The diamond curse rocks Zimbabwe

By Charles Mangongera

Last week I attended a National Endowment for Democracy (NED) roundtable discussion on Africa’s resource curse led by eminent scholar Larry Diamond.

The Council on Foreign Relations recently published Diamond’s article Petroleum to the People, co-authored by Jack Mosbacher, in which they explain how Africa’s vast oil deposits could be a curse as politicians and those connected to them collect rents and use them to entrench their power at the expense of social and economic development.

They make a number of poignant observations, which I found compelling as I reflected on Zimbabwe’s diamonds.

They suggest Africa’s rich oil endowment has become a curse as it has fuelled corruption and bad governance in countries reaping revenues from it and those that are yet to exploit their deposits are likely to suffer the same fate unless there is a change in the way the revenues are used.

They cite the case of Equatorial Guinea to illustrate their point. Blessed with one of Africa’s richest oil deposits estimated at one billion barrels, Equatorial Guinea started selling oil in 1995 and has earned billions of dollars, but its citizens remain poor, thanks to massive corruption by President Teodoro Obiang Nguema Mbasogo and those close to him.

Teodoro Obiang Mangue, son to the president, lives like a rock star. In the United States he allegedly has a multi-million dollar mansion in Malibu, California, a fleet of luxury cars, a collection of speedboats worth millions of dollars and Michael Jackson memorabilia valued at US$3,2 million dollars.

I remember reading last year that French authorities had seized a US$200 million property in a wealthy Paris suburb that belonged to the Nguema dynasty, where a collection of art, antiques and fine wines was found. Ironically three quarters of the citizens of Equatorial Guinea subsist on less than US$2 a day and those opposed to the regime often find themselves at the notorious “Black Beach” prison where torture, beatings and starvation are the order of the day.

Nguema is one of Africa’s most vile dictators and counts Zimbabwe’s President Robert Mugabe among his closest allies. Nine years ago a group of mercenaries led by Simon Mann was intercepted and captured at Harare International Airport as it attempted to make its way to Malabo to depose Nguema’s government in a coup.

Mugabe promptly handed Mann and his gang over to Nguema who sent them to “Black Beach”. Since then the two have been close allies. The opposition MDC-T party alleges Nguema has doled millions of dollars to Mugabe and his party in times of need; including the election campaign for the recently-held national polls which Mugabe’s Zanu PF won by a landslide amid allegations of vote-rigging and systematic disenfranchisement.

The Nguema dynasty’s profligacy will not surprise many Zimbabweans. Since the discovery of diamonds in Marange district in the country’s eastern province of Manicaland, Zimbabwe’s ruling class has developed a keener taste for the finer things in life.

There are reports of luxurious homes with helipads owned by the political elite. Harare reportedly has more Mercedes Benz vehicles than any other city in the world per capita.

Two years ago a Zimbabwean government minister who officially earned US$300 a month paid nearly US$30 million cash to acquire a majority stake for his family trust in a local bank.

Just last year the Mail & Guardian newspaper of South Africa reported that Zimbabwean businessman Robert Mhlanga, chairman of Mbada Diamonds — one of the companies awarded a mining concession in Marange — had splashed close to US$20 million on prime real estate in that country.

Mugabe has publicly acknowledged the existence of corruption in the murky diamond sector but has done little to curb it.

Three months ago he publicly claimed former chairman of government-owned Zimbabwe Mining Development Corporation (ZMDC), a state-owned company with diamond mining concessions in Marange, had received a US$6million bribe from a Ghanaian investor and vowed to take action.

The accused, Godwills Masimirembwa, remains a free man. Investigators could have developed cold feet after realising the net would catch some really big fish.

In a country where proceeds from crime have been used to buy political influence, it is probable that part of the US$6 million bribe found its way into the ruling party’s coffers.

The majority of Zimbabwean citizens live in grinding poverty. About eight in 10 of those eligible to work are jobless. Citizens spend hours in darkness as the country cannot meet its energy requirements. Infrastructure is derelict and companies are closing, rendering thousands jobless. Government has shelved the announcement of the annual budget scheduled for November because it has no money.

Ironically in Surat, a diamond trading hub in India, the price of diamonds has plummeted because of an oversupply of the precious stones. The source? Zimbabwe’s Marange diamond fields. Diamonds are being illicitly exported and the proceeds are lining the pockets of political elites and their networks.

Another point Diamond and Mosbacher make, which rings true for Zimbabwe, is that the resource curse breaks the “social contract between a population and its government”. When governments no longer have to tax citizens or tax them less because they are deriving revenues from the sale of natural resources, they have no incentive to serve the people.

Citizens are unlikely to demand that government delivers jobs and social services from the tax revenues, while government becomes less accountable and uses the patronage system to retain political power.

While in Zimbabwe the social contract was already breached before the discovery of diamonds in Marange, thanks to repression, rapid economic decline, joblessness and citizen despondency, the discovery of the precious gems threw a financial lifeline to a regime that was on the verge of collapse.

By the time elections were held in 2008 Mugabe had become so severely weakened that he could not financially sustain the election rigging machinery, resulting in him losing to MDC-T leader Morgan Tsvangirai in the first round of a presidential election.

Forced to share power with the opposition following a sham second round election, Mugabe set out to regain his stranglehold on the polity and to build robust infrastructure for election rigging. He deployed the military to take control of the diamond fields before awarding mining concessions to Chinese companies that went into joint venture agreements with state security linked firms.

He then ran a parallel government in which Treasury, by then controlled by the former opposition, was bypassed as revenues from diamonds were deployed to strategic institutions such as state intelligence, the military, the police and party structures.

Diamond revenues were said to have been used to buy support from African leaders ahead of the July 31 election. He also allegedly paid millions of dollars to an Israeli firm to forge the voters’ register in his favour.

Diamond and Mosbacher suggest African countries can avoid the resource curse by distributing oil revenues to citizens through what they call an “oil-to-cash” system where the government transfers cash to citizens directly and then taxes them a portion of it.

The idea is that the pain of taxation will force citizens to demand service delivery and accountability, thereby maintaining the social contract between the population and the government. For such a system to work it must be born out of citizen agency and must not be pushed from outside.

As long as Zimbabweans do not demand accountability in the mining and sale of the country’s diamonds and other natural resources, politicians and their associates will continue to line their pockets and the country will not prosper.

Charles Mangongera is a Zimbabwean researcher. He is currently a Reagan-Fascell Democracy Fellow at the National Endowment for Democracy (NED) in Washington DC. He writes in his personal capacity. This article was initially published in the Zimbabwe Independent newspaper.