Zimbabwe: Let's Ensure Diamonds Benefit Nation

Miners for diamonds in Zimbabwe. The country was recently targeted for a possible ban on marketing its diamonds.
Originally uploaded by Pan-African News Wire File Photos

Let’s ensure diamonds benefit nation

Zimbabwe Herald

AS auctions of Zimbabwe’s Marange diamonds started yesterday, the Government and the nation face a stark choice, and must make this choice very quickly.

The riches generated from these diamonds can be used to make a few well-connected individuals fabulously wealthy or the money can be used to balance a far more lavish budget than the State has been able to finance up to now.

There appears, at the top anyway, little argument.

President Mugabe and Finance Minister Tendai Biti have made almost identical statements that the cash raised from diamonds must go to the State, and must never be used to enrich individuals, even if these people are Zimbabweans.

Such agreement across the political spectrum should mean that the choice is easy, but it would be unwise to underestimate those who wish for great riches at the expense of the nation.

There is still disagreement over what happened to the cash raised from the first sales and everyone knows that fortunes were made from Marange in the early days of the field, when illegal mining and smuggling were rife.

With estimates that at least US$1 billion can be raised every year from the field, one of the best alluvial fields in the world, Zimbabwe could readily raise Government spending by 50 percent.

That sort of money would allow Minister Biti to pull civil servants out of total poverty with a substatntial pay rise (although their salaries would still be low) and, at the same time, start making significant inroads into fixing State education and health.

In fact, the diamonds could replace the hoped-for foreign aid that never arrived, and do a bit more.

The extra spending by the State would boost the economy, creating large numbers of other real jobs. We only have to look at what most of the world did in the last two years when faced by recession; they spent their way out of it.

A boosted economy will not just benefit a large number of Zimbabweans and Zimbabwean companies, it will also benefit the State as tax revenues rise.

So the Government budget can grow some more with that extra income, as well as with the direct diamond income.

We have the fine example of two of our neighbours, Botswana and Namibia, who have both turned diamonds into national wealth. Botswana has moved from being just about the poorest country in the world to one of the better developed African countries using its diamonds. And Namibia, a desert, has achieved standards of living close to those of South Africa by the same route.

Of course, the mining companies that scoop up and sort the diamonds must be allowed to make a fair profit. Their expertise and investment in the right equipment cannot be used for free.

There have been suggestions that diamond wealth could be split 20-80, with the larger share going to the State. The exact split may have to be varied over time, with the companies getting more when diamonds are hard to mine and getting less when they are easy to find.

Scooping up alluvial diamonds, for example, is not that hard. But one day we will find the pipes that were eroded to produce these alluvial diamonds and mining those will be more expensive, but still very worthwhile.

But whatever the actual fair split might be, we are sure that the majority of the wealth will always go to the State, fulfilling the spirit and letter of the laws on indigenisation.

It should not be hard to find the smallest percentage for mining costs if Zimbabwe used an open and transparent tender system to select its technical partners. We should also consider very carefully the advice given to us already to choose just one partner, rather than have a multitude of companies on the field. This would make policing and auditing much easier.

Minister Biti’s desire to see all proceeds of diamond sales going into a State account also makes a lot of sense. There would be no argument then over just what was raised. The State would then pay the mining partner its agreed fee.

We will probably need some legal changes very quickly.

Zimbabwe, like most gold-producing nations, bans private ownership of raw gold.

Anyone can have jewellery, or coins or some other form of worked gold; but no one without a mining licence is allowed to own the stuff as it comes from the ground.

The reason for that law was obvious. It ensured that all gold was accounted for.

We need the same sort of law for rough diamonds, banning individual ownership of these.

Now that we can sell Marange diamonds for the highest possible price, by adhering to the minimum technical requirements of the Kimberley Process, we must move swiftly to sort out how the wealth will be shared and used, ensure that we get the best deal possible from mining companies using open and transparent selection procedures, and make the legal changes that are required.