Diamond sale a false economic dawn

An auction of Zimbabwean diamonds has created an air of expectation that the country’s economic plight will be eased or even improved, but the stones realised as little as a fifth of their value, and most of the proceeds are expected to benefit controversial mining companies.

The Kimberley Process Certification Scheme — an initiative to prevent conflict diamonds from entering the multibillion dollar global market —allowed Zimbabwe to sell diamonds from the Chiadzwa area of Marange in Manicaland Province.

The diamond fields — reputedly the largest find in a century — have been mired in controversy, with constant allegations of human rights abuses since they were discovered in 2006.

Amnesty International has reported that soldiers deployed to guard the diamond fields have forced people to mine the diamonds, which were then smuggled out of the country, while other reports have indicated that security forces were killing illegal miners.

Primrose Mudzengi, 38, a teacher in the capital, Harare, earns $150 a month, which she has to juggle to cover rent, school fees for her two children, food and transport.

“Civil servants like me are virtually living on slave wages. I am confident that our salaries will improve significantly once diamonds are mined and sold on a large scale, and the government can spare more money for us,” Mudzengi told IRIN. “I will be able to take my children on holiday as I used to do before the economy started sliding, and stop living like a beggar.”

The president of the Progressive Teachers Union of Zimbabwe (PTUZ), Raymond Majongwe, was more pragmatic.

It would be “folly for civil servants to think that the diamonds would improve their lives”, he told IRIN.

“There are sharks out there who want to line their pockets first and, as it stands, there is a lack of clarity on how much the diamonds would give to our economy by way of job creation, and the value of the diamond deposits is not known,” he said.

Government coffers

It is estimated that Zimbabwe would need about $8billion to resuscitate the economy.

According to mining minister Obert Mpofu the auction raised $56.4 million, of which the government will receive $30 million, compared to an earlier estimate by finance minister Tendai Biti that the auction raised $46 million, with $15 million coming into government coffers.

Eric Bloch, an economic analyst, told IRIN that ahead of the auction it was hoped the diamonds would sell for $400 to $500 per carat, but only “around $80 per carat” was achieved.

“Contrary to the current popular feeling, there is little evidence that diamonds will translate into our economic panacea,” Bloch told IRIN. “Hopes can easily turn into disillusionment; the economy will not turn around overnight, and the gains will be minimal for some time.”

The government will receive 10 per cent in royalties and 25 per cent as corporate tax from profits made by the mining companies, while the Zimbabwe Mining Development Corporation (ZMDC), a government parastatal, will get a small dividend, Bloch said.