Outrage over diamond profit breakdown

By Patrick Chidzero (Business Correspondent)

Zimbabwe on Wednesday sold 900, 000 carats of diamonds worth US$72 million from the controversial Chiadzwa diamond fields in the Marange District. Buyers are reported to have come from such diverse countries as the United States, Russia, India, Lebanon and Israel.

But it is the breakdown in how the proceeds from the sale will be divided that has already created uproar. Reports say government will get 10% from the sales as royalties, the Minerals Marketing Corporation of Zimbabwe 0.8% , the government owned Zimbabwe Mining Development Corporation 2.5% from the proceeds.

The ZMDC’s joint venture partners will get up to 5% percent each in management fees while the remaining 79% percent is meant o cover ‘production costs’. The balance will go to the government through the ZMDC and its investment partners.

How a business can incur nearly 80 percent in production costs operating in an area where the diamonds are already close to the surface has been described as scandalous. Added to that there is little sophisticated equipment on site to justify the costs and the army has been exploiting local villagers in much condemned forced labour practices.

Zimbabwe’s diamonds were last month controversially certified by the Kimberly Process Certification Scheme despite objections from human rights groups opposed to the ongoing abuses by the army. KP monitor Abbey Chikane certified the gems before the sales were conducted at the Harare International Airport.

Prime Minister Morgan Tsvangirai, Vice-President John Nkomo and Deputy Prime Minister Arthur Mutambara attended the sale heralding it as a much needed relief for the economy. Mugabe conveniently left on a visit to China and avoided the sale. This left PM Tsvangirai to officially open the auction and give it international credibility.