10 July, 2021
The Office of
Auditor General (OAG) report of year ending 2019 came at the right time when
the government of Zimbabwe is clamoring for a vision of an upper middle income
economy by 2030. As always anticipated by many, it brought some juicy news,
surprises and some shock as to how the State Owned Enterprises (SOEs) have been
operating. Our interest is the audit for Zimbabwe Consolidated Diamond Company
(ZCDC). The Auditor General’s Report revealed the poor procurement standards,
failure by ZCDC to properly account for diamond stocks, failure to comply with tender
rules on the sale of diamond, failure to account for the amounts that the State
Owned Enterprise ( SEOs) is owned by other entities among other issues. These
issues raise red flags on its governance systems. There is a huge possibility
that something could have been happening which points to leakages of diamond
consolidation of diamond companies in Chiadzwa brought hopes to people who were
disappointed by the failure of previous diamond companies to bring community
development and improve social service delivery in the area. The Zimbabwe
Mining Diamond Corporation (ZMDC) gave birth to ZCDC and the government’s main
drive for establishing ZCDC was to ensure transparency, accountability and
optimal commercial exploitation and marketing of Zimbabwe’s diamonds. The
community members and the nation at large thought mismanagement of diamond
revenue as was witnessed in the previous era, where US$ 15 Billion was alleged
to have been lost, would never be repeated with the government at the helm of
diamond mining value chain. However, the revelations from the recently released
Auditor General’s report on State Owned Enterprises (SOEs) proved the people
otherwise. The report revealed glaring loopholes in how the nation’s wealth is
being managed by the diamond mining giant.
The Auditor General’
report raised loopholes in procurement systems of ZCDC and heightened red flags
on Illicit Financial Flows (IFFs) and this is a sad scenario for a community
that is looking forward to receiving developmental benefits from diamond mining
in Marange. There is anger in people whose hopes of benefiting from Chiadzwa
diamond are fading away year in and year out.
It goes to support the Chiadzwa community’s assertion that, they
benefitted more from the diamond during the diamonds rush period in 2006 better
known by locals as ” bvupfuwe”(abundance period). Their lives changed
for the better. The formal diamond mining seems to indicate that it brought
misery and more poverty to the locals. This revelation sets a bad precedent to
other mining companies given that it is a State-Owned Enterprise (SOE). Its
formation in 2015 was mainly premised on the need to sanity into diamond mining
sector. What is being revealed by the Auditor General’s Report is a proof that
ZCDC is failing to live up to its standards and intended mandate. In 2018, the government made a move to parcel
out part of ZCDC’s diamond fields to other mining companies and this was after
the government observed that ZCDC had capacity issues. This latest audit report
seems to substantiate the observations by government.
primarily domiciled in Chiadzwa where it does its operations. Already, there
are pending projects that need to be completed besides the others eagerly
anticipated by Communities. The road to Chiadzwa is in a dilapidated state and
a few public vehicles still use that road making the area inaccessible. Most
people now prefer to use the Hot springs route when coming to town, which is
longer and more expensive. The heavy
vehicles of the mining companies have further damaged the company and do not
care to construct the road. The former ZCDC Chief Executive Officer Mr. de
Preto once agreed that ” it was high time the people of Chiadzwa
witness meaningful development through various projects initiated by the
company”. Here, we are in 2021, the community is yet to access
meaningful benefits from the diamond endowment. In fact, the hopes of getting
meaningful benefits from Chiadzwa’s diamonds are fading away.
While the past
acts of mismanagement of previous funds as revealed by past audit reports of
ZCDC’s predecessor, ZMDC may have been avoided, this current case sends tongues
wagging. For how long shall the communities and
Mutare rural district council continue missing their benefits from diamond
mining? The results of the Auditor General’s report comes at a time when the
company has been recording persistent losses a situation that has been
incapacitating the company to pay dividends to government and fund community
development.The education system
could have been uplifted by constructing classroom blocks, furnishing the
schools with furniture and books or drilling boreholes, but not much was done
other than doing renovations of few classroom blocks. The company made a promise
to build classroom blocks at Rombe Primary school. However, it is now five
years after this promise was made and there is not much meaningful progress.
Apparently, school children are now walking more than five kilometers to and
There are not
many socio -economically valuable projects that the company has accomplished
since its operations began in 2016. Health facilities remain substandard with
women and girls walking about 10km to and from to access clinics. The most
disheartening situation is that the clinics do not have basic supplies most of
the time. There are no ambulances at clinics and with the state of roads in
most cases, sick people get stuck on the road when they are in dire and
immediate need of health care and as such complications and deaths in some
instances are the order of the day.
After all health is a basic right as provided in section 76 of the constitution (Zimbabwean
Constitution of 2013). There are 21 clinics in the district, and all
need some facelift. They are short staffed, and medicines and drugs are not
enough. According to Mutare Rural district council official, “
ZCDC has of late not been honoring its mandate of paying their taxes
We have missed opportunities to grow and
develop economically as a nation because of Illicit Financial Flows (IFFs) in
the diamond sector. According to Malvin Mudiwa of Marange Development Trust,
a community-based organization in Marange, ” The figure indicated in
the report is a wakeup call for communities to guide jealously on how their
resources are being managed. It can be an indicator that fraud could have taken
beneficiation remains a topical issue in Chiadzwa. This word is often used by
politicians and some ZCDC officials without much care. It is with much hope
that the dusty roads leading to Chiadzwa be attended to including their
bridges. Apparently, the public transporter ZUPCO is shunning the 50 kilometers
road because it is not fit for use by bigger coaches. This has left the
community at the mercy of private transporters who charge exorbitant fares.
With the Covid 19 restrictions in place, this has made it difficult to travel.
As a precautionary measure, the company is alleged to have been using soil to
cover potholes and this does not last a distance. The roads simply needs resurfacing
since they were destroyed by Cyclone Idai in 2019. The community expects the
resurfacing of the road because it regularly used by the mining companies.
a right to voice concern about the way funds are handled given that resources
are found in their area. Section 13 (4) of the Constitution provides
that communities must benefit from their mineral resources in their respective
areas. ZCDC being a state entity is obliged to timely release their audited
annual reports for public scrutiny. While for the first time they have done so (for
its 2016, 2017 and 2018 financial it is worrying to note that they have been
reporting losses for the past three years. According to Mr Chiadzwa, one of the
traditional leaders, ” the company has been operating for 24
hours a day since consolidation. If they are not making profits why not
stop?” For sure the company
invested more than a billion in the procurement of equipment imported from
Belarus and the expectation was that this would translate into profits and
revenue flows to government and local authorities. However, the results on the
ground indicate otherwise. We are not
sure if the company’s performance in 2021 will improve. In 2020, the company
indicated that they had about 2 million carats of diamond stock which was
waiting for the market. We are not sure if these stocks changed the trajectory
of the company’s financial performance in 2020.
We are in 2021 and the company has not yet published its audited annual
financial statement for 2020.
While ZCDC claims to have carried a couple of Corporate Social Responsibility (CSR), this has not been justified in the eyes of the locals. For example, In 2018 the company built a state of the art vegetable market mall in Sakubva. The company also donated some food hampers and agricultural input to some community members in Arda Transau and Marange end of 2018. To them this is meaningful development in their area. The families relocated to Arda Transau are going for several weeks without drinking water, yet the company can simply drill approximately 100 boreholes to save the situation. A recent visit to Chirasika primary school revealed that some pupils were learning in disused wooden cabinets at the school. They have even gone on to do a makeshift wooden block to accommodate all local pupils. Proper management of the diamond revenue would have gone a long way to change the fortunes of the community. According to a study by Veronica Zano and Joyce Machiri ,” companies must invest in infrastructure ( portable water, electricity, schools,roads, hospitals), building social capital and human capital…” . They reiterated that there is ” need to instill public confidence in public institutions”.
It is quite
unfortunate that Zimunya Marange Community Share Ownership Trust, an
organization formed to spearhead development in the area has literally failed
to live to their expectations. The last time they were given $5million United
States dollars by ZCDC, the funding failed to make any meaningful impact due to
different reasons. Among them was administrative bungling, change in currency
exchange policy and procrastination. To show that the people of Chiadzwa are
not a happy lot, they were once involved in a series of demonstrations. The
company only rescued the situation by coming up with a Diamond security Indaba
which to date has not meaningfully brought the intended progress to the
It is high time
that ZCDC takes the needs of the people into consideration lest the community
of Chiadzwa will be forced to lash out and demand the mining activities be
stopped until a time the Government and mining companies are willing to ensure
there is community beneficiation. The previous sporadic demonstrations in 2018
and 2019 should be taken as a key lesson for the company. The community is aware that there is need to
have the social license to operate and the social license to operate can only
be obtained if the company addresses community’s demands.
several recommendations that can be made to address the challenges being
experienced by locals where ZCDC is operating.
- Government needs to investigate ZCDC’s mandate and revamp its administration so that there is transparency, accountability and practical will to fulfil its mandate.
- ZCDC should lead other mining companies by example by paying taxes to Mutare Rural District Council timeously while the money still has value.
- There is need to establish a Community Forum consisting of all stakeholders that will have meaningful development dialogue from time to time and involve the community in prioritization and development of CSR projects.
- The mining companies to seek social license to operate
- There is a great need to close all loopholes leading to Illicit Financial Flows (IFFs) by being transparent and accountable in their operations.