Financial Transparency Coalition

This Valentines Day, Global Witness is publishing a report raising concerns that diamond purchases may help fund the Zimbabwean military. The report, Diamonds: A Good Deal for Zimbabwe? reveals that several directors of one of the largest mining companies operating in Zimbabwe’s controversial Marange diamond fields are drawn from the Zimbabwean military and police, and highlights the risk that off-budget funding of the security sector could be used to finance violence in any future election.

The report also reveals that 25% of another diamond firm has been given to a company linked with a man widely reported to be President Mugabe’s former personal pilot, and which has an opaque company structure based in tax havens.

“Zimbabwe desperately needs diamond revenues for health and education services, not AK 47s and flash cars for the elite,” said Nick Donovan, senior campaigner at Global Witness, “Zimbabwe must ensure that diamond mining companies are not used as an off-budget cash cow by ZANU PF loyalists in the military and police. If the next election is accompanied by violence there’s a real risk that any bloodshed will be funded by diamond revenues.”

In 2008, the Zimbabwean army took control of the Marange diamond fields using troops and helicopter gunships, killing and wounding many small scale miners in the process. Since then diamond concessions have been allocated to several companies in questionable circumstances.

The report profiles two such companies, Anjin Investments and Mbada Diamonds:

• Anjin Investments claims to be the world’s biggest diamond miner. Anjin is a joint venture between an obscure Zimbabwean firm called Matt Bronze and a Chinese construction company. Anjin’s Zimbabwean board members include senior serving and retired military and police officers, and the Permanent Secretary at the Ministry of Defence.
• Mbada Diamonds. Global Witness’s investigation reveals the company has a complex structure, with associated companies located in secrecy jurisdictions including Mauritius, Hong Kong, British Virgin Islands and Dubai.

“Corporate anonymity and the use of secrecy jurisdictions can be used to hide the true beneficiaries of business deals and have the potential to conceal corruption, tax avoidance or off-budget government spending. The Zimbabwean Government and Mbada should immediately publish all contracts and details of revenue flows to allay such fears,” said Donovan.

The Kimberley Process (KP), the intergovernmental diamond certification scheme, recently approved unlimited diamond exports by Mbada and is considering giving the same endorsement to Anjin. Over the past three years the scheme, which was set up to stop the trade in blood diamonds, has failed to address state-sponsored violence in the Marange diamond fields and resisted calls for reform. Global Witness left the KP in December 2011.

“Given the failures of the KP the diamond industry urgently needs to implement a system of ‘supply chain due diligence’ in order to give consumers the confidence to buy diamonds without any risk that they fund human rights abuses,” concluded Donovan.

Global Witness is recommending that the Zimbabwean Government should:

• Pass legislation that bans serving members in Zimbabwe’s security sector from exerting any control over mining companies – including being the beneficial owners of subsidiaries of companies operating in the country’s sector.
• Immediately audit every concession granted so far in Marange and publish details of the beneficial owners of Mbada and Anjin.

/ Ends

Notes to editors:

Contact:  Nick Donovan +44 (0)772 0972 392 or Andrea Pattison +44 (0)7970 103 083

1. A copy of the report is available on the Global Witness website:http://www.globalwitness.org/library/diamonds-good-deal-zimbabwe

2. The Zimbabwean members of Anjin’s Executive Board are:

• Mr. Martin Rushwaya, the permanent secretary in the Ministry of Defense;
• Mr. Oliver Chibage, a commissioner in the Zimbabwe Republic Police (ZRP);
• Ms. Nonkosi M. Ncube, a commissioner in the ZRP;
• Mr. Munyaradzi Machacha, a ZANU PF director of publications;
• Mr. Mabasa Temba Hawadi, a director of Marange Resources (Pvt) Ltd, a subsidiary of the ZMDC.

The non-executive board members are:

• Mr. Morris Masunungure, a current or retired officer in the Zimbabwe Defence Forces (ZDF);
• Mr. Romeo Daniel Mutsvunguma, a retired Colonel in the ZDF alleged by Human Rights Watch to have participated in violence in 2008 (see box below).

3. Mbada was given a diamond mining concession in 2009 in questionable circumstances.  It is chaired by former Air Vice Marshal Robert Mhlanga, a prosecution witness in the 2003 treason trial of then MDC opposition leader Morgan Tsvangarai, and widely reported to have been President Mugabe’s personal pilot. Mbada was a 50:50 joint venture between the Zimbabwean state mining company and Grandwell Holdings, registered in Mauritius, but owned by Reclam, a South African scrap metal company.  In the last financial year 50% of Grandwell was passed to Transfrontier, which has an opaque company structure based in secrecy jurisdictions. The beneficial owners of Transfrontier are unknown. However Global Witness research reveals the firm’s connections to Mr. Mhlanga.

4. The Kimberley Process (KP) is a government-to-government certification scheme for rough diamonds set up in 2003 to prevent diamond-fuelled conflict and human rights violations.  Global Witness left the KP in 2011 due to its reluctance to reform and successive failures over Zimbabwe, Cote D’Ivoire and Venezuela. The KP does not address human rights abuses committed by states rather than rebels and is silent on issues of military ownership and revenue flows.