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Rough diamonds worth US$140 million vanish

Rough diamonds worth an estimated US$140 million dollars have disappeared from the supposedly impenetrable Minerals Marketing Corporation of Zimbabwe (MMCZ) and Zimbabwe Consolidated Diamond Company (ZCDC) repositories.

The diamonds weighed 350 000 carats.

According to previous auctions, Zimbabwean diamonds normally fetch about US$400 per carat, although this can rise to as much as US$12 000 per carat.

Auditor-General Mildred Chiri, in her report for 2019 which was recently released, revealed that both the MMCZ and ZMDC cannot account for up to 350 000 carats of diamonds which were kept in their vaults.

The matter has since been taken up by the Parliamentary Portfolio Committee on Mines and Mining Development, which, at a hearing on Monday, demanded answers.

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The committee is chaired by Shurugwi South legislator (Zanu PF) Edmond Mkaratigwa.

Environment and minerals watchdog, the Zimbabwe Environmental Law Association (ZELA), was also invited to present its analysis of the situation.

Chiri’s investigation also revealed serious diamond stock reconciliation loopholes which she said could provide the avenue for looting.

She also reported that some diamonds were sold in the Zimbabwean dollar to local customers, who later spirited the precious gemstones outside the country, pocketing foreign currency in the process.

Curiously, the identities of the customers were not revealed even to the auditor general herself.

“In 2019, 297 660, 41 carats of diamond stock held at MMCZ was not counted at the time of the stock count. These parcels were packed for customers and held at MMCZ. However, at year-end, during the stock count, these stocks were not included in closing inventories,” Chiri said in her report.

“In 2018, 41 699, 85 carats of diamond stocks held at MMCZ were excluded from the stock count. It was assumed at the time that these stocks had been sold to customers. An additional 13 222, 85 carats were excluded from the final stock sheet in error,” Chiri’s report reads.

In response to Chiri’s findings, the ZCDC management indicated that the company would in future engage a diamond stock controller to prevent such leakages, but the auditor general raised the flag saying such loopholes are mostly a result of deliberate corrupt actions.

“So the stock reconciliation problem was attributed to systems challenges. However, sometimes, laxity in systems can be created to enable corrupt or fraud behaviour to thrive,” Chiri noted.

Chiri’s report further reveals that the MMCZ, in December 2019, could not account for five carats worth slightly over US$2 000. The diamonds conveniently went missing during a Close Circuit Television (CCTV) failure.

“The audit revealed that the corporation could not account for five (5) carat diamonds worth US$2 075 which went missing during a weight verification exercise. The findings of the audit revealed that MMCZ could not ascertain how the five carats of diamonds were lost because the CCTV video footages could not be retrieved as there was an internal control system failure.

“There is a high possibility that the diamonds were stolen. This clearly points to the failure by the corporation on its role to ensure effective accounting of natural resources and curb mineral leakages,” Chiri reported.

ZELA, in its presentation Monday, urged Mkaratigwa’s committee to visit ZCDC and also investigate the adequacy and functionality of MMCZ’s systems on the prevention of diamond leakages.

“The focus of the investigation should be on systems and procedures that relate to the prevention of leakages, the capacity of the corporation in maintaining records relating to production, storage, movement and sale of minerals, systems and procedures that relate to the prevention of corrupt practices and collusion by officers in the system,” ZELA’s representative George Mapope said.

Chiri also raised the red flag over the sale of unspecified quantities of diamonds to unidentified local buyers, which she said exposed the country to illicit financial flows.

“During the financial period ended 31 December 2019, ZCDC sold diamonds to local customers in local currency Zimbabwe Dollars (ZWL$) instead of United States Dollars (US$). ZCDC indicated that it was instructed by the Ministry of Mines and Mines Development to sell diamonds in local currency and the directive was said to be in compliance with the SI 33 of 2019 which promulgated the 1:1 exchange parity between the US$ and the Zimbabwean Dollar (ZWL$),” the audit report says.

“However, the 1:1 parity between the US$ and the ZWL$ never existed on the ground. The US$ was valued more than the ZWL$ on the parallel exchange market. There is a possibility that the local buyers benefited from buying diamonds in local currency and exporting it to external diamond markets in US$ resulting in undervaluation of the entity’s royalty payments to government, the report further reads.

The lack of transparency in the multi-billion-dollar industry forced the government to amalgamate diamond operations in Chiadzwa and Chimanimani in 2016, collapsing all companies which were operating there into one state-owned entity, the ZCDC.

But this has made very little difference as looting of the strategic resource, often involving senior bureaucrats and other influential people, remains rampant.

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