Death, sanctions and big business in the struggle for Zimbabwe's diamonds

As sanctions against Harare come under review, MPs call for a FTSE 100 company to be investigation for its involvement in the strife-torn Marange diamond region

Back in late October 2008, up to 30,000 ordinary Zimbabweans had spread across the country's diamond fields. They had flocked east in the hope of unearthing gems to ease the hardship of the financial crisis – but however savage the economy might have felt at the time, their situation was about to become more brutal.
Infantry, estimated to be 1,500 strong, supported by helicopters, descended on the area. As the freelance miners ran, soldiers and paramilitary police began firing AK-47s directly at those fleeing. More than 200 people in Chiadzwa, a previously peaceful but impoverished part of the Marange diamond zone, are thought to have been massacred.
The purpose of the assault, campaigners say, was to clear the diamond fields and hand control to the military. The WikiLeaks cables record James D McGee, US ambassador to Zimbabwe, filing this report on 7 January 2009. "[An official] met with Newman Chiadzwa, the tribal chief of the Chiadzwa region that contains the diamond-rich Marange fields, to discuss violence in the region as well as recent developments in the turbulent Marange diamond trade. Chiadzwa described how the military expansion in Chiadzwa in late November has been displacing the police and diverting the diamond flow from the Reserve Bank of Zimbabwe to the Zimbabwean military." The Zimbabwean embassy did not respond to requests for comment.
Clearly these assaults will forever haunt those involved, but four and a half years after the nightmare in Marange, the issue remains current: this week, the European Union will review the sanctions it imposes on Zimbabwe, which could result in a lifting of restrictions, despite protests from the UK.
Simultaneously, UK parliamentarians are calling for tougher measures against all Marange diamond miners, including naming them on the sanctions list, as well as asking for an investigation into one major City name – FTSE 100 financial services firm Old Mutual – that has an indirect investment in the Zimbabwean fields.
Kate Hoey, who chairs the all-party parliamentary group on Zimbabwe, said Marange diamond companies were "suspected of directing millions of dollars to corrupt and violent interests associated with Zanu-PF," adding: "Old Mutual needs to be investigated for a potential breach of sanctions." Hoey said it was a stakeholder in one of the shareholders in Marange miner Mbada Diamonds "and was therefore effectively in a joint venture with a sanctioned entity – the Zimbabwe Mining Development Corporation [ZMDC]. We cannot allow a British company to behave like this."
Old Mutual, which opened its first office in Harare 86 years ago, indirectly holds a 1.5% stake in Mbada Diamonds, after investing its clients' funds in a 6% stake in a scrap metal company, New Reclamation Group (NRG). NRG subsequently acquired 25% of Mbada, while a further 50% of the diamond company is controlled by ZMDC, a state-owned company on HM Treasury's sanction list because of its close association to President Robert Mugabe's Zanu-PF party.
A spokesman for Old Mutual said: "Our holding in this investment is legal and we would never knowingly take action that did break any laws." He added that Mbada had passed the "Kimberley Process" – the international agreement established in 2003 to prevent "conflict diamonds" from entering the mainstream rough diamond market – and that an Old Mutual investigation had found "no human rights abuses" since the company had been formed.
"In our view, our involvement should be good for Zimbabwe," he said. "We will stay in this investment, while, like all our investments, keeping it under review."
Sanctions experts said that in most circumstances an indirect investment in a company part-owned by a company on the sanctions list was unlikely to be illegal. However, Old Mutual's position on the mine's human rights record is being directly challenged.
In July 2011, the campaign group Human Rights Watch (HRW) interviewed 10 miners in Marange who claimed to have been mauled by dogs and beaten by private security guards. They claimed that the majority of incidents involved guards working for Mbada. One miner said: "The Mbada guards are the worst. They don't hesitate to set the dogs upon you and they also beat you up."
The campaign group reported another incident in which Mbada private security guards set four dogs on a handcuffed artisanal miner caught digging for diamonds close to the company's mines. "I was attacked by all of them," said the man. "The dogs were biting me and I was screaming. It was terrible."
Mbada did not respond to repeated requests for comment on HRW's research. Old Mutual declined to say if it had contacted the campaign group but added: "We have engaged with a number of stakeholders and NGOs regarding the Mbada mine. In addition, the independent directors of our Old Mutual life company in South Africa conducted an extensive on-site visit of the mine last year and are confident that human rights are being respected at Mbada." Old Mutual declined to identify which NGOs it had approached, however.
And some believe these debates represent only a fraction of a wider issue. Roy Bennett, treasurer general of the Movement for Democratic Change (MDC), which since 2009 has shared power in Zimbabwe with its rival Zanu-PF, said: "The broader immorality of the move is clear to any fair-minded person. First, mining rights were stolen by the government and handed over to Mbada. Second, their control of the area was secured on the basis of egregious human rights violations; Mbada was the direct beneficiary of this. And third, the operations of Mbada and the revenue generated by it has been completely opaque."
Nor does Mbada's accreditation under the Kimberley Process impress everybody in the diamond trade. The jeweller Tiffany's states: "We have advised all of our business partners of our zero tolerance policy for diamonds of Marange origins." Meanwhile, the campaign group Global Witness, which was one of the key bodies behind the original establishment of the Kimberley Process, left the scheme in December 2011. It claims the process "has failed to address state-sponsored violence in the Marange diamond fields and resisted calls for reform", and it has also raised concerns that "Mbada Diamonds … has a complex structure, with associated companies located in secrecy jurisdictions including Mauritius, Hong Kong, British Virgin Islands and Dubai."
Mbada did not respond to questions. However, Old Mutual said: "Mbada's remittances to the treasury and other relevant government departments are audited by KPMG on an ongoing basis. This has established that all remittances from Mbada related to royalty payments, reserve depletion fees, taxation and dividends sent to the Zimbabwean treasury are substantial and in line with existing agreements and regulations.
"As you are no doubt aware, Tendai Biti, the secretary general of the MDC, heads the Zimbabwean treasury. We also sought guidance from the MDC in Zimbabwe, and were given assurances by Morgan Tsvangirai, the president of the MDC, and Tendai Biti that they want Old Mutual to maintain its indirect investment in the mine. The MDC is clear that the revenues from the Mbada diamond mine will help finance Zimbabwe's recovery."
Or, as Douglas Mwonzora, the MDC's spokesman, puts it: "The MDC's position is that all diamond mines should be nationalised." Like all things in the diamond trade, it depends which way you cut it.