Wednesday, February 15, 2012

Military laundering diamond proceeds

COMPANIES operating in the country’s controversial Marange diamond fields are controlled by the security services with proceeds likely being laundered out of the country through front companies and tax havens, campaign group Global Witness has claimed.

UK-based Global Witness has long campaigned against Marange diamonds and last December pulled out of the industry watchdog, the Kimberly Process (KP), describing the organisation’s decision to clear for sale diamonds from the area as "an outrage."

On Tuesday, Global Witness published a report on companies operating in Marange and claimed most are controlled by security service personal adding that their ultimate beneficial owners remain murky while the country’s treasury is getting precious little from their activities.

The report – released ahead of the European Union’s review of its sanctions against Zimbabwe on Friday – examines the ownership structures of Mbada Diamonds and Anjin Investments which have joint venture operations in Marange with the state-owned Zimbabwe Mining Development Corporation (ZMDC).

“(We have) obtained information showing that several of Anjin’s Zimbabwean directors are drawn from the military and police. This raises serious questions about who controls the company and the profits it generates – questions serious enough to justify cancellation of the contract,” Global Witness claimed.

“The Zimbabwean members of Anjin’s Executive Board are Martin Rushwaya, the permanent secretary in the Ministry of Defence; Oliver Chibage, a commissioner in the Zimbabwe Republic Police (ZRP); Nonkosi M. Ncube, a commissioner in the ZRP; Munyaradzi Machacha, a Zanu PF director of publications and Mabasa Temba Hawadi, a director of Marange Resources (Pvt) Ltd, a subsidiary of the ZMDC.”

Regarding Mbada Diamonds, the report adds: “Global Witness has uncovered a complex and opaque legal ownership structure for Mbada, including companies in Hong Kong and the British Virgin Islands, as well as a string of what appear to be nominee company officers.”

A company called Transfrontier Mining is alleged to own almost 25 percent of Mbada Diamonds although “the ultimate beneficial owners of Transfrontier have not been identified”.

“However, they may be connected with (retired) Zimbabwean Air Vice Marshal Robert Mhlanga, the Chairman of Mbada. Mhlanga is widely reported to have been President Robert Mugabe’s personal pilot, and was a prosecution witness in the 2003 treason trial of then MDC opposition leader Morgan Tsvangarai.”

Global Witness said profits recorded by both Transfrontier and ZMDC were not known; neither were the royalties, dividends and taxes paid by Mbada Diamonds.

The group warns that “the secrecy surrounding the real owners of Mbada has a number of potential consequences, including a possible loss of tax revenues, and the potential opportunity for officials or military figures to personally benefit from a state asset.”

The report recommends the cancellation of Anjin Investments’ contract adding: “The (coalition government) should immediately review all other contracts in the Marange diamond fields, and audit concession allocation procedures and operations conducted so far, to see whether they represent a good deal for Zimbabwe.”

Global Witness claims that diamond proceeds were likely being used as an off-budget source of cash for the country’s partisan security services adding some of the funds could be used to fund a violent campaign during elections expected this year.

The Marange diamonds have long divided the country’s coalition administration with Finance Minister Tendai Biti complaining that proceeds were not making their way into treasury.

In his 2012 budget statement, Biti said: “We are beginning to sound like a broken record in emphasising the need for transparency in the handling of our diamond revenues and, indeed general revenue from the rest of the mining sector.”

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