Centre for Natural Resource Governance (CNRG), which advocates for good governance in Zimbabwe’s extractive sector, said that the sudden rise in value of Zimbabwean diamonds in Dubai calls into question the previous prices realised by the country’s diamonds on the same Dubai Diamond Exchange (DDE).
Zimbabwe conducted its inaugural diamond tender in Dubai late March, which reportedly fetched a total of $29.2 million from 380,626 carats.
Over 400,000 carats of rough diamonds from Anjin, Jinan, DTZ OZGEO, DMC, Marange Resources, Mbada and Kusena were featured in the tender, which was facilitated by Global Diamond Tenders.
DDE chairperson Peter Meeus said the tender achieved an average price per carat of $76/ct with the most valuable stone fetching $5000 per carat.
CNRG noted that Zimbabwe sold about 15 million carats at an average price of $50 per carat in 2012, mainly on eastern markets such as the DDE, India and China.
“What then has caused a 50 percent increase in prices on the same exact market?” said CNRG.
It claimed that the revenue said to have been accrued from the second tender in Antwerp was misleading.
Zimbabwean officials had said that the tender realised an average price of $72 per carat but CNRG noted that it was $79.68 per carat instead.
Zimbabwe offered 959,403.59 carats at the tender of which only 867,308.40 carats were sold.
CNRG said there were two scenarios that best explained why the inaugural Zimbabwe diamond tender in Antwerp had flopped.
It said diamond companies likely sabotaged the first Antwerp tender by sending low quality stones because they preferred the “murkier waters of Dubai and Chinese markets”.
Secondly, CNRG said the diamond companies or the government were also engaged in trade mispricing whereby government or diamond company officials colluded with buyers to sell the diamonds at unreasonably low prices so they could receive huge financial kick-backs.
“The sudden increase in the value of Zimbabwean diamonds in Dubai appear to be in response to the highly successful second Antwerp tender which raised the value of Zimbabwe’s diamonds by 50 percent,” it said.
“Information obtained by CNRG reveal that some Marange companies were uncooperative during both the first and second Antwerp tenders by way of submitting broken and poor quality stones but offered high quality goods for the Dubai tender.
“This gives credence to the view that Marange companies connived to sabotage the Antwerp tenders.”
The recent visit to the DDE facilities by President Robert Mugabe had also raised suspicion that Zimbabwe would likely snub Antwerp.
“Recent declarations by the Minister of Mines, Walter Chidhakwa and Presidential spokesperson, George Charamba that Zimbabwe’s diamonds fetched a higher average price in Dubai than in Antwerp when this is in fact untrue (as proved above) seem to be red herrings to justify the sale of diamonds in Dubai rather than in Antwerp,” it said.
“EU’s head of delegation in Zimbabwe, Ambassador Dell’Ariccia believes this is possible. He is quoted as saying, ‘In the two auction sales of diamonds that took place in Antwerp, there was full information about the quality and quantity of the stones, the price fetched and therefore the amount of funds that will go to Zimbabwean coffers. The auction in Dubai took place last week and at this stage I still do not know how much was sold and how much will go to the Zimbabwean fiscus. Dubai is a fiscal paradise; there is a certain opacity in the transactions. It is possible the auction can be transparent but it is also possible that it may not be’.”
CNRG also said that it was deeply concerned with the paltry, “tokenistic payments” being remitted to Treasury after diamond sales.
“The failure of the companies to remit the resource depletion fee and marketing fees to the Treasury is of major concern,” it said.
“Could it be they are exempted from paying these taxes in the contracts they signed with government? This can only be known if contracts are made available to the public and the diamond mining companies are required by law to publish their financial statements.
“The tax regime in Zimbabwe is tailored in a way that ensures Treasury receives 15% of the diamond companies’ revenue as royalty and over 75% of their profits as dividends and corporate tax.”
It said given the “tokenistic payments” made to Treasury since operations in Marange commenced, it was evident that there was something terribly wrong either with the way the Zimbabwe Revenue Authority (ZIMRA) was operating or the way the contracts mining companies hold were tailored.
“In order to deal with this widening tax deficit and to curb illicit financial flows and financial fraud in the extractives sector, Zimbabwe should join the Global Forum on Transparency and Exchange of Information for Tax Purposes,” CNRG said.
“This is a global body formed under the auspices of the Organization for Economic Cooperation and Development (OECD) that aims at sharing information to prevent illicit financial flows and tax evasion. Uganda, South Africa and Kenya are some of the 122 member countries.”
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
