10 July, 2021

Compiled by Cosmas Sunguro

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 revenue.  

The 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.    

ZCDC is 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 from home.

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 timeously”.

 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 place “.

Community 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.

Communities have 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 community.

Conclusion

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.

Recommendations

There are 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.