Diamond Buyers Club

Zimbabwe's new government has changed its empowerment ownership laws for the diamond and platinum sectors, in an effort to re-engage international lenders, curb spending and attract investors to revive the country’s battered economy.

The new rules, Reuters reports, limit majority ownership by state entities to only diamond and platinum operations and not the entire mining sector as in previous legislations, which were introduced during the rule of former president Robert Mugabe.

Those requirements were intended to increase black Zimbabweans' share of the economy, but were opaque and open to abuse.

Under the new rules introduced by President Emmerson Mnangagwa, who took the post in November after Mugabe quit under pressure from the military, only allow state-owned miners to hold majority stakes in diamond and platinum firms. But they also let those companies to negotiate a timeline to comply with the new law.

New empowerment law limits majority ownership by state entities to only diamond and platinum mines and not the entire mining sector as in previous legislation.

Zimbabwe is home to the world’s second largest platinum reserves. It also known for its diamonds, though alluvial deposits are almost depleted, and it's said to have eight out of nine “rare earth” minerals and a processing capacity for gold, diamond and chrome.

The country’s platinum sector has attracted major producers, including Anglo American Platinum, Impala Platinum and Sibanye-Stillwater, which have had to relinquish control of their Zimbabwean mines to locals.

Shady sector

Activity in the diamond industry is not as easy to track and it has been plagued by controversy. Human-rights organizations have linked Zimbabwe’s military and intelligence agency with several companies operating in the Marange diamond fields, discovered in 2006. Such connections have been long hidden behind a wall of secrecy over revenue flows and ownership.

In 2012, Partnership Africa Canada (PAC) report argued that Zimbabwe’s political elite had stolen about $2 billion in diamond revenue. The same year, corruption watchdog Global Witness claimed a Chinese diamond mogul ploughed $100 million into the CIO to fund covert operations against the opposition in exchange for diamonds traded outside official channels.

A 2013 parliamentary probe into the diamond sector found “irregularities and loopholes in the entire diamond value chain”, with clear discrepancies between the government’s books and figures provided by mining houses.

And just last year, Global Witness said it had uncovered further evidence suggesting state-owned Zimbabwe Mining Development Corporation (ZMDC) was set up by the country’s feared secret police “to secure a secret off-the-books source of financing.”

The group also said that of the $2.5-billion in diamonds Zimbabwe has officially exported since 2010, only $300 million were clearly marked in public accounts.

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