's leading conflict diamond experts and a key architect of the KP, “We don't know where all the diamonds went that were approved by Abbey Chikane. Chikane was a mistake on several levels… He has extensive personal business interests in the Southern African diamond industry that should have disqualified him from the outset.”
Is the KP fatally corrupted?
This leads to a bigger question: given Chikane’s chicanery and Washington’s grab of the KP, both at the expense of Zimbabweans being persecuted by Mugabe’s regime, should civil society chuck out the KP as a useful tool in monitoring multinational corporate activity in blood diamond zones?
After all, though some good may be claimed from KP activities in West Africa, the definition of conflict diamonds has excluded some of the world’s primary culprits: anti-democratic, corrupt and authoritarian ‘rent-seeking’ regimes, such as Namibia and Angola, who not only ‘self-regulate’ what constitutes KP-certified diamonds, but also act as partners to mining houses, therefore directly benefitting from diamond revenues.
Last week, Magawu was finally allowed to visit the Marange mines. As he then reported, “They have brought in state of the art equipment to intensify mining. I was deeply concerned with the level of mining taking place given that the money is not being accounted for. But we take this is a stepping stone, (hoping for) greater scrutiny by civil society. A meeting I held with (Finance Minister) Tendai Biti recently revealed that he had not yet received any information on the diamond auctions that were conducted in December and January respectively. If diamond revenue can't reach the treasury then we may be sitting on a time bomb.”
Khadija Sharife is a researcher at the UKZN Centre for Civil Society.