Breaking News: How Zimbabwe Officials Looted and externalized US$15 Billion in Diamond Sales

WHILE real-life diamond heists are as dramatic as robberies we see in the movies — from the raiding of vaults at the Antwerp Diamond Centre in Belgium where US$127 million was stolen in 2003, to the US$107 million mugging at Harry Winston store in Paris, France, in 2008 — the looting of Marange diamonds in Zimbabwe has been as cinematic as any Hollywood blockbuster can get.

Elias Mambo/Obey manayiti

Former mines minister Obert Mpofu

Former mines minister Obert Mpofu

After months of complex investigation into what happened and is still going on at the Chiadzwa diamond fields, the Zimbabwe Independent, with the support of the Investigative Journalism (IJ) Fund, is unearthing new details showing how the country was robbed of hundreds of millions and possibly billions through a web of deceit, under-invoicing, fake invoices, false declarations, manipulation of the sorting and valuation process, exchange of parcels and illicit financial flows across borders, as well as corruption and patronage.

According to a recent United Nations Conference on Trade and Development report, between 1970 and 2008, a total of US$854 billion left Africa in illicit financial flows similar to those in Marange.

This comes as Mbada Diamonds, the biggest of the Marange operators, is imploding under the weight of debts and asset-stripping through auctions. Pungwe Mining (Pvt) Ltd and other creditors have laid siege on Mbada, whose machinery, equipment, vehicles and furniture is now being sold in a series of auctions, with two having been conducted in Mutare this week.

Pungwe is demanding its US$18 million pound of flesh from Mbada after obtaining writs of execution from the courts, although one senior official from the fallen mining giant says it owes the contractor only US$2,8 million.

Court documents show Pungwe obtained three writs with different sums of US$3 188 787,09 in May 2015, US$13 803 258,11 (May 2016) and US$1 337 102,21 in June, which adds to over US$18 million. Checks indicate that over US$2 million has been raised through the auctions by the sheriff and the money has gone to Pungwe. Other creditors are also hovering over Mbada like vultures circling a carcass.

One confidential document obtained by the Independent — which will carry a series of stories on Marange starting this week — demonstrates how the auction processes were manipulated, parcels returned and prices changed based on proceedings at the Dubai Diamond Sales Tender No. 1 from March 23-31 2014 held at Almas Towers, headquarters of the Dubai Multi-Commodities Centre.

This revelation came out of email exchanges between auctioneer Neil Haddock of Global Diamond Tenders (GDT) and former Marange Resources acting chief executive Mark Mabhudhu. The e-mails outline a series of examples where parcels were sold to bidders and later returned for re-valuation and re-bidding with prices knocked down dramatically.

“After all these transactional changes which occurred post the tender process, Marange Resources revenues nose-divided from US$4 351 760,58 to US$3 902 241, 07,” the document says. “This represents a significant reduction of US$449 519,51. The final price per carat dipped down to US$108,53/carat from the originally declared US$121,04/carat representing a 9,51% decline. This method of theft cost the country hundreds of millions of dollars”

Besides the manipulation of the process and prices of diamonds on sale, the document, which will be quoted in detail in stories to follow, also raised security concerns over the gems during tendering and bidding processes in Dubai.

Another document further shows controversy continues to swirl over 3,37 million carats, officially worth US$112 million, which were taken by Anjin Investments to China in 2012 after authorisation by Defence minister Sydney Sekeramayi, who was then acting mines minister although he was substantive State Security minister, under the guise of sanctions-busting. The Independent recently exposed the deal.

Pungwe also attached Mbada’s 12-seater Cessna 208 aircraft sold for US$980 000 through auction in August to Zanu PF MP and transport mogul Kenneth Musanhi.

Documents also show Gecko Namibia (Pvt) Ltd also subcontracted by Mbada to supply mining equipment, is demanding R200 million (US$13,3 million) from the local diamond giant, which is collapsing under a blitz of raids. There are also many other Mbada creditors, according to documents.

However, Mbada is being stripped of its assets despite a court order which says it must not be interfered with before a dispute over the consolidation of mines to form the Zimbabwe Consolidated Diamond Company and its cancelled licence is fully resolved.

Information obtained shows Mugabe had personally assured Mbada investors in private meetings that their money was safe and they would mine in perpetuity when they met him over their contract in 2009.

Details also show that contrary to the widely held perception that Mbada belongs to Johannesburg-based local tycoon Robert Mhlanga, the company’s private sector shareholders, grouped under New Reclamation Group (Reclam) of South Africa, do not include Mhlanga who was in fact appointed to represent government interests as its chairman after brokering the deal. A 2010 parliamentary committee investigation led by the late former minister Edward Chindori-Chininga raised a conflict of interest issue over this although Mhlanga has a different view on it.

Checks have shown that while fronted by Mhlanga, Mbada is owned by Marange Resources, in turn controlled by the state-owned Zimbabwe Mining Development Corporation, and Reclam’s Mauritian-registered subsidiary Grandwell Holdings.

Reclam, a leader in South Africa’s recycled metal processing industry, provided its 50,1%-owned unit Grandwell a shareholder loan of R306 million in 2010 (over US$30 million at the time) to set up Mbada. The key man in the Mbada deal was Johannesburg-based Reclam Holdings executive chair David Kassel, whom the Independent interviewed to shed light on the company’s origins and dealings. Apart from scrap metal business, Kassel had previously been involved in diamond and gold mining.

Government seized the Marange diamond fields from London-listed African Consolidated Resources in 2006 and set up separate joint ventures to form Mbada, Canadile, Anjin and Diamond Mining Corporation, among others. The Independent, which interviewed scores of diamond company executives, managers, shareholders, workers and stakeholders, as well as scrutinising documents, including banks statements, came across shocking stories of theft, bribery, kickbacks and payment of politicians and the broke ruling Zanu PF’s bills from the companies which operated at Chiadzwa.

This come at a time when government is prevaricating on the forensic audit into the affairs of the seven mining companies that were operating in Zimbabwe’s diamond-rich Marange area prior to a controversial consolidation exercise in February.

The seven companies which operated in Chiadzwa under 50-50 joint ventures with the government are Mbada, Anjin, Marange Resources, Diamond Mining Company, Kusena Diamonds, Jinan and GyeNyame.

Investigations show that another company, Alstopia Mining Limited, trading as Rera Diamonds and run by Joseph Sibanda (Rera), involved in the extraction, processing and sorting of diamonds, was booted out of the fields at exploration stage.

Rera, we can exclusively reveal, sought the help of South Africa politician, writer and cleric Frank Chikane — brother to Abbey Chikane, a founder chairman of the Kimberley Process Certification Scheme (KP) appointed in 2009 as the KP Process monitor for Zimbabwe — to secure political support and a US$12 million loan from a leading Canadian private merchant bank Forbes & Manhattan which focusses on the resource-based sector to commence operations in Chiadzwa.

Sibanda, a businessman with various other interests, yesterday confirmed roping in Chikane, but indicated it was through religious and not political networks.

Chikane was director-general of the presidency of South Africa under former President Thabo Mbeki who told President Robert Mugabe in 2012 he had evidence a senior Zanu PF minister had demanded a US$10 million bribe to facilitate a US$1 billion investment by ANC-linked investors.

Former mines minister Obert Mpofu was at the time accused by Canadile Miners boss Lovemore Kurotwi of demanding a US$10 million bribe to facilitate his company’s investment.

Kurotwi, who fought pitched legal battles with government over US$2 billion fraud allegations, repeats the accusation in his book The Rise and Fall of Chiadzwa.

Mpofu cancelled Canadile’s operating licence in Chiadzwa and allegedly seized US$10 million cash and diamonds worth US$150 million. The US$160 million, Kurotwi claimed in his book, has neither been accounted for nor returned since.
“Both the US$10 million in cash and the US$150 million in diamonds disappeared as soon as Mpofu kicked us out,”
Kurotwi says. “The cash and the diamonds have not been accounted for ever since. Everybody close to the case simply says ‘ask minister Mpofu’, whenever they are asked about the whereabouts of the cash and the diamonds.”

Mugabe in March added an alarming dimension to the Marange saga after he claimed that Zimbabwe got less than US$2 billion due to “smuggling” and “swindling” when the country earned about US$15 billion from diamonds, a US$13 billion variance.

While previous investigations by civil society groups, especially Partnership Africa Canada and Global Witness, estimated that US$2 billion could have been siphoned from Chiadzwa, the Independent mainly focussed on the methods of stealing.

The objective of the probe was to establish a fresh understanding and more profound insight into the background of the situation, the companies involved and how they were structured, organised and controlled; elite predation and how criminalised networks spanning political, security and business elites operated and creamed off Marange; market dynamics, production levels, sales, revenues and remittances of royalties and taxes to Treasury.

While the full scope of the plunder might never be known, interviews and documents obtained by the Independent show that there was manipulation of the processes, theft and outright looting, although certain material facts and figures came across as overstated and even exaggerated.

Our special investigation, whose exclusive findings we are serialising beginning today, will shed further light on the raging Marange saga and illuminate debate on the issue troubling the conscience of the nation.

To be continued.

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