A report recently released by Equity Communications, a research company focusing on the Zimbabwean mining industry, revealed that the country‘s rough diamond sales reached $466.9 million last year.
This was a decline of 38.4 percent compared to the sales recorded a year earlier.
The decline was attributed to revenue leakages and the fact that Zimbabwe had sold most of its accumulated stock of diamonds in 2012 after the Kimberley Process lifted an embargo on Marange diamond exports.
It was also due to the fact that diamond producers recovered fewer diamonds in 2013.
However, the situation was set to change due to the international tenders, which commenced recently following the lifting of sanctions by the European Union on the Zimbabwe Mining Development Corporation (ZMDC) and its partners in Marange.
Antwerp was first to conduct the trial diamond tenders last December.
The trial tender accrued €7.6 million ($10.4 million) from 279,723 carats sold.
About 300,000 carats had been put on offer.
It also convened another tender last February, which brought $70 million from 959,931 carats sold.
Analysts in Zimbabwe had forecasted revenues of around $35 million.
The country convened another trial tender last month in Dubai, which raked in $29.3 million from 380 626 carats placed under the hammer.
Equity noted that the Antwerp tender confirmed what many already knew in the global diamond market - that the people of Zimbabwe were being fleeced in all their previous diamond sales.
“Scrupulous dealers who bought diamonds at tenders in Harare, via the Dubai route, had maintained that Zimbabwe diamonds could only be bought at hefty discounts of as much as 25-40 percent arguing that diamonds from the country came with serious reputational risks for traders,” it said.
“The stakes couldn't be higher for the government of Zimbabwe. Because of limited external financial support, Zimbabwe has to internally generate revenue required to keep the country functioning. “Furthermore, the government can no longer print money to cover liquidity problems and it can no longer place the blame on governing partners when things go wrong.”
Equity said diamond revenues were expected to increase 47 percent this year raking in $686 million on the back of somewhat increased production, improved diamond sales and marketing methods as well as continued plugging of revenue leaks.
“Furthermore, rough diamond prices are generally expected to increase by 11 percent in global markets because of long-term supply contract renewal cycles and improved consumer demand from China and India,” it said.
Equity also noted that the recent changes in the sales and marketing of Marange diamonds would result in diamond revenues for Zimbabwe growing towards $1 billion in the coming years, provided Zimbabwe continued to access actual market prices for its diamonds.
Ultimately, it said, the production footprint of the Marange diamonds was not prolific by world standards.
Zimbabwe would have to boost production to at least 14 million carats per year if it wants to receive diamond revenues similar to those achieved by its neighbours, said Equity.
However, the country’s diamond output declined 26.1 percent to 8.9 million carats last year, according to Equity.
It said diamond production in the southern African country took a knock due to two reasons.
“First, Zimbabwe held watershed elections that introduced socio-economic policy uncertainty during the campaign period and this affected operations of mining companies,” said Equity.
“Second, the alluvial deposits in the Marange diamonds fields are now considerably depleted after five years of formal mining activities.”
The country’s diamond output was projected to remain in the 9 million carats range (if not lower) this year.
The Zimbabwean government was currently reviewing mining licences in the Marange diamonds fields and intended to reduce the number of operators to two.
Equity said this would likely affect mining operations for the companies since security of tenure was no longer available.
"As things stand, Zimbabwe is still investigating the best way to consolidate the various operators in Marange. That's the first step. If consolidation occurs, then the next step would be to stabilise and rationalise production in the concession areas,” said Equity’s Tinashe Takafuma.
“After that, the third step would be to optimise production and map out plans for underground mining. Finally, large capital investments would then be required to explore the underground operations. We are looking at 3 to 5 years of preparation."
So given this background, Equity’ s suggestions that Zimbabwe would need to reach an annual output of 14 million carats to reach its neighbours’ revenue levels, appeared untenable.
“Such ambitions are still about [three] to [five] years in the future, and also highly depended on the approach Zimbabwe takes to develop its diamond industry henceforth,” it said.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
