RAPAPORT... It is Valentine's Day -- the day for lovers to exchange jewelry gifts -- and the day that Global Witness published a report showing how diamond purchases may ultimately be funding Zimbabwe's military.
The report, ''Diamonds: A Good Deal for Zimbabwe?,'' reveals names of high-level military officials who are serving on the board of Anjin Investments, one of the largest mining companies operating in Zimbabwe’s controversial Marange diamond fields. According to the group, Anjin’s executive board includes, Martin Rushwaya, the permanent secretary in the Ministry of Defense; Oliver Chibage, a commissioner in the Zimbabwe Republic Police (ZRP); Nonkosi M. Ncube, a commissioner in the ZRP; Munyaradzi Machacha, a ZANU-PF director of publications; Mabasa Temba Hawadi, a director of Marange Resources, a subsidiary of the Zimbabwe Mining Development Corporation (ZMDC), which also faces U.S. sanctions.
Anjin's non-executive board members were listed as: Morris Masunungure, a current or retired officer in the Zimbabwe Defense Forces (ZDF) and Romeo Daniel Mutsvunguma, a retired colonel in the ZDF alleged by Human Rights Watch to have participated in violence in 2008.
The report also revealed that 25 percent of Mbada Diamonds was handed to a company linked with a man widely reported to be President Robert Mugabe’s former personal pilot, and which has an opaque company structure based in tax havens. Mbada, which was recently added to U.S. sanctions, was given a diamond mining concession in 2009 under questionable circumstances and is chaired by former air vice-marshal Robert Mhlanga, a prosecution witness in the 2003 treason trial of then MDC opposition leader, Morgan Tsvangarai, and widely reported to have been Mugabe’s personal pilot.
Mbada, which was recently added to the U.S. sanctions list, was a joint venture between Zimbabwe and Grandwell Holdings, which is registered in Mauritius but owned by Reclam, a South African scrap-metal company. But in the most recent financial year, 50 percent of Grandwell was passed to Transfrontier, which has an opaque company structure based in secrecy jurisdictions, Global Witness found. The beneficial owners of Transfrontier are unknown. However Global Witness research revealed the firm’s connections to Mhlanga.
''Zimbabwe desperately needs diamond revenues for health and education services, not AK47s and flash cars for the elite,'' said Nick Donovan, a senior campaigner at Global Witness. ''Zimbabwe must ensure that diamond mining companies are not used as an off-budget cash-cow by ZANU PF loyalists in the military and police. If the next election is accompanied by violence there’s a real risk that any bloodshed will be funded by diamond revenues.''
In 2008, Zimbabwe's army took control of the Marange diamond fields using troops and helicopter gunships, killing and wounding many small scale miners in the process. Since that time, violence has subsided and diamond concessions have been allocated to several companies in questionable circumstances, Global Witness contended.
Global Witness defined Anjin Investments as a joint venture between "an obscure" Zimbabwean firm called Matt Bronze and a Chinese construction company. Global Witness’s investigation into Mbada Diamonds revealed a matrix reporting structure hiding in the jurisdictions of Mauritius, Hong Kong, British Virgin Islands and Dubai.
''Corporate anonymity and the use of secrecy jurisdictions can be used to hide the true beneficiaries of business deals and have the potential to conceal corruption, tax avoidance or off-budget government spending. The Zimbabwean government and Mbada should immediately publish all contracts and details of revenue flows to allay such fears,'' said Donovan.
Both Mbada and Anjin were cleared for exporting rough diamonds in November. "Over the past three years the [Kimberley Process], which was set up to stop the trade in blood diamonds, has failed to address state-sponsored violence in the Marange diamond fields and resisted calls for reform," the group's statement noted. Global Witness, which was a founding member of the Kimberley Process, left the scheme in December.
''Given the failures of the Kimberley Process the diamond industry urgently needs to implement a system of ‘supply chain due diligence’ in order to give consumers the confidence to buy diamonds without any risk that they fund human rights abuses,'' concluded Donovan.
Global Witness recommended that Zimbabwe must cancel Anjin's contract, review all Marange-related diamond mining contracts, and audit rough diamond operations to date.
Furthermore, the government should pass legislation that bans members of Zimbabwe’s security sector from serving and exerting any control over mining companies – including being the beneficial owners of subsidiaries of companies operating in the country’s sector, and immediately audit every concession granted so far in the Marange and publish details of the beneficial owners of Mbada and Anjin.
Global Witness also raised several questions for discussion in its report.
1) Do Anjin and Mbada’s corporate structures benefit Zimbabwe’s people?
2) Do Anjin or Matt Bronze make any payments direct to the Ministry of Defense, Ministry of Home Affairs, Zimbabwe Republic Police, Zimbabwe Defense Force, Central Intelligence Organization or the Office of the president and Cabinet?
3) Is Transfrontier International actively trading in Mbada-produced diamonds in Dubai? If so, how are the transfer prices governing the sale of diamonds between two related companies (Transfrontier and Mbada) determined? And, if so, how does this affect the taxes paid to the Zimbabwean treasury?
4) Who are the ultimate beneficial owners of Matt Bronze and Mbada and associated companies including Transfrontier, and related firms registered in Hong Kong, British Virgin Islands and Dubai, Skyview Minerals, Reclam and Liparm?
5) Was the transfer of 50 percent of Grandwell Holdings to Transfrontier Mining Company made in return for the grant of an extra 6,440 hectares concession area? If so, why was 50 percent of Grandwell transferred to Transfrontier, registered in Hong Kong, rather than to the Presidency of Zimbabwe, in whom mineral rights are vested by law?