Zimbabwe: Govt Diamond Consolidation Plan in Limbo

THE ZIMBABWEAN government’s plans to consolidate diamond mines operating in Marange are in limbo amid indications the mining companies are resisting the proposed move.

Taurai Mangudhla

Insiders who spoke to business digest on condition of anonymity this week said diamond companies were “seriously” resisting the move.
They say government would have to make serious compromises to get the mines to buy the idea.

There are five mines operating in Marange — Anjin. Diamond Mining Corporation , Jinan Mining Private Ltd, Marange Resources and Mbada Diamonds — after Gye Nyame and Kusena went under. Gye Nyame and Kusena will be taken over by wholly government-owned Marange Resources.

The consolidation exercise which could result in all the diamond mines in Marange being bundled into a single company was first mooted during former Mines minister Obert Mpofu’s tenure and only took shape earlier this year under Mines minister Walter Chidhakwa’s supervision.

According to initial proposals of a process that was supposed to be completed by end of March, government will own a 50% equity stake in the new company while the other five diamond miners will share the remaining equity based on their balance sheets. It, however, appears Chidhakwa put the cart before the horse when he announced the consolidation process would be completed by end of March.

Two months later, Chidhakwa and his team in government and the private sector are yet to conclude the process which insiders say may not see fruition.

“Sometimes politicians make political promises and make people believe changes will be there like yesterday and yet they forget these processes are driven by commercial imperatives so as a result things take much longer,” said a source close to the consolidation process.

According to a source working close with government, companies are also dragging their feet largely because of the lack of independence implied by the process as well as the liabilities situations of their prospective partners.

“Although some of the companies are smaller and perhaps were not doing so well, the issue is that they want to maintain their control and pride,” he said. “Some companies are operating like those illegal panners who haven’t invested in any exploration, today they go to this area, they get something and celebrate but the next day is a completely different story.”

However, a leading local business consultant, who requested not to be named, argued consolidation was the only way to save the industry from collapse while benefitting the economy from improved royalty collections.

“My view is that things are difficult and companies have to belong to a bigger vehicle that is able to source funding and grow the cake.”