It was interesting reading an article, which cited the Zimbabwean mines minister Obert Mpofu as saying that the southern African country was set to “dominate” the global diamond market.
His assertion was based on the latest Kimberly Process (KP) data, which showed Zimbabwe as the fifth biggest producer of diamonds in the world after Russia, Botswana, the Democratic Republic of Congo and Canada.
It produced 8.5 million carats in 2011 from 8.4 million carats recorded in 2010.
“We were recently given certification by the KP (to export diamonds), but we have already shaken the world market both in terms of production and demand,” Mpofu was quoted as saying by The Herald newspaper.
“Our gems are a force to reckon with. If we had not been hindered in selling our diamonds in the past years by the West, we could be one of the top countries in the world in terms of diamond production.” It is true that there was high demand for Marange diamonds, particularly in the United Arab Emirates, but this does not mean that Zimbabwe’s gems were set to “dominate” the world.
Judging with the figures released by KP, it is safe to conclude that diamonds from Marange were regarded to be of low quality. Harare exported 7.7 million carats in 2011 worth $422.9 million at an average price of $54.31 per carat.
This is shockingly poor when one looks at Namibia, which sold 1.4 million carats at an average price of $572.93 per carat helping it realise $800 million during the same period under consideration. South Africa also exported 6.6 million carats (at an average price of $205.94) worth $1.3 billion. The reason why diamonds from Namibia and South Africa were fetching higher prices per carat showed that they were of a higher grade.
We are not even comparing Zimbabwe’s diamonds with those from Botswana, as doing so is like comparing a teaspoon and a shovel.
However, the comparison is too tempting to ignore. Botswana’s diamonds recorded an average price of $217.77 per carat in 2011 ahead of Russia’s $117.82 per carat. By the way Russia is the world’s leading diamond producer by volume.
Zimbabweans cannot afford to beat their chests like Tarzan just because their country produced diamonds that saw it being listed as the world’s fifth best diamond producer by volume. What matters at the end of the day is the value of the diamonds a country produces.
Although maybe not the best person to comment about Zimbabwe impartially, De Beers chief executive Philippe Mellier said last February that the large quantities of rough diamonds from Marange mines would have little impact on demand for De Beers goods or its prices. “There will be competition from Zimbabwe but I don’t think these diamonds will have a material impact on the market,” he told Rapaport. “We know the Zimbabwe stones are of a lower quality and certainly compared to the quality of diamonds that De Beers is offering, I think we can compete quite nicely.”
Sino-Zimbabwe Diamonds, a defunct joint venture between the Zimbabwe Development Corporation and Chinese investors ceased operations in Marange saying that their claim did not have enough and quality diamonds for viable commercial mining. “We have finished testing the potential of the block (claim). The diamonds are not viable for economic mining. We found that the diamond quality in the area is poor. We did not expect all of them would be industrial,” said Grant Rau, who was Sino-Zim’s chief geologist. However, ZMDC chairman, Godwills Masimirembwa said the area had potential like any other diamond claims in Marange. “The way forward is for us and Sino-Zimbabwe to work together and carry out further exploration. The area available for exploration is huge. There are diamonds in this area but the area that has been explored is very small. The nature of this resource requires exploration and money has to be sunk into exploration,” he said.
Blame game
Instead of accepting the reality that the majority of Marange diamonds were of low quality, minister Mpofu said that Zimbabwe could not optimise benefits from its gems because of sanctions imposed by the West.
The U.S. and its allies imposed sanctions on firms mining Marange diamonds in partnership with ZMDC accusing them of “propping up the repressive machinery” of President Robert Mugabe’s political party. “If you look at the price of our diamonds captured in the KP report, one can easily see that we are selling the diamonds at a low price as a result of the sanctions that have been imposed on our diamond companies,” he said. “It has become difficult for our diamond-producing companies in [Marange] to sell their gems despite the KP certification.”
Seriously, how do sanctions affect the price of Zimbabwe’s diamonds?
Besides, the world thought that sanctions on Marange diamonds were somewhat being circumvented as confirmed by minister Mpofu in an exclusive interview with the Cable News Network (CNN) last March. He said that despite the West’s effort to cripple the economy through the placement of diamond mining firms under sanctions, Zimbabwe will focus on trade with friendly countries on a win-win basis. “The country’s mining companies are on the sanctions list. Marange Resources, Mbada and ZMDC are all under sanctions,” Mpofu said. “We will do business with friendly countries but if we start telling people who we have sold the diamonds to and at how much, then what do you expect to happen to our companies. They (West) will freeze their money and as I speak, ZMDC has its money frozen by the United States.”
Bragging
It must be very painful to see how reality can be stubborn sometimes as we remember very well what minister Mpofu said last year when KP lifted a ban on the export of diamonds from Marange. He said then that Zimbabwe would no longer need to beg for assistance from donors as it would expect a $2 billion boost to its annual budget from the gems.
This in a way gave a false hope to many a people (including Finance minister Tendai Biti) who desperately needed such news given the economic horror the country went through for over a decade.
However, as Zimbabwe placed its diamonds under the hammer, the real status of Marange gems emerged as it failed to bring the billions that had been lavishly projected.
For some, the poor inflow was testimony of how the diamond revenue was being used to finance parallel government activities. Whatever the case maybe, one can convincingly say that Marange diamonds were currently selling for a pittance because they were of a poor grade not because of sanctions.
The same argument can be put forward when considering how DRC’s diamonds fared last year. The central African country was the third largest diamond producer in the world by volume having recorded an output of 19.2 million carats in 2011 and managed to export 18.8 million carats (at an average price of $17.77 per carat) worth $334 million. Despite dwarfing Zimbabwe in terms of the volume of gems produced and exported, DRC realised depressed revenues, thereby cementing the argument that with diamonds it is all about quality not necessarily quantity.
No amount of propaganda will change this fact.
