The ongoing Zimbabwe diamond mining saga that has seen the arrests of some Core Mining and ZMDC officials has attracted a lot of attention and opened a new chapter on the role of the state in diamond mining activities. Equally, the new licenses that have been reported awarded to Anjil, and Pure Diamonds and Sino-Zimbabwe continue to point to one sad story – the story of Zimbabwe losing confidence in its own people and indeed the inclusive government of Zimbabwe, against the spirit of true and unbridled economic empowerment, has been caught flouting its own commandments. If the inclusive government of Zimbabwe is already party to two licenses currently extracting diamond in Chiyadzwa, why would it be too slow and dull to learn and impart the knowledge to local partners in new licenses?
Worth noting in the new licenses is the fact that the element of foreign companies, or the need thereof to partner with such, has continued to take centre stage in the awarding of licenses in the diamond extraction in and around the Marange area. Whilst the inclusion of foreign companies in the diamond mining industry or any other industry in Zimbabwe is not a bad idea, it is so much bad and distasteful to imply and indeed act in confirming that Zimbabweans on their own cannot mine diamonds in the Marange area. Who does not know that the Marange diamonds are largely alluvial? Isn’t this the same place that lit Mutare with loads of US$ when illegal ‘panners’, armed with sticks, shovels and carry bags, extracted diamonds worth millions of dollars? And indeed they got the gems, and the story of the alluvial Chiyadzwa diamonds and the miracles thereof has been told, recited and indeed documented.
Why would the government therefore, against its own spirit of empowering its people, award and continue to award licenses to ‘foreigners’ to extract alluvial gems that sticks, shovels and picks could unearth? Alluvial diamonds, for what they are, remain and will always be alluvial diamonds, not requiring state of the art machinery to extract. Alluvial diamonds generally stem from diamond-rich kimberlite rocks that would have been eroded over time by rivers, with the diamonds being deposited downstream. Artisanal mining techniques have mined the Chiyadzwa diamonds, of course not to the broader benefit of the Zimbabwean economy, and indeed alluvial diamonds, in the general interests of Zimbabweans, should be left for Zimbabwean to extract. There is general talk, erroneous equally, that Zimbabweans alone cannot extract alluvial diamonds and would indeed need foreign partners with deep pockets to buy bull-dozers, excavators, front-end loaders and security fence to be able to extract diamond. This notion is regrettably ill-informed, unfair and indeed a prejudicing one. Since when have bull-dozers, excavators and so on been expensive when compared to the return on investment from alluvial diamonds?
For the record, the Zimbabwe's financial sector has capacity to syndicate more than sufficient resources to which-ever Zimbabwean would be looking for the capital to extract diamonds in the Chiyadzwa. Recently three banks, FBC, ZB Bank and Agribank have been in the market to raise a combined $37 million to finance the next agricultural season. Will it ever rain this coming season or we will have the worst drought? Notwithstanding that there are serious risks in funding agriculture, more so in an environment that is illiquid and dominated by big foreign banks that impose regrettable country risk limits that have been stifling the growth of credit in the economy, these three local banks have put up a commendable act. Whether they raise all the money or part of it is beside the point. What therefore makes the government believe that there is no local funding for alluvial diamond extraction when, in fact, poor ordinary Zimbabweans could, after years of hyper-inflation, amass the capital to extract the gems via sticks and shovels? What foreign expertise would be needed besides compliance issues with the Kimberly Process? Does Zimbabwe not have deposits sitting on bank balance sheets at over $2 billion today, with $1.3 billion of these in loans and advances? Why therefore would banks not lend to Zimbabwean companies in alluvial diamond extraction that does not require huge initial capital outlay?
The beneficiation of the diamonds is one area where Zimbabwe does not have expertise, and few would question the wisdom of the Zimbabwean government in awarding licenses to foreigners partnering local companies with the technical know-how and markets.
The time has therefore come when Zimbabweans need to be honest about themselves, their capabilities and actions that will take Zimbabwe forward in a non-prejudicial manner. Sarkozy, the French President, addressing the European Parliament in 2008 said; “I don’t want EU citizens to wake up a few months from now and discover that EU companies belong to Non-EU capital which has bought at the lowest point of the stock exchange”. Isn’t this economic patriotism where the EU protects that which is theirs, barring Middle-East and Chinese investors to grab EU assets at their lowest prices? Is it not Elysee Palace, the official residence of the French President, that is dreaded by big companies in France whenever they engage in big deals with non-French companies? In February of 2009, Eutelsat board members were summoned to Elysee to answer why they had chosen a Chinese ‘Long March’ rocket to launch a satellite instead of using a French firm, Arianespace. Why would therefore Zimbabwe, for its prized diamonds existing on the surface and not needing sophisticated underground equipment, enlist foreign capital that will see money leaving this country to sit in foreign banks and finance foreign interests?
Isn’t Australia proposing an excess profit tax of 30% on iron ore and coal miners? Surprisingly, after futile protests, BHP Billiton Ltd, Rio Tinto Ltd and Xstrata plc have been reported to have signed agreements in support of the new tax rate. Is this not Australia benefiting from its resources in a win-win situation? Why then would Zimbabwe, for what it can do successfully with its local capital and expertise, cede rights to foreigners in alluvial diamond panning? In the UK, Vince Cable’s ranting on excessive bank profits and threats to those banks not lending to British companies reveal the growing insecurity of governments worldwide concerning the ability to manage banks and financial resources in order to continuously influence the growth process. Equally, the Chinese state-owned banking sector protection experience that has been influential in driving Chinese growth to this day where China is a global superpower, notwithstanding everyday criticism from such institutions as the IMF, is an important learning point in global economics. On the same issue, the 01 September statement by the Fed Chairman, Bernanke “that a combination of tougher oversight and tighter capital requirements will take away the attractiveness” of banks being too big to fail bear testimony to the fact that any serious country today needs to have some significant influence in the way resources are allocated in the economy, be it in banking, mining or otherwise.
The Minister of Youth and Economic Empowerment, Mr Kasukuwere, and the President of the Affirmative Action Group, Super Mandiwanzira, have grabbed headlines championing the cause of able Zimbabweans in charge of their destiny, but surely their motives and what they stand for become very weak when licenses to alluvial diamonds extraction need foreign partners. The excuse that the foreign capital on alluvial diamond extraction does not have controlling stake is not a good one, and indeed Zimbabwe needs to re-look at its economic vision. Emotions have always boiled about foreigners owning shops and other small retail businesses suffocating local Zimbabweans. In the same breath, why would foreigners be allowed to take part in alluvial panning? If we can’t bar foreigners in alluvial panning, lets equally not bar foreigners in retail businesses. The law has to be fair to all foreigners, and more importantly, make sense. The Minister of Finance, Tendai Biti, will soon be presenting a fragile budget statement, with or without a deficit. Government revenue remains weak, and surely short of coming up with pragmatic changes to the taxation levels on key minerals such as diamonds and platinum, the fortunes of this economy will remain weak for long, and Zimbabweans will have themselves to blame. This new sad chapter therefore in the extraction of Chiyadzwa diamond is regrettable, and indeed the inclusive government needs to quickly re-look at its economic strategy.
Brains Muchemwa is CEO of Oxlink Capital (pvt) Ltd. Feedback: brainsmu@gmail.com. Disclaimer: The comments, sentiments and statements made in this article are that of the writer and do not, in any way, reflect the views of Oxlink Capital (pvt) Ltd.
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