Zimbabwe diamond sale under scrutiny

A proposed sale of Zimbabwean diamonds proved controversial, because of disputes over ownership and whether or not the gems are “blood diamonds”. Although the sale was postponed, the issue is unlikely to go away.

In January Mbada Minerals, the South Africa-based company in a joint-venture arrangement with Zimbabwe’s state-owned Zimbabwe Mining Development Corporation (ZMDC), announced a public auction of 300,000 carats of Zimbabwean diamonds. The sale–which was subsequently “postponed” by the Zimbabwean government–would have involved gems from the Chiadzwa-Marange diamond fields in eastern Zimbabwe, which have been mired in controversy ever since they were first discovered in 2006. The Zimbabwean police and army have been repeatedly accused of serious human-rights abuses in the area, with a 2009 report by non-governmental organisation Human Rights Watch (HRW) stating that soldiers ordered civilians to dig for diamonds at gunpoint, used forced child labour and raped women. Hundreds of civilians were killed in the process, according to HRW. The diamonds were reportedly smuggled into Mozambique and other countries from where they could be exported as “clean” gems, rather than so-called conflict diamonds.

Although it is far from clear how much the diamonds are worth–an article in the weeklyIndependent newspaper suggested a figure of US$30m to US$300m a month, although the latter figure would make Zimbabwe an even bigger producer than Botswana–it is apparent that all parties in the government want to ensure that the state gets its share of the spoils. This is bad news for London-listed African Consolidated Resources (ACR), which owned the claims until they were confiscated by the Mugabe administration. ACR has won a court action recognising its ownership of part of the diamond fields, but while the Movement for Democratic Change (MDC) certainly disapproves of the tactics espoused by Robert Mugabe’s Zimbabwe African National Union-Patriotic Front (ZANU-PF), it is unlikely to side with a company that claims to be owned and run by Zimbabweans but is listed on the London Stock Exchange’s junior board, AIM. In addition, MDC leaders point out ACR obtained its mining rights from the Mugabe government, implicitly supporting ZANU-PF in the process.

However, ACR warned that anyone purchasing gems at the proposed Mbada auction would be buying “stolen diamonds” and risk prosecution. There was also an international dimension, since there were questions over whether the auction would contravene the Kimberly Process Certification Scheme, set up to eradicate “blood diamonds” and protect the human rights of those engaged in the industry. In the event, the authorities ostensibly postponed the sale because they wanted a Kimberly Process monitor to be present. It has since been claimed that the Zimbabwean government rejected such a monitor on the grounds that he was from the EU, insisting instead that a Namibian be appointed to oversee the sales. However, with Mbada’s chairman–a former air vice marshal in the Zimbabwean airforce who reportedly has very close links to Robert Mugabe–having stated that diamonds would be auctioned regularly, and with apparent in-fighting between ZANU-PF’s Mujuru and Mnangagwa factions for control of the diamonds, it seems likely that the sale issue will be resurrected soon, with all the controversy that this will involve.

The Economist Intelligence Unit