The Zimbabwean government said in 2014 that it was planning to streamline operations in Marange by the end of (that) year to improve transparency and revenue inflows.
Diamond miners in Marange had been accused of failing to remit diamond revenue to the Treasury.
Zimbabwean Finance minister Patrick Chinamasa said in November 2013 that the Treasury had not received proceeds from diamond revenue in the nine months to September 2013.
Harare had targeted to receive $40 million from diamond sales during the period.
Chinamasa’s predecessor, Tendai Biti was forced to cut Zimbabwe’s budget in 2012 to $3.4 billion from $4 billion after receiving $41 million from $600 million that he expected from diamond sales.
President Robert Mugabe indicated early last year that he would want to see one or two mining firms operating in Marange to improve transparency.
Although the integration was initially meant for mining companies operating in Marange it was later extended to include DTZ-OZGEO and Murowa Diamonds.
Rio Tinto used to own a 78-percent stake in Murowa, but exited the country last June.
Harare would have a 50 percent stake in the consolidated firm while the diamond companies would share the remaining equity.
State-owned daily, The Herald quoted mines minister Walter Chidhakwa as saying last July that companies not happy with the consolidation proposal were free to cease their operations in Zimbabwe.
"I have made a strong plea to the companies, resistances here and there, uncertainty here and there. But I want to communicate that we are not stopping," he said.
"Where we are now is that as 50 percent shareholders through ZMDC we have a right to call for an extra ordinary general meeting. We have called for EGMs and we have invited our partners to the EGM.
"We want them to take a position and tell us whether as companies they will go ahead. That is the commercial route. The companies will go in and vote and come up with a position. These are commercial mechanisms.
"If any company decides not to sign up for the consolidation, government will use the legal route. But commercial decisions by companies do not have the effect of changing government policy…“
The minister reiterated his position at the just ended Zimbabwe mining indaba in Harare that the streamlining of diamond mining operations was going ahead and those not willing to “obey” the country’s laws and policies would be pushed out.
However, a prominent local lawyer said at the same gathering that the planned forceful consolidation of diamond mining operations in the country was a recipe for disaster and tantamount to “shooting ourselves in the foot”.
“A merger is difficult; it is more difficult to put together a merger than a marriage. In a marriage when trouble comes, you can kiss your spouse and make up,” said Scanlen and Holderness senior partner Sternford Moyo.
“You [will not] go around kissing your partners, especially diamond miners”. Moyo said forcing miners into a marriage of convenience would brew trouble. “A forced merger is therefore worse than a forced marriage,” he said.
“It is generally desirable to have corporate approvals when putting together any transaction and were you don’t get the corporate approvals and there is no consent by the investors, the likelihood of trouble is very, very high.”
Moyo said if Harare’s objective was to strengthen weak diamond companies in the country, it would not achieve much.
“If the objective is to strengthen weak companies I can assure you that weak plus weak equals [double weakness]. You are not going to resolve the problem at all, you are actually going to compound the problem,” he said.
Little purpose
A member of parliament for Zimbabwe’s opposition party, the Movement for Democratic Change (MDC) also said last August that the planned consolidation of the country’s diamond mining companies in Marange was of “little purpose”.
Eddie Cross, an economist, said although less was known about the remaining deposits at Marange, it was believed that a sheet of agglomerate across much of the site was estimated to contain 9 billion carats of raw diamonds.
He said the agglomerate, which was the “source” of the alluvial diamonds that are now exhausted, was a very difficult system to mine and extract the diamonds.
“All companies on Marange have tried and failed. Anjin, in particular, has tried to break the technical barriers, but failed. The original owners of Marange, ACR, claim that only Rio Tinto of London and De Beers have the capacity to mine the agglomerate,” said Cross in an opinion published in the local media.
“If that is the case, there is little purpose in bringing all four existing mining companies together with the ZMDC in an attempt to form a local Debswana and exploit the diamonds on site.”
He said as stated in a recent audit reports, none of the four companies operating in Marange had any financial resources left.
Mbada and Marange Resources had combined debts of $74 million and none had the technology needed, said Cross.
“Surely, it’s time to go back to sanity, pick up the idea mooted first by ACR and form a joint venture with De Beers and then join in with Botswana in a joint marketing and processing venture which will dominate world diamond trade for many years to come,” he said.
“This would boost state revenues and create the capacity to deal with our debt problems and start a long-term process of economic activity that could lift all Zimbabweans out of poverty.”
Apart from the arguments put across by Moyo and Cross, what is also interesting about the proposed streamlining of diamond operations in the country was government’s failure to explain how it would incorporate future diamond players in the country.
Hypothetically speaking, if, for instance, Alrosa enters Zimbabwe and is successful to find an economical kimberlite, how is it going to operate in the country given that Harare wants everyone to come under one huge umbrella?
The government had been arguing that Botswana had done the same (streamlining operations) and they want to the same.
Yes, Botswana engaged De Beers and together, through their joint venture company, Debswana, produced the bulk of the country’s diamonds, but the reality was that the country also licenced private companies to prospect and mine diamonds in the country.
These included Botswana Diamonds (working together with Alrosa mainly in Orapa), Lucara Diamond, Kimberley Diamonds and Gem Diamonds.
Having stated that what needs to be interrogated is whether it is feasible to integrate companies such as DTZ OZGEO and Murowa Diamonds, who invested a lot in explorations and constructing plants with miners in Marange, who didn’t do any exploration in Marange, as the government admitted?
In my humble opinion, dear reader, the answer is a big, fat no.
It therefore behooves Harare to leave Murowa and DTZ OZGEO out of this consolidation as initially suggested.
If true that alluvials have depleted in Marange then let these miners, if not a few come together (leaving others on the wayside) and go deeper on their own rather than seek to harvest through the back door where others have invested on their own over the years.
It is such decisions that continue to portray Zimbabwe in a bad light, unnecessarily for that matter.
Officials need to rethink this move.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
