Making diamonds sparkle for sustainable local economic development

Making diamonds sparkle for sustainable local economic development

By Richard Ncube and Mukasiri Sibanda
If Zimbabwe is to pull herself out of the deep-rooted socio-economic hardships, part of the solution lies with good management of mineral resources. Inescapably, heeding lessons from Marange diamonds debacle, for instance, is key to unleash the country mineral wealth potential.

It is a known fact that despite having a vast reserve of diamonds, Zimbabwe has not benefited much from same. This inspired the Zimbabwe Environmental Law Association (ZELA) to organise a one-day multi-stakeholder workshop themed “Making diamonds sparkle for sustainable local socio-economic development.”

The workshop is being held today, 26 February 2019, at Sky View hotel in Mutare. At least 60 people from different stakeholder groupings are expected. Stakeholders include relevant government institutions, community-based organisations (CBOs), civil society organisations (CSOs), Faith Based Organisations (FBOs), Parliament, media and industry.
Essentially, stakeholders are expected to share and reflect on their various experiences on fighting the Marange diamond curse. Many meetings have been convened before. However, through a multi-stakeholder approach, ZELA strives to present a unique platform which collectivises diverse views from stakeholders. A move necessary to co-create strategies for following the diamond money to modernise schools, clinics, roads, water and sanitation.

Targeted government institutions include Zimbabwe Consolidated Diamond Company (ZCDC), Mineral Marketing Corporation of Zimbabwe (MMCZ), Mutare Rural District Council (MRDC), and the Environment Management Agency (EMA). ZCDC is expected to share perspectives on development of the diamond mining industry in Mutare – diamond output, employment and skills development, tax contribution, community enterprise development, corporate social responsibility, and environment management.
MMCZ is supposed to share information on marketing of diamonds (by volume and value), valuation of diamonds, beneficiation and value addition, and curbing diamond leakages. Experience sharing on hinging sustainable local socio-economic development on diamond mining activities will be led by MRDC. The role of the Community Share Ownership Trust (CSOT) in the promoting of living standards will be explored. Last year (2018), Marange Zimunya CSOT received US$5 million from ZCDC. EMA will speak on environment management issues, what has worked, what has not worked, and what must be improved.

One of the most vocal, and arguably effective parliamentary portfolios in the land is the parliamentary portfolio on mines. Over the years the committee has generated reports and recommendations on diamond issues in Marange. Its concerted effort has however not been favoured with a positive response. Zimbabwe is still grappling with issues of accountability and transparency in this sector. We therefore expect the Parliament, getting into the workshop to unravel the crux of its work, challenges and proposed solutions.
Litigation over the years has been used as a strategy by ZELA and other public interest institutions to protect and promote the realisation of community human rights in the Marange area. There are several both reported and unreported cases in the diamonds sector in Zimbabwe. This workshop seeks to educate and raise awareness among the participants and delegates on the use of litigation as a tool of change to achieve social and economic justice. The workshop will also present an opportunity to the participants to evaluate the effectiveness of litigation as a strategy.

The major stakeholder in this whole discourse are the communities in which diamond mining activities are taking place. In the ordinary scheme of things, communities are expected to benefit from the mining activities in their localities. A development that is supported by Section 13 (4), which compels government to put in place mechanism to ensure communities benefit from resources in their localities.
Be that as it may, the communities have experienced relocations and evictions over the years. The workshop will therefore endeavour to hear from communities on what has been some of their challenges in this diamond rich region. Further, the communities are expected to share their experiences with the other invited stakeholders and ask for clarifications if need be on some of the issues that are going to arise from the workshop.

One of the expected major highlights of the workshop is an International perspective to the discourse. The workshop will scrutinise the role Kimberly Process Certification Scheme (KPCS) to enhancing sustainable local economic and social development, and the promotion and protection of community rights. Shamiso Mtisi, the global coordinator of civil society coalition in KP will facilitate a discussion with communities, helping to unravel strength and weaknesses KPCS and to explore was of making the scheme responsive to community voices.
Finally, conversation on opening artisanal and small-scale mining (ASM) activities in the diamond sector will held. The nation is losing because of criminalising artisanal diamond mining activities in Marange alluvial diamond fields. Conflict between ZCDC and artisanal mining is devaluing sustainable impact of diamond mining activities. Now that ZCDC has warmed up to working with artisanal diamond miners, it is important for communities come up with strategies to pile pressure on government and ZCDC on recognising artisanal mining. KP, just like Africa Mining Vision (AMV), recognises that artisanal diamond mining is an integral component of the mining sector.

Parliament’s visit to the Chiadzwa/Marange diamond fields.

Where is the missing $15 billion from Marange diamonds? This is an eminent question that is likely to be asked in any public discussion on the Marange diamonds. A state owned enterprise, the Zimbabwe Consolidated Diamond Company (ZCDC) was created under the guise of promoting greater transparency and accountability in the management of Marange diamonds. The 8th Parliament of Zimbabwe through the Portfolio Committee on Mines and Energy (PCME) is one of the stakeholders that have sought to hold the government and ZCDC accountable.

Public hearings have been conducted at Parliament targeting the ZCDC and its parent the Ministry of Mines and Mining Development (MMMD). Currently, ZCDC is mining concessions that were previously held by Marange Resources and Diamond Mining Company (DMC). ZCDC has not been able to start mining operations in diamond concessions owned by Mbada diamonds, Anjin and Jinan due to a February 2016 contested consolidation of diamond companies which has since spilled into the courts.

Arguably, the role of Parliament as a critical stakeholder in the governance of mineral resources has been a contentious one among civil society and development partners. Of course, Zimbabwe’s challenging political economy where the executive has a well-documented history of whipping Parliament into line is the fodder which many critics use. The PCME has however, been handy in some instances. The widely acclaimed Chindori Chininga Report (October, 2013) on Marange diamonds is a case in point.

To gain first hand appreciation of what is happening in Marange after the contentious consolidation of diamond mines, the PCME, with the support of the Zimbabwe Environmental Law Association (ZELA) visited Marange and Arda Transau on 13 and 14 January 2017. Parliament had to get clearance to conduct the field visit. Regrettably, the clearance constrained the hand of PPCME to interact with the affected community members and the workers.

The tour commenced with a meeting between the legislators, journalists and the ZCDC management and staff at the ZCDC Boardroom at Chiadzwa. The team went through safety and security presentations from the ZCDC Head of Security.

The ZCDC mining processes are divided into portals. The first port of call for the parliamentarians was Portal Q, which is the area that was formerly mined by DMC. There the participants witnessed earth movers and Lorries extracting the ore for transportations to the mining processing plants. The plants themselves are not connected to the national power grid, hence they use diesel powered generators. The ZCDC management indicated that they were working towards the connection to the national grid. They said they were using up to 20,000 liters of diesel per day to run generators to power the mining processes. This is not desirable both for feasibility reasons and for environmental considerations especially huge carbon imprint of such an operation. ZCDC indicated that ZESA was stonewalling their efforts to get connected to the power grid.

Most of the equipment being used by ZCDC is on a ‘for hire’ basis, which is an expensive move for the company. There were questions raised about the sustainability of depending on hired machinery instead of purchasing own equipment. Members of the PPC expressed concern that equipment hiring is prone to corruption, especially if there is no oversight over procurement procedures and systems.

There were various issue updates that surrounded the tour. For instance, the acting ZCDC CEO Ridge Nyashanu took the legislators through the mission, vision and core values of the ZCDC Company. He also reiterated the challenges facing the company, namely the court proceedings. On top of that there seemed to be challenges in raising capital, having to hire expensive equipment, water shortages, high security costs, legacy issues as well as absence of a reliable skills base.

He also indicated those mines that had not been secured by ZCDC due to court challenges were being protected by the Zimbabwe Republic police (ZRP) Support Unit under an operation code named “Operation Chengetedzai Upfumi”. Procurement contracting is needed to prevent corruption, inefficiencies and leakages of resources which have impacted on the profitability of ZCDC’s operations. Ultimately, accruable benefits to the state such as corporate income tax and dividends will be hurt by corrupt procurement practices.

In terms of geological challenges, the company was yet to identify the kimberlite pipeswhich would be the actual source of the diamonds. At the moment there is only alluvial mining taking place at the Chiadzwa/Marange diamond fields.

Prof Gudyanga who is both the Permanent Secretary to the Ministry of Mines and Mining Development and an ex-officio Chair of the ZCDC gave an update on the status of ZCDC before the tour. He highlighted some of the challenges that were being faced by the company.

Among the challenges were the legal challenges faced by the company were as follows:

* Legal Challenges: ZCDC faced legal challenges from companies who were operating the mines before their licenses failed to be renewed by the Minister of Mines, Hon. Walter Chidhakwa in February 2016. ZCDC had already won court cases against DMC and Mbada Diamonds. However, there was still an outstanding challenge from Anjin and Jinan. Through bilateral discussions held between the Zimbabwean and Chinese governments, Anjin and Jinan are expected to drop their court challenge.

It is remarkable to note that government has sought the alternative dispute resolution route aside from litigation to resolve the disputes around diamond mining claims. The court process by nature is long, costly and can rapture relationships with investors in this case. This is the route that should have been pursed diligently from the outset. Notably, the protracted legal disputes have caused a sharp drop in diamond production which has a telling effect on foreign currency shortages. Diamond export earnings could have eased the foreign currency crises that is hurting socio-economic development. Already, the Zimbabwe Medical Association (ZMA) has issued a stress call on low stock levels for essential drugs caused by foreign currency shortages.

* Relocations of Villagers from mining areas: ZCDC announced the intention of completing the relocations of people from the mining areas. However, this was said to be hampered by lack of financial resources as the company was just operating two mine portals.

However, a relocation plan must be put in place, an open plan with clear targets to allow communities to monitors the relocation exercise. The ideal scenario is that relocations under Free Prior Informed Consent (FPIC) should precede mining activities. However, it looks like ZCDC is looking to raise funds for relocation from the proceeds of mining activities. Potentially, this might escalate community rights violation if cash flow challenges are experienced and from other competition priorities like capitalization.

* Employees There were plans for former employees of the previous diamond mining companies to be absorbed into ZCDC. This was pending the outcome of the ongoing legal proceedings.

There is need for disclosure of the numbers of employees that were affected by the consolidation and the total debt ZCDC has accrued as a result. It will be interesting for CSOs to carry out a study focusing on socio-economic impact of consolidation focusing on affected workers to show the human cost often overshadowed by economic considerations

* Diamond Exploration The mining taking place was mainly for alluvial diamonds. A huge investment is being made by ZCDC towards geological surveys and mapping underground pipes.

It is clear that ZCDC is facing capitalization challenges. Given the high costs associated with exploration, it is hard to see a situation where meaningful diamond exploration of diamonds can be undertaken by ZCDC. Therefore, ZCDC must prioritise the engagement of a sound technical and financial partner to explore and exploit diamonds in Marange. .

* Consolidation and ZCDC’s legal status The permanent secretary explained that there is a misconception that ZCDC is an initiative to consolidate the diamond companies that were operating in Marange. Rather, the consolidation process refers to the mines. It was also explained that ZCDC was registered under the Companies Act (Cap 24:03).

On the denial by Prof Gudyanga that ZCDC was neither a successor company to neither the previous diamond miners nor a consolidation of their business, there arises many questions about the real status of the company. The absence of an act of parliament makes it questionable as to what sort of a parastatal it is. Furthermore, if it is a private company, then there will be questions over the way it got the license over the diamond, which are supposed to be strategic for the economic development of the nation.

* Production statistics ZCDC’s annual diamond production for 2016 stood at 963,000 carats against the targeted production of 1.3 million carats. In 2015, diamond in Marange stood at 2.3 million carats. This was caused by ZCDC’s failure to mine diamond concession owned by Mbada, Anjin and Jinan due to the legal disputes.

2016, diamond production in Marange fell by 59%, from 2.3 million carats in 2015 to 953 000 carats in 2016. Considering the peak diamond production of more than 12 million carats in 2012, the Marange diamond wealth now ominously looks like a squandered opportunity. ZCDC is not living up to its promise on improving transparency and accountability. As an example, diamond production statistics are not disaggregated to show gem, semi-precious and industrial diamonds. Disclosure of disaggregated diamond production data is very important as high valued gem quality diamonds are highly susceptible to theft, smuggling and undervaluation.

* ZCDC’s expansion plans The company was trying to optimize production at the mines sites which it currently operates. Then there were plans to start mining at the Mbada and DTZ claims. In terms of capitalization, the company was working towards purchasing equipment, refurbishments as well as getting connected to the national power grid instead of using diesel fueled generators for power.

* 5.8 Management of ZCDC: Almost 90% of the management of ZCDC are in acting capacity for almost half a year. This does not build confidence among the team in executing the mandate of the organisation. Legislators also observed that the Secretary of Mines was domineering throughout the entire site visit and there was no sense of independence by the management team to make decisions or respond to questions raised.

* Security of diamond: Another key issue shared concerned security of the diamonds. ZCDC was developing a product tracing system that will track the diamonds from the mine to the sorting house. There was also remote monitoring of production processes with different security teams expected to produce occasional reports separately from each other. There were also plans for the use of drones to monitor the mining and production processes.

*CSR and Community Enterprise Development: Another key issue shared concerned security of the diamonds. ZCDC was developing a product tracing system that will track the diamonds from the mine to the sorting house. There was also remote monitoring of production processes with different security teams expected to produce occasional reports separately from each other. There were also plans for the use of drones to monitor the mining and production processes.

* Security of diamond: Another key issue shared concerned security of the diamonds. ZCDC was developing a product tracing system that will track the diamonds from the mine to the sorting house. There was also remote monitoring of production processes with different security teams expected to produce occasional reports separately from each other. There were also plans for the use of drones to monitor the mining and production processes.

* Security of diamond: Another key issue shared concerned security of the diamonds. ZCDC was developing a product tracing system that will track the diamonds from the mine to the sorting house. There was also remote monitoring of production processes with different security teams expected to produce occasional reports separately from each other. There were also plans for the use of drones to monitor the mining and production processes.

On the second day, the Committee on Mines and Energy had an opportunity to visit the homesteads that were constructed by the former companies at Arda Transau. A standard house comprises of a lounge, 3 bedrooms and a separate kitchen. A clinic, a primary and secondary school were built for the community. ZCDC was in the process of relocating 23 families, with recent relocations effected in December 2016. According to ZCDC, there are about 4 032 households that need to be relocated, representing 32 villages. During the tour the Committee managed to interact with some members of the community. There were their major concerns:

i. Housing defects: Some of the home owners were experiencing housing defects such as cracks on the floors and walls. This was attributed to poor workmanship and the fact that some of their houses were constructed on wetlands.

ii. Relocation Allowance/Disturbance Allowance: There were complaints by some of the families that they did not receive their relocation allowance, which was supposed to be given on an individual basis rather than per household. Most of the households are in polygamous relationships.

iii. Inadequate Space for Expansion: Complaints were raised that children who had reached the age of majority or had married were failing to get space to build their own homes. The half-hectare land allocated to these families was inadequate to address this challenge.

iv. Unemployment: The youth complained they had no sources of livelihood in the area. This was attributed to lack of capital to start income generating projects.

v. Right to Water: Some of the residents complained that portable water had been disconnected to their homesteads. Each household has to pay $8 per month but due to lack of sustainable livelihoods, very few households have capacity to pay these bills. For households that are not connected to tap water they are forced to walk long distances to the nearest source some of which are not safe for drinking.

vi. Lack of Houses: There are some families who were relocated but have not yet been allocated their houses. There were allegations that there are some people were are renting out their houses to persons from elsewhere other than Marange.

vii. Compensation for Property: A complaint was raised by a former shop owner that he had not been compensated for loss of property which he left behind in Marange. It was also highlighted that were no agreements on the valuation of properties that the families were forced to leave behind.

viii. Agricultural Inputs: The families requested assistance under government programs such as the Presidential Input Scheme, to enable them to engage in meaningful agricultural activities.

ix. Lack of Interface: The community expressed disappointment over government agencies and the mining company who were taking long to address their concerns. Usually there was no feedback on measures being taken to address these challenges.