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Ownership Issues and International Sanctions in Marange: The Case of Anjin

22 october 2012

Since the Kimberley Process deliberated that diamonds produced in the Marange fields in Zimbabwe meet the minimum standards required for trade, the focus of Zimbabwean and international media has moved away from violence in Chiadzwa and towards the identification of those companies operating in Marange and their ties with the Zimbabwean government. We shall try to analyze the reasons behind this shift with a particular focus on the case of Anjin, and identify the primary motivation in the unilateral sanctions regime imposed by Western countries, as well as possible effects of the use of unilateral sanctions against Zimbabwe on the Kimberley Process Certification Scheme and on the diamond market in general.

Why is the ownership issue so important? The case of Anjin Investments

In the last months, the most debated issue regarding the controversial Marange diamond fields was the one regarding the legal ownership the companies operating there. Marange hosts today four mining companies: Mbada Diamonds, the Diamond Mining Corporation (DMC), Marange Resources (formerly Canadile Miners) and Anjin Mining. According to the Zimbabwean law, all mining companies operating in the country must be at least half owned by a national entity. For this reason, Mbada Diamonds, the DMC and Canadile Miners were created through a joint-venture agreement between foreign investors and the Zimbabwean Mining Development Corporation (ZMDC), a company fully owned by the Ministry of Mines.

When in November 2011 the Kimberley Process Plenary Meeting deliberated that Zimbabwean Companies operating in Marange were allowed to sell their diamonds, many analysts were caught by surprise: the Kimberley Process adopts its decision by consensus - meaning that a motion is accepted only if no member opposes to it - and many influential members, such as the United States and the European Union had previously expressed serious concerns over potential human right abuses in Marange.

While the United States and the European Union did not oppose to the deliberation, in the following days they declared that all unilateral sanctions imposed on Zimbabwean entities and persons accused of undermining the democratic development of the country were to be applied against diamond mining firms. As for both the US and the EU the ZMDC was a nominated entity, Mbada Diamonds, Diamond Mining Corporation and Marange Resources were put under sanctions.

When KP monitors visited Anjin in November 2011 and asked for supporting documentation on the company they discovered that, contrarily to all other companies, Anjin was not related to the ZMDC, but to private Zimbabwean company named Matt Bronze. As Matt Bronze was not reported in any sanction list and the names of its beneficiaries were unknown, there was no legal basis to restrain Anjin diamonds from entering the US and European markets. It was at that point that making light on Anjin’s obscure corporate structure became a priority.

On February 2, 2010 the Ministry of Mines granted a 3,731-hectar concession in the eastern part of Marange to Anjin Investments. Anjin is a joint venture company incorporated by Chinese construction giant Anhui Foreign Economic Construction Group (AFECC) and Matt Bronze Enterprises (Pvt). AFECC already had a strong presence in the African Continent and was operating in Mozambique, Togo, Madagascar, Ethiopia and Mauritania.

In Zimbabwe, AFECC is building a military college equipped with swimming-pools, cinemas and an hospital in the outskirt of Harare. The Zimbabwean government managed to cover all construction expenses by obtaining a US$100-million loan from the Export-Import Bank of China, which in exchange asked Marange diamonds to be used as mortgage guarantee.

Because of this complicated thread of agreements (see Figure 1), many analysts hypothesised a strong involvement of the Zimbabwean Military in Anjin. Illations were accusations by exponents of the Movement for Democratic Change, which repeatedly accused Anjin’s revenues to be out of control of the Ministry of Mines. Figure 1 presents a visual analysis of Anjin’s network.

The illations could not be confirmed until Kimberley Process monitors Mark van Bockstael and Abbey Chikane visited the diamond processing plant in late 2011 and received a detailed description of Anjin’s board members that was later published by the NGO Global Witness in February 2012. Just by performing a basic internet search it was possible to determine that most of the Zimbabwean members of Anjin have a role in the police and military (Table 1).

While most of the Zimbabwean Members of Anjin have clear relations with the police and military establishment, none of them was included in the European Union and United States list of sanctions. This meant that there was no legal basis to prevent investors from buying diamonds produced by Anjin.

In June 2011, Global Witness published a second report sustaining that during a visit to the Zimbabwean registry of companies documents were found proving that Brigadier-General Charles Tarumbwa would have been listed as principal officer of Matt Bronze. No copy of such document was included in the report.

Charles Tarumbwa was included in the EU lists for his involvement in the campaign of terror that preceded the last elections in Zimbabwe. Proofs of his involvement in Anjin could lead to the imposition of sanctions on the company. In April 2012 Tarumbwa filed an appeal against the European Commission, which is now being reviewed.

With many clues but lack of direct evidence linking Anjin to any individual or entity whose activities undermine democratic institutions in Zimbabwe, the Chinese joint-venture is living in a limbo. While not officially imposing any sanctions, the American government preventively blocked a US$20 million transaction from a Belgian firm to Anjin in March. The European Union is moving cautiously while waiting for a sentence on Tarumbwa’s appeal, and this is irritating some of its members, led by the United Kingdom, which are pushing for tougher sanctions.

Conclusions

Controversies over the ownership of diamond mining companies operating in Marange and other areas in Zimbabwe are the direct result of a shift of focus: frustrated by the decision taken during the last Kimberley Process meeting, NGO’s are now pushing on the government of Western countries to prevent Zimbabwe diamonds from entering the market.

Unilateral sanctions could have a profound effect on the diamond business. From the political point of view, the use of sanctions could undermine the Kimberley Process, as its decisions are made irrelevant by the trade policy of single states. From the economic point of view, sanctions against diamond extraction giants such as Anjin and Mbada could rapidly produce a double price standard: while the flow of millions of carats from Zimbabwe will probably cause a price contraction on the world market, those countries which have sanctions in place could be able to maintain high prices by preventing the oversupply of rough diamonds.

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