Only Mugabe and his friends benefit from Zimbabwe’s diamond wealth

Stellenbosch, South Africa — Superficially, Zimbabwe is in much better shape than it was just a few years ago. Hotels are full of foreign businessmen, and luxury vehicles seem ubiquitous in the capital, Harare. Henry Ncube, a local street cleaner, has never seen as many new cars. But Mr. Ncube, 33 and married with two children, is not happy: “I only have this job part time, things are only a bit better for my family [since 2008] and I still can’t afford school” (for my children).

Mr. Ncube has reason for pessimism. Zimbabwe’s growth is being fueled almost entirely by the diamond trade, which benefits only the political elite and their friends. Zimbabwe, which has had all sorts of political problems over the past three decades, is now also succumbing to the resource curse too.

It is important to put things into perspective. In 2008, the economy was in tatters, neither rule of law nor stable money existed, and violence was to be found in every politically sensitive constituency. After ruling party ZANU-PF and its leader, Robert Mugabe, had lost and stolen yet another election, the future looked dire. But, in early 2009, ZANU-PF and the opposition MDC party signed a power sharing deal. Inflation was controlled by dollarizing the economy, and, with one of the world’s largest diamond finds in the east of the country, the possibilities looked bright.

Yet Mugabe’s elite still controlled the army and the despised secret police, the Central Intelligence Organisation (CIO). And the diamond fields in Marange, near the easternmost city of Mutare, provided ZANU with the wealth to retain control. Farai Maguwu, director of the Center for Research and Development in Mutare, explained to me the detailed recent history of diamond activities. Mr. Maguwu is a winner of a Human Rights Watch award and undoubtedly a very brave man, for simply telling the truth.

Vast deposits of high-quality diamonds were found in in Marange over the summer of 2006. Geological reports by foreign companies, notably De Beers, suggested a potentially staggering find — maybe the largest in the world. Mugabe and his military were quick to seize on the prize. They followed the same process they had when stealing white-owned farms: ZANU designated the area as public land in order that artisanal miners and anyone desperate could just pitch up and start panning. Chaos reigned as 30,000 people descended on the site. Then Mugabe brought in the military to restore order. As with the farms, some members of the military and the CIO remained, took over a few of the mines, and enslaved artisanal miners to do their bidding. They then sold the rights to the remaining mines to foreign companies.

In return, one of those companies, China’s Anjin Resources, established a military academy for ZANU. Mysteriously, the CIO, which has no large budget, is now fully equipped with new Chinese vehicles, guns, and ammunition. As one political commentator, who didn’t want to be named for security reasons, put it, “ZANU/CIO are rearmed just in time to steal another election.”

Mr. Maguwu hoped that the Kimberley Process (KP) — the association of governments and diamond interests that aims to prevent mining in conflict areas and to stop the proceeds of illegal mining from financing bloodshed — would at least have refused to endorse the sales. This would have limited the buyers, lowered the price the diamonds could have sold for, and thus decreased the income available to ZANU. But after Mr. Maguwu met with an official from the KP on May 25, 2010, he was arrested and spent nearly a month in jail. No independent expert I spoke with thought this a coincidence.

The KP then quickly released a report endorsing the sales of stones from the Marange area, completely undermining the sanctions of Western nations against Mugabe’s elite. Last week, the KP’s new chairwoman, U.S. ambassador Gillian Milovanovic, reiterated the organization’s position that the Marange stones cannot be seen as conflict diamonds under current definitions. The Kimberley Process was always flawed; Human Rights Watch and others that helped found the KP left it in disgust.

Meanwhile in Zimbabwe, Mugabe’s cronies were siphoning the vast majority of the funds from recent sales. Late last year, MDC claimed that the Treasury Ministry, which MDC controls, was vastly underpaid in tax revenue from diamond sales. ZANU deny any irregularities.

Local sources tell me that violence still occurs in Marange. It is probably less frequent than it was in 2009 and 2010, but it is also harder to inspect. Private security and military order render it impossible for uninvited white foreigners to even get close to the mines, and difficult for black locals to source information.

What really worries experts such as Mr. Maguwu and Harare workers such as Henry Ncube is that all the diamond wealth is going into just a few pockets. The lack of trickle-down diamond income obviously harms the poor, but it has more pernicious effects too. After all, while Mugabe’s men retain power, financing and developing any business remains a risky proposition, since any deal may be arbitrarily overthrown. Worst of all, with a renewed war chest and new weapons, ZANU-PF looks set to violently steal yet another election, probably in early 2013. That would be another tragedy in a country that has already suffered so much.

There is not much the West can do about this. But, at the very least, U.S. officials should focus their attention on how diamond sales are undermining U.S. sanctions. An American withdrawal from the Kimberley Process, especially now that the chairman is an American, would surely destroy the KP and hopefully lead to a more useful successor. It cannot come a moment too soon.

— Roger Bate is the Legatum Fellow at the American Enterprise Institute.



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