#Zimbabwe lost $12 Billion in illegal diamond trading

ZIMBABWE has lost an estimated $12 billion through illegal trade involving multinational companies from rich countries involved in the mining sector here.

The amount siphoned off is enough to pay off the country’s total debt– estimated at just under $10 billion.

A new report, entitled Capital Flight, Natural Resources and Institutions in Zimbabwe and compiled by Zimbabwean researchers and academics, reveals that the multi-billion capital flight has taken place over the last three decades – largely through falsified invoicing.

According to the researchers, trade in the major minerals involves companies from Zimbabwe’s main trading partners, which include South Africa, Canada, Australia, UK, China and the US.

“Capital flight from Zimbabwe reached a record high of $3.1 billion in 2006. Evidence from the African Development Bank and Global Financial Integrity (2013) also shows that Zimbabwe has lost a cumulative $12 billion in the last three decades through illicit financial outflows ranging from secret financial deals and tax avoidance to illegal commercial activities,” says the report.

Furthermore, according to the Minerals Marketing Corporation of Zimbabwe (2014) the country is losing more than $50 million worth of gold every month through smuggling,” it adds.

Independent estimates last year indicated that gold leakages accounted for losses of around $ 800 million every month, a figure that has not been officially refuted.

Zimbabwe is endowed with abundant mineral resources that experts say could easily turnaround the economy, but their contribution to economic development has remained minimal.

The report says the mining sector, despite being touted Zimbabwe accounts for about 9 percent of the world’s diamond production, 6 percent of platinum and about 4 percent of palladium output.

The country is currently extracting around 30 different types of minerals, chief among them diamonds, gold, nickel and platinum, with minerals accounting for most of the exports.

“Most of the metals and minerals mined locally are for the export market. This therefore presents a fertile ground for mis-invoicing – given that most of the companies in the mining sector are foreign owned,” reads the report.

The research indicates that the companies involved in minerals trade have been under-invoicing their goods by bringing less capital into Zimbabwe and then exporting high value minerals to numerous destinations.

The offending companies declare a smaller amount of money they receive from exports than what is reported as imports by trading partners.

They have also been over-invoicing imports, whereby the companies have been accessing more locally available foreign currency and then taking it out under the pretence that it would be used to import goods and service.

The exporters report a larger amount of money they use for importing than what is reported by trading partners.

The report identifies corruption, dysfunctional regulation, weak enforcement of rules and money laundering as the main drivers of capital flight. It also blames the financial leakages on tax evasion, lack of transparency in trade transactions, high and persistent government budget deficits, excessive external borrowing, and political instability.

Canada, China, Germany, UK, Greece, Italy, US and Zambia are named as gateways to facilitate capital flight out of Zimbabwe. Italy recorded the highest capital flight from Zimbabwe between 2008 and 2013 while the highest illegal inflows came through Belgium.

The researchers also blamed President Robert Mugabe’s Look East policy for massive capital flight.

‘”Even the ‘friendly countries’ like China show capital flight from 2010. This might suggest that during the crisis period China was bringing unrecorded capital into Zimbabwe, but as the economy improved China was sending out money from Zimbabwe as illegal repatriation of profits,” says the report.

Developed countries like the US, Germany and Canada could have been used as routes through which money was illegally taken out. The report also notes that diamond export mis-invoicing was rife in trade between Zimbabwe and European countries, including the UK

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