A contest is emerging between Indian and Chinese capital for control of Zimbabwe’s vast diamond and steel resources.
The rich pickings are said to be at the centre of a battle in which executives of the state-owned Zimbabwe Mining Development Corporation (ZMDC) have landed in jail and new criminal charges have been brought against a company that opposes the government takeover of the rich Marange diamond fields.
This week six ZMDC executives appeared in court facing charges of fraud and smuggling. While the government said the arrests showed a crackdown on graft in the diamond industry, many view them as the start of a struggle between influential figures for the control of the billion-dollar industry.
Prime Minister Morgan Tsvangirai’s Movement for Democratic Change said the arrests barely concealed "the real powers" involved in a tussle for dominance.
"The party feels the officials arraigned so far are ‘small fry’. The real powers behind the deals, supported by the military junta, remain in the shadows," the MDC said.
The arrested mine officials are alleged to have created a fictitious company and awarded it lucrative diamond licences, falsely claiming the company would invest $2-billion in Marange.
According to police, the company used the claim to smuggle out diamonds worth more than $10-million.
Eight of the country’s best known lawyers appeared for the executives in court on Monday October 8. Police outside the courtroom screened people, including journalists, trying to get into court.
A report by investigators claims the mine executives are associated with men variously described as South African "drug cartel bosses and a notorious illegal diamond dealer", and "apartheid-era mercenaries".
Investigators have also named a man called Marco Chiotti, who they describe as "an Italian-South African", who has allegedly had dealings in Angola, the Democratic Republic of Congo, Liberia and Sierra Leone. But many top officials have kept their interests well concealed.
The only political figure with known interests in diamonds is Solomon Mujuru, a long-time investor in a diamond mine near Beitbridge.
Amid the controversy, the government announced it was giving new mining licences to China’s Anjin Corporation and Sino-Zimbabwe, the latest China-Zimbabwe joint venture, allowing them to exploit Marange diamonds.
Another licence was issued to Pure Diamonds, believed to be Canadian.
In addition, a consortium of wealthy Indian diamond buyers signed a deal, said to be worth $1.2-billion, to buy rough diamonds for India’s diamond-cutting city of Surat.
The Surat Rough Diamond Sourcing (India) will buy a minimum of $100-million of rough diamonds every month from the Zimbabwe Diamond Consortium (ZDC), which includes some backers of Zanu-PF.
The deal would be worth almost half Zimbabwe’s 2010 budget, totally overshadowing current trade between Zimbabwe and India, which stands at about $80-million a year.
If the deal goes ahead it will suggest Zimbabwe could now be dumping the diamond auctions that began this year under the Kimberley Process, which monitors the world diamond trade.
Fending of Chinese competition
Indian investors in Harare said Surat, with 80% of the world’s diamond-cutting business, will invest more in Zimbabwe to fend off Chinese competition.
As part of the $1, 2-billion deal 1 000 Zimbabweans will be sent to India to train as diamond cutters. A group of war veterans also claims to have clinched an agreement to have its members sent to India to be trained in cutting and polishing.
A meeting of the Kimberley Process last month failed to agree on whether Zimbabwe should sell Marange diamonds, but the growing interest from China and India could be encouraging Zimbabwe to go it alone.
Zimbabwe has just announced it would sell the country’s largest steelmaker to India’s Essar Group, ahead of ArcelorMittal SA and Jindal Steel of India.
The Essar deal could be worth up to $500-million. This article was first published in the Mail & Guardian