When civil society in Zimbabwe noticed that the government’s reported revenues from diamonds were declining despite surging diamond exports, it began asking “Why”?
It’s hard to know where the money ends up. It is lost in a complex system of transfers of diamond mining revenues from companies to the government. Mining contracts are confidential and information on the mines’ contributions to the national Treasury is scarce.
In 2013, research by the Zimbabwe Environmental Law Association (ZELA) found that while diamond production in terms of carats grew by more than 500% between 2008 and 2013, there was a steady decline in revenues. In 2011 and 2012 the shipments of diamonds grew from US $238 million to $563 million, but treasury contributions dropped from $81 million to $45 million.
ZELA wanted to unravel the mystery surrounding the country’s diamond revenues. The government is a 50% shareholder in all Marange diamond mines, yet late or no remittance of dividends and royalties were frequent. ZELA analysed national budget statements and the financial accounts of the Zimbabwe Mining Development Corporation (ZMDC) and discovered that in 2012 the government expected $600 million from diamond mining dividends and royalties, but received only $45 million.
Looking into the National Budget Statements also revealed that the total amount contributed by Marange mines through dividends and royalties between 2010 and 2013 was $300 million. Yet, ZMDC publicly stated that the corporation had contributed $300 million in just one year, suggesting that the revenues from the other 2 years may have been hidden.
The study concluded that there were major leakages in diamond mining revenues. ZELA called for new transparency rules on dividends, taxes and royalties, including a requirement for the ZMDC to present audited reports to parliament annually and a new rule that all diamond mining contracts be subject to Parliamentary scrutiny before being signed.
As a result of ZELA’s advocacy the government has committed to reviewing the current Mines and Minerals Act. It has also begun a process of consolidating diamond mining companies operating out of Marange with a view to strengthening transparency and accountability around diamond revenues.
The Zimbabwe Mineral Revenue Transparency Initiative will be relaunched and the Mines and Energy Parliamentary Portfolio Committee has become more active in investigating the mining sector.
- There is a need for credible research that reveals mining revenue leakages and demonstrates the potential impact of lost revenue.
- Advocacy for improved mining sector governance requires long term efforts. The required reforms usually happen over a long period of time.