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What you need to know about new Zim diamond policy

17 december 2018

Zimbabwe recently announced its long-awaited new diamond policy, which limited diamond exploration and mining in the country to only four companies.

The state-owned Zimbabwe Consolidated Diamond Company (ZCDC) and Murowa Diamonds, which are currently mining diamonds in the country would be joined by two unnamed new players, to make up the four.

Mines minister Winston Chitando said Harare settled for only four players for easy monitoring of the mining and selling of diamonds, according to The Herald.

Although the two were not named, he was also quoted by Reuters last week as saying that Zimbabwe would allow De Beers and Vast Resources to explore for diamonds in the country.

Vast, which teamed up with Botswana Diamonds, had exclusive access to key diamond concessions in Marange through an agreement with a community organisation.

With De Beers not showing interest in Zimbabwe, speculation was rife that Anjin would bounce back given reports last September that Harare had bowed to pressure from Beijing to allow the partly Chinese-owned diamond mining firm, to resume mining operations in Marange.

Anjin was jointly owned by Chinese Anhui Foreign Economic Construction Company and Matt Bronze — an investment arm of the Zimbabwe Defence Forces.

Foreign control

Zimbabwe amended its empowerment law last March, which scrapped the 51/49 threshold in the extractive sector and other sectors of the economy.

The indigenisation law remained intact concerning the platinum and diamond sectors.

However, the new diamond policy brought in a relief to international investors as it also empowered government to accept foreign control of a diamond mine.

“[This is] subject to submission of satisfactory submissions and due diligence, that all rough diamonds produced from all diamond mining operations shall be submitted to the Diamond Value Management Centre, to be established by the ZCDC for cleaning, sorting and valuation, save for Murowa Diamonds,” Mangaliso Ndlovu, who was the acting information minister, said at the time.

“Government, through ZCDC, shall control 46 percent and the Local Company Trust – the 5 percent indigenous partners of any foreign investor who intends to undertake diamond mining activities in Zimbabwe,” he said.

The new diamond policy, said Ndlovu, would also see private players participate in value-addition after cleaning and sorting of diamonds upon obtaining the necessary approvals.

Questions begging answers

The policy also allowed any other entity or person with diamond mining title to approach any one of the four approved companies for joint venture agreements.

So, should one choose to enter into a JV with one of the unnamed companies, does it mean that ZCDC would still be entitled to a 46 percent stake in that JV?

Will the 5 percent stake also go to the Local Company Trust and have the balance shared between the investor and the diamond company?

Does it also mean that if one engages Murowa, which currently operates independent of ZCDC, the state won’t be involved in their operations?

These are questions that the policy and government officials should make clear.

It is my submission that since diamond exploration was a very expensive exercise, Harare should have allowed anyone interested to do so without roping in ZCDC.

If Murowa had been mining diamonds without government involvement, surely some few companies should also be allowed to do the same.

In Botswana, the government has a 50 percent stake in Debswana, while the remaining stake is owned by De Beers.

Debswana produces the bulk of the country’s diamonds, but Botswana also allows private players such as Lucara Diamond to privately mine diamonds.

All they simply do is gather their tax and royalties.

Companies such as Pangolin Diamonds and Botswana Diamonds also have diamond exploration permits in the country without government demanding involvement in their projects.

Zimbabwe should have simply opted for such ownership structures rather than to burden ZCDC with high exploration budgets.

Arguing that four companies will help bring transparency and monitoring operations was not convincing at all.

It is the fight against corruption, opaqueness and bad governance that will bring success, not an attempt to cap the number of diamond exploration and mining companies in the country. 

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished