President Robert Mugabe has turned to his bitter regional rival Botswana President Ian Khama for a model to exploit diamonds to fuel economic development in Zimbabwe.
Khama has consistently rejected President Mugabe’s re-election as fraudulent and has often spoken out about Zimbabwe’s political crisis.
Nothwithstanding the frosty relationship, Mines and Mining Development minister Walter Chidhakwa will visit Botswana on July 2 to study the diamond model in Botswana — the world’s leading diamond producer by value.
Chidhakwa on Wednesday confirmed that he would be visiting Botswana on July 2.
He said he has also been to Namibia and South Africa to study their models and now wants to look at the Botswana model as he works on his plans to consolidate the diamond mining companies into one entity, with 50% government shareholding as is the case in Botswana. The government of Botswana mines diamonds in partnership with South African giant De Beers.
“Diamond mining is a very difficult sector,” said Chidhakwa. “It is difficult to monitor and manage, but if we consolidated the companies into one and have one monitoring mechanism the model of consolidation will allow for better monitoring thereby reduce the leakages.”
He added: “I will be going to Botswana to look at their model. We are relatively a new diamond-mining country.”
Botswana has used diamonds to develop the country from being a mostly rural backwater at Independence in 1966 to a booming economy.
While Zimbabwe was the second most industrialised country in the region after South Africa at Independence in 1980, it has since largely become a shell due to the de-industrialisation characterised by company closures and job losses, largely blamed on mismanagement of the economy.
More than 7 000 workers were retrenched last year alone and more than 1 000 workers from 67 companies have lost their jobs in the first quarter of 2015.
At least 55 000 workers have been rendered redundant after 4 610 companies closed shop countrywide between 2011 and 2014, according to Finance and Economic Development minister Patrick Chinamasa in his 2015 national budget statement.
Top government sources said this week a request for the visit to Botswana to look at its diamond model was made by Mugabe in a meeting with Khama during his visit to that country last month.
This is a surprise development as Mugabe and Khama have a not-so-cordial relationship despite Mugabe’s claims that relations with his counterpart are genial.
Khama has repeatedly rejected Mugabe’s re-election, saying the polls were stolen.
The Botswana president hardly ever agrees with Mugabe at regional meetings such as Sadc and the African Union, with the latest case being on presidential term limits and the International Criminal Court from which Mugabe wants African countries to withdraw saying it is targeting African heads of state.
At the just-ended AU summit Mugabe said African leaders had made a mistake by endorsing legislation which sets a two- term presidential limit.
“It is a democracy, if people want a leader to continue, let him continue.”
However, Khama disagreed.
“… There comes a time where we think that once you get into office and you’ve been there for 10 years (two five-year terms), really that is enough, you should make way and let others come in,” Khama said a fortnight ago.
Meanwhile, Chidhakwa wants the mining companies to merge into one firm, in a move meant to streamline their operations while curbing leakages.
The move comes after most diamond mining companies in the Marange area of Manicaland failed to account for revenues they realised in their mining operations, save for Mbada Diamonds which in March last year declared to parliament that it had surpassed the US$1 billion turnover mark.
Chidhakwa’s plans also come after years of complaints from within government and ordinary Zimbabweans, civil society and opposition parties that diamond revenues were not finding their way to Treasury, but were being used to line pockets of top politicians and service chiefs through shady deals. Zimbabwe is the world’s fourth-largest diamond miner, producing an estimated eight million carats with potential to supply 25% of global demand. However, the country is in the midst of an economic crisis and has little to show for its diamond wealth.
Seven companies were operating in Chiadzwa, namely Mbada, Anjin Investments, Diamond Mining Company, Gye Nyame, Jinan Ming Private Ltd, Kusena and Marange Resources.
Chidhakwa in an interview on Wednesday said the consolidation process would involve the merging of the wholly government-owned Marange Resources with the other diamond mining companies, including Murowa and River Ranch.
“The problem in Zimbabwe is that we have companies in Chiadzwa that were opportunistic and speculative. What we are now trying to do is to resolve that problem,” he said.
“We want to do it through consolidation. There is a basic way of doing it (sharing); 50 divided by let’s say seven. But it will not be equal sharing because they have different levels of capitalisation. We then say we are using net-asset-value of each company. You take the net asset value of Mbada, Anjin and others and you add them and come up with the total net asset value.
“You calculate Anjin as a percentage of the total and Mbada the same, and everybody gets their share. Because we now say that there is no limit, this company will mine all diamonds in the country and there is no other company that will be allowed to mine diamonds in Zimbabwe besides that framework. Everyone is coming on board – Murowa and River Ranch,” he said.
Chidhakwa said the companies would have latitude to do exploration across the country in the context of that bigger entity.
He said they would calculate how much equipment is required to mine the diamonds and its value; each company would then be required to inject capital, depending on the shareholding — like a rights issue.
If some fail to raise the money they will then be diluted and the bigger companies can buy additional shareholding.
“This mining is not for mickey-mouse miners, but serious mining across the country. The problem is that when you look at the agreements we signed, all the companies were expected to inject money either in the form of cash or equipment and it is in the agreements.
“If you go and look at what they (diamond mining firms) have injected, it’s generally less than half because some went on to lease equipment. When you calculate net-asset-value, the leased equipment is not included. So the panic now is that they are looking at what they are coming in with. Out of the lot, only one company brought about 45% of what was originally agreed on. That is where the first stage of company resistance is,” he said.
The second stage of resistance has to do with the loss of positions. The consolidation will mean one board, one CEO and one finance director.
Chidhakwa is considering two possible security systems at diamond mining fields: one where they will fire drones with cameras and another where they will use balloons with cameras to monitor activities on the ground to try and curb leakages.
It is expected that greater transparency in diamond mining will help revive the country’s ailing economy.