The lifting of a trade embargo on Zimbabwe’s Marange diamonds by the European Union last year has seen major diamond trading centres in the world battling to offer the southern African country a platform to put its stones under the hammer.
Belgium, which helped convince colleagues in the EU to lift sanctions on the Zimbabwe Mining Development Corporation (ZMDC) was first to trade Marange goods.
A trial Antwerp diamond tender organised last December accrued €7.6 million ($10.4 million) fr om 279,723 carats sold.
About 300,000 carats had been put on offer.
The country’s mines secretary Francis Gudyanga said at the time that the majority of the parcels offered did not reflect a complete run-of-mine of each individual mining operation.
“In other words, the composition of the goods did not represent a cross section of the goods range from high to low quality, produced at any of the five mining operations,” he was quoted as saying by state media.
“Overall, 89 percent of the goods offered consisted of low quality industrial goods. In general, goods were not optimally cleaned, sorted and parcels were not ideally composed.”
A second Antwerp tender auction was also conducted last February bringing in $70 million from 959,931 carats.
Analysts in Zimbabwe had forecasted revenues of around $35 million.
However, proceeds from the auction grew by about 700 percent compared to the first sale.
The improved returns were said by officials to be a result of better quality diamonds that were placed under the hammer.
The transparency that came with the Antwerp tenders was hailed by many as something that Zimbabwe needed given the opaque nature that previously characterised Marange diamond sales.
Despite the two successful Antwerp tenders, Harare announced that it was planning to have tenders at the Dubai and Shanghai diamond centres to accurately gauge their worth.
Mbada Diamonds chairperson Robert Mhlanga also told a parliamentary committee that he was against EU diamond sales.
“I have strong reservations about Antwerp because they are our yesteryear enemies. We have actually reeled under sanctions, thanks to Brussels and for us now because they have claimed to have lifted sanctions and we run to them. Personally, I have my own reservations,” he said.
Mhlanga, who was recently appointed to board of the Dubai Diamond Exchage (DDE) said Zimbabwe should instead set up its own diamond exchange to plug revenue losses in commissions paid to the AWDC.
“I don’t think that is good. I strongly believe that Zimbabwe as a country we have capacity to hold auctions in this country wh ere hundreds of companies can attend,” Mhlanga said.
“There is a multiplicity of benefits when you invite people to do tenders in your own country. You bolster your own tourism industry… I don’t believe in appeasing a foe.”
As anticipated, AWDC thought Zimbabwe’s plans to have tenders in Dubai and Shanghai betrayed its commitment.
“I made a commitment to the minister of mines (former minister, Obert Mpofu) to help lift sanctions on Zimbabwe Mining Development Corporation and I worked extremely hard to keep these promises,” said AWDC chief executive Ari Epstein in an address during a Zimbabwean parliamentary seminar in Harare last month.
“The export of Marange diamonds were resumed, unfortunately not to Antwerp but to the rest of the world. Why, when the sanctions are lifted are you imposing sanctions on yourselves?”
He also said that results from the Antwerp tenders had demonstrated the immense buying power and benefits the world’s leading diamond-trading platform had to offer.
Epstein said performance zoomed past expectations, as on average, the sales in Antwerp generated prices that were 30 percent above the producing companies’ expectations and 50 to 60 percent higher than prices fetched in Zimbabwe and other diamond centres.
He also noted that for the first time in four years, a transparent and appropriate return on investment for the Zimbabwean government had been achieved.
Prior to trading in Antwerp, Marange goods were sold in Zimbabwe but also in other diamond centres, at an average price of $47 per carat, resulting in an average return on investment for the Zimbabwean treasury of $7.05/ct.
By contrast, Antwerp, achieved an average price of $80/ct or $12 per carat in royalties for the Treasury.
“If all sales were to go through Antwerp, Zimbabwe would gain more than $400 million in extra revenues, resulting in an increase of $60 million of royalties per year,” said Antwerp.
“Naturally, the total sum of money flowing back to Treasury would be exponential of this figure.”
With Antwerp having presented its case, what many wanted to see were results of the Dubai tender of Marange diamonds, which ended on 30 March.
The Dubai tender raked in $29.3 million from 380 626 carats sold.
Unlike the Antwerp tender, all companies were asked to clean their diamonds before the tender so as to fetch higher prices.
DDE chairperson Peter Meeus said the tender achieved an average price of $76 per carat, with the highest price a carat reaching $5 000.
“The DDE has and will continue to support African diamond markets by ensuring the appropriate infrastructure is available to facilitate the trade between producing and consuming nations,” he said.
Zimbabwean mines minister Walter Chidhakwa said the government earned $4.3-million in royalties from the tender.
In terms of the average price per carat recorded in both diamond trade centres, one can see that Antwerp fetched better prices.
The $4 difference can be very huge, if millions of carats are considered for sale.
However, figures released by Zimbabwe early this month showed that the second Antwerp tender had recorded an average price of $72.96 per carat not $80 per carat as AWDC reported.
The Zimbabwean government praised the Dubai tender for attracting better prices, but what should be taken into consideration was the fact that not all stones sold in Antwerp were clean as was the case in Dubai.
So that had an impact on pricing.
Another factor, which showed that Harare would likely prefer DDE ahead of Antwerp was the recent travelling of President Robert Mugabe to the United Arab Emirates (UAE) to facilitate the opening on an embassy, which would have no major diplomatic task to handle except to oversee the sale of the country’s diamonds.
DDE also stood with Zimbabwe at the time EU barred their diamonds from the international market.
That would likely influence the future trading of Marange diamonds outside the Zimbabwean borders.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
