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Zimbabwe Parliament Committee Says Gem Revenue Missing

June 13 (Bloomberg) -- A Zimbabwean parliamentary committee said tens of millions of dollars of revenue that a diamond-mining company says its paid to the government never found its way to the Treasury.

While the 2013 National Budget shows that the Treasury received $41 million from diamond mining in 2012, matching the amount received the year earlier, one company, Mbada Diamonds Ltd., says it has paid $293 million to the government since it started mining in 2009, the Portfolio Committee on Mines and Energy said in a report that it compiled over four years.

The three other companies operating in the Marange field, which the committee said could supply a quarter of world demand, refused to disclose the payments they made to the government, the committee said in the report, which was presented to parliament yesterday in Harare, the capital.

“There are very serious discrepancies between what government receives from the sector and what the diamond mining companies claim to have remitted to Treasury,” the committee said.

Chris Gavrilides, the managing director of Johannesburg-based New Reclamation Corp., which has a stake in Mbada, referred queries to Jeremy Joffe, the chief executive officer. Joffe was not in his office today and didn’t immediately reply to an e-mailed request for comment.

Prince Mupazviriho, permanent secretary at Zimbabwe’s Ministry of Mines and Mining Development, said he hadn’t seen the report.

Legal Framework

“The diamond industry is operating without a clear legal framework and administration to provide assurance that the peoples’ resources are being protected,” the committee said.

Non-profit groups including Partnership Africa Canada and Human Rights Watch have said in reports that diamonds from Marange are being smuggled across the border to Mozambique.

New York-based Human Rights Watch said the military killed 200 illegal miners at Marange in 2008. The government denied this.

The committee consists of 22 members of parliament from both President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front and the Movement for Democratic Change of Prime Minister Morgan Tsvangirai. It was denied access to the Marange field for three years and couldn’t hold a public hearing because of security concerns, it said. Large parts of Marange are occupied by the military, according to the report.

Parliamentary Accountability

The “executive and its officers were unwilling to be held accountable by parliament,” it said. Officials from some companies had to be forced to appear before the committee and the Mines Ministry seemed to discourage their appearance, it said.

Mbada is an equally owned joint venture between New Reclamation subsidiary Grandwell Holdings Ltd. and Marange Resources Ltd., a state-owned company, according to New Reclamation’s website.

The other mining companies operating on the field are Anjin Mining, a Chinese company, and Diamond Mining Co., known as DMC, the committee said.

Zimbabwe’s diamond production rose to 12 million carats last year from 8.72 million carats in 2011 and is forecast to be 16.9 million carats this year, the committee said. Exports climbed to $563.6 million last year from $233.7 million in 2011.

Prior Experience

The selection of Reclamation and a company known as Core Mining to form ventures with the government’s Zimbabwe Mining Development Corp. were “not done in accordance with any known precedents,” the committee said.

It questioned why the companies were selected when they had no prior experience in the industry, a point noted by a due diligence study by the ZMDC.

An attempted sale of diamonds by Mbada in January 2010 violated international and national law, it said. Grandwell also gets a 5 percent management fee from revenue, which is “not in the best interests of the country.”

The committee also criticized the way a relocation of local community members was undertaken.

“It was left to the discretion of the mining houses,” it said. “During the committee’s field visit in 2012, DMC stated that its primary purpose was to make profits and the exhumation and re-burial of the communities’ graves was secondary.”

The committee urged the demilitarization of Marange and said retroactive action should be taken against some companies.

“Stern measures should be taken by the Ministry of Mines to discipline any company in mining of diamonds for the illegal attempt to auction or illegally sell the country’s diamonds,” it said. “Government has the right to apply sanctions retroactively to discipline a mining company just as government has the right to renegotiate dubious mining companies.”

To contact the reporters on this story: Godfrey Marawanyika in Johannesburg at gmarawanyika@bloomberg.net; Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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