Zimbabwe: Chinese cream off US$200 million
A new wave of "blood" diamonds?
Late last year, Global Witness announced it was withdrawing from the Kimberley Process "conflict" diamonds certification scheme - one it had helped establish.
The group's founding director, Charmian Gooch, specifically cited the scheme's endorsement of "unlimited diamond exports from named companies in the Marange region of Zimbabwe" as having "turned an international conflict prevention mechanism into a cynical corporate accreditation scheme". See: Campaign Group pulls out of 'failing' Blood Diamonds scheme
Now, two Zimbabwean government ministers have raised serious doubts about the legitimacy of the biggest company operating at Marange.
Anjin Investments, itself owned by the Chinese defence industry, controls 50% of the Marange diamonds and is allegedly in hock with a private company, Matt Bronze, operated by members of the Zimbabwean army.
Says a 22nd June 2012 report in The Independent (Zimbabwe): "[T]his means the [mine's] proceeds are going to the military which is averse to transparency and accountability."
According to Zimbabwe's finance minister, Anjin has paid nothing to the treasury from its Marange diamond revenues, thus depriving the country of an estimated US$200 million to date.
This is partly because the proceeds are being used to pay off a high-interest loan, secured by Zimbabwe from China's Export-Import Bank for construction of a National Defence College.
However, many Zimbabweans believe that Anjin has also been supplying diamonds directly to China in exchange for weapons which go directly to the Zimbabwean armed forces.
Fresh Global Witness accusations - and a dubious response
On Saturday 23 June 2012, Global Witness published a report accusing Zimbabwe's Central Intelligence Organisation (CIO) of receiving "off budget financing" from Sam Pa, a Hong Kong-based businessman.
Pa is said to be a business partner with Sino Zimbabwe Development, a diamonds, cotton and property company in Zimbabwe.
Global Witness also claims that 50% of Anjin's shares are owned by Brigadier General Charles Tarumbwa, the Judge Advocate General at the Ministry of Defence, acting through the Matt Bronze outfit as a front for the Zimbabwean military.
The UK human rights group has called on the international community to "investigate the activities of Sam Pa, Sino Zimbabwe Development, and Anjin Investments to see whether their actions justify imposing targeted sanctions, such as asset freezes."
Shortly after these allegations surfaced, retired Colonel Tsinga Dube, who heads up ZDI (named as holding a 40% stake in Anjin) declared that the state-owned company "had not even considered investing in Anjin".
However, Colonel Dube did not address claims, included in in Global Witness' report that, in fact, it is Matt Bronze which holds the army's strings (or vice versa) in the diamond enterprise.
Chinese cream off USD200m
By Tendai Marima
The Independent (Zimbabwe)
22 June 2012
THE Chinese are creaming off millions in hard currency from Marange diamond fields through an agreement which allows them to milk 90% of the revenue generated from the deal, depriving the country of more than US$200 million to date.
Deputy Mines Minister Gift Chimanikire has disclosed Anjin Investments, the biggest diamond company in Chiadzwa, is controlled by Chinese who own 50% equity and the Zimbabwe Defence Industries (ZDI) which has 40%. The remaining 10% is supposed to be owned by the government through the Zimbabwe Mining Development Corporation (ZMDC).
However, Finance minister Tendai Biti yesterday said ZMDC is not involved, suggesting the 10% Marange diamond fields is actually owned by a company called Matt Bronze controlled by the army.
The directors of Matt Bronze are not known, raising fears this could be benefitting individuals in the army, not the public. Since Anjin is a Chinese Defence Industry company, ZDI controlled by the army and Matt Bronze a military outfit, this means the company's proceeds are going to the military which is averse to transparency and accountability.
According to a compliance report drafted by the Kimberley Process Certification Scheme seen by the Zimbabwe Independent, Anjin mined 3 000 000 carats of diamonds between July 2010 and October 2011.
"At full throttle, the monthly production capacity may reach approximately two million carats for which a comprehensive production footprint has developed," the report says.
In an interview yesterday Biti said if Anjin was to operate at full capacity the company would produce two million carats valued at an average of US$80 per carat which could yield US$160 million a month. However, Biti said Anjin was not remitting anything to treasury despite creaming huge profits.
"They are not remitting, not even a single cent," he said.
Biti also gave a breakdown of the structure of royalties and taxes, showing Anjin is expected to pay 14% in corporate taxes (based on the net figure), 4% non-resident shareholders tax, royalties of 17% and also VAT.
This means Anjin is supposed to remit revenues covering the 50% shareholding (if the ZDI's 40% and the controversial 10% are added) and taxes, something which should have yielded more than US$200 million so far.
"Because it's a joint venture we are automatically entitled to 50%, so 50% plus taxes gives you the figure we are supposed to get (US$200 milllion). Our complaint is that ZMDC is not in there; it is this Matt Bronze company which is owned by the army," Biti said.
Anjin has not made remittances to treasury partly because diamonds are being used to pay off a high-interest loan from China's Export-Import Bank (Eximbank) to build a state-of-the-art National Defence College near Mazowe.
Zimbabwe entered into a US$98 million loan agreement with Eximbank on March 21 2011. The contract states the Chinese would fund and build the National Defence College.
At a 2% interest rate, Zimbabwe would repay in a series of 26 installments over 13 years, but only after a seven-year "grace period" has passed.
However, government ministers claim to be in the dark over how much is generated by Anjin to repay China's loan.
When the deal was initially presented to parliament in May 2011, MPs objected to its high-interest rates and the lop-sided structure of the loan which had greater financial benefit for the Chinese as lenders. However, after much heated debate, it was approved in a second parliamentary sitting in June.
Top government sources say diamond revenues from Anjin are also being used to pay for arms being imported from China. Zimbabwe buys arms from China.
Speculation is rife China is supplying Zimbabwe with arms in exchange for diamonds. Just before the 2008 elections, a Chinese ship loaded with arms was stopped from docking at the Durban port after protests by trade unions. The Anjin deal seems to be the new cover.
In an interview this week, Chimanikire said: "We are aware that there was a loan arrangement for the defence college that would be paid through Anjin's diamond mining and China would supply equipment."
Of the five diamond mining companies licenced to mine in Marange, Anjin is the biggest. It has seven shafts which amount to seven mines in one area.
Biti has blamed the underperformance of revenue collected this budget year on poor contribution by diamond mining firms, lamenting revenues of only US$30,5 million had been remitted to the fiscus between January and March, against a target of US$122,5 million.
Revenue collections for March 2012 amounted to US$287,9 million against a target of US$320,2 million, giving rise to a US$32,4 million shortfall which Biti said arose mostly owing to underperformance of diamond proceeds.
It is estimated Anjin mines seven million carats a year and with additional processing plants, it is expected to increase production to 10 million. However, the company's financial records remain a mystery, according to Chimanikire.
"Their records must be made available to the public; in many companies at the end of the financial year a dividend is declared to the shareholders and even a 1% shareholder is told how much the company made and what they will get. Speaking in my capacity as deputy minister of mining, there is no way Anjin could have recorded a loss," he said
Chimanikire further said diamond remittances were essential to the fiscus and companies like Mbada and Marange Resources are supposed to declare their dividends on a monthly basis because government needs the money.
Anjin has been at the centre of controversy since it began operations in Chiadzwa in early 2010. Zimbabweans on Anjin's board mainly comprise serving and retired members of the military and the police.
In its report, Diamonds A Good Deal for Zimbabwe?, international human rights group, Global Witness, warned involvement of the military and police in diamond mining "creates opportunities for off-budget funding of the security sector".
Chinese diamond mogul funding Mugabe's military: report
By Cecilia Jamasmie
26 June 2012
A Chinese magnate, benefiting from his access to diamonds in Zimbabwe, is reported to have ploughed $100 million into the country's Central Intelligence Organisation (CIO) to fund covert operations against the opposition, according to the latest report from pressure group Global Witness, published on Saturday.
The document, Financing a Parallel Government?, reveals that the CIO allegedly received off budget financing from a Hong Kong-based businessman at the same time that the CIO is alleged to be engaging in a campaign to discredit key members of Zimbabwe's opposition.
CIO members exercise joint control over Sino Zimbabwe Development, a diamonds, cotton and property company in Zimbabwe. Their partner is businessman Sam Pa, a prominent member of the Queensway Syndicate, a network of companies with a track record of negotiating opaque resource for infrastructure deals across the African continent.
The report also exposes how a Zimbabwean military lawyer owns half of Anjin Investments, the biggest diamond company in Zimbabwe's controversial Marange diamond fields, on behalf of Zimbabwe's Ministry of Defence.
"Given the violent reputation of the CIO and military, we fear that this money could fund human rights abuses during the forthcoming election," said Nick Donovan of Global Witness. "Off-budget financing of the security sector undermines Zimbabwean democracy by subverting civilian control over key organs of the state. The international community should investigate the activities of Sam Pa, Sino Zimbabwe Development, and Anjin Investments to see whether their actions justify imposing targeted sanctions such as asset freezes."
Information given to Global Witness by sources within the CIO suggests that Sam Pa provided funding and material to the organization as well as to Robert Mugabe's re-election bid, in return for access to Zimbabwe's diamond, cotton and property sectors.
One CIO document put this support at $100 million and 200 pick-up trucks. Two sources also told Global Witness that the money has been allocated by the CIO towards Operation Spiderweb, covert activities designed to discredit Prime Minister Tsvangarai, Finance Minister Biti, and Industry Minister Ncube, although Global Witness cannot confirm the existence of these programmes.
Anjin Investments claims to be the world's biggest diamond miner. Previous research by Global Witness revealed how Anjin's Executive Board members include senior serving and retired military and police officers, and the Permanent Secretary at the Ministry of Defence.
In the report published today, Global Witness reveals that 50% of Anjin's shares are owned by Brigadier General Charles Tarumbwa, the Judge Advocate General at the Ministry of Defence, acting through Matt Bronze a front for the Zimbabwean military.
"Since ZANU PF lost control of the Ministry of Finance, they appear to have engaged on a hunt for off-budget financing for the military and secret police," said Donovan. "Zimbabwe's civilian government must exercise democratic control over the budgets of security forces. If not, there is a real danger of a shadow security state emerging, with both a monopoly on violence and secret sources of funding."
The report came only days after Zimbabwe's Deputy Mines Minister, Gift Chimanikire, confirmed an army-owned company holds a 40% stake on Anjin, one of the most lucrative diamond concessions in the country.
‘Army has no stake in Anjin'
Taurai Mangudhla, Business Writer
Daily News (Zimbabwe)
3 July 2012
HARARE - The Zimbabwe National Army yesterday dispelled claims it had interests in the biggest diamond miner in Marange, Anjin Investments (Anjin).
Following submissions to Parliament by top government officials that the army, through its Zimbabwe Defence Industries (ZDI) arm has a 40 percent stake in the diamond miner, ZDI chief executive retired Colonel Tshinga Dube claimed the state-owned company had not even considered investing in Anjin.
"Given the upside potential in mining, we would have gladly welcomed an opportunity to participate in that industry, but such an opportunity is not something that has featured on our radar," Dube told the Daily News.
In direct response to Mines and Mining Development deputy minister Gift Chimanikire's claims to Parliament that ZDI was a significant shareholder in Anjin, Dube said the MDC legislator was ill-informed.
"We have nothing against those making the claims neither do we believe there was any malice intended, but we believe in setting the record straight," Dube said. "We understand a mistake was made by the deputy minister of Mines and Mining Development and have no reason to believe that it was deliberate.
"Because of this, we think it is only proper to put the record straight. We are a state-run company and therefore the public deserves to know the truth. Our focus at the moment is turning around ZDI like what all other captains of industries have been doing since dollarisation in February 2009."
Anjin, Dube said is jointly owned by Anhui Foreign Economic Construction Group of China and Matt Bronze, a wholly-owned Zimbabwean entity.
The ZDI executive said while ZDI, like any other business, reserves the right to invest in a business of its choice depending on viability, it had not been presented with an opportunity to invest in Anjin.
ZDI is the country's sole manufacturer of small arms ammunition and was set up by government in 1984 to manufacture ammunition and military equipment for the Zimbabwe Defence Forces.
ZDI, further argued Dube, who also chairs Marange Resources - one of the five diamond mining companies in Marange - would not have been allowed to preside over a company with an interest in the same field.
Marange Resources is wholly-owned by the Zimbabwe Mining Development Corporation.
"We at ZDI and Marange Resources, where I am chairperson, want to focus on the job at hand and hopefully people will check their information first before presenting it as gospel truth.
"It is even worse when such incorrect information is presented in a respected institution like Parliament. Dealing with untruths is an unnecessary distraction," said Dube.