Cranswick said Gono, Grace and Mujuru were looting diamonds at Marange

VZCZCXRO8732 OO RUEHDU RUEHMR RUEHRN DE RUEHSB #1016/01 3171114 ZNY CCCCC ZZH O 121114Z NOV 08 FM AMEMBASSY HARARE TO RUEHC/SECSTATE WASHDC IMMEDIATE 3681 INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE RUEHAR/AMEMBASSY ACCRA 2422 RUEHDS/AMEMBASSY ADDIS ABABA 2541 RUEHRL/AMEMBASSY BERLIN 1041 RUEHBY/AMEMBASSY CANBERRA 1817 RUEHDK/AMEMBASSY DAKAR 2172 RUEHKM/AMEMBASSY KAMPALA 2597 RUEHNR/AMEMBASSY NAIROBI 5025 RUEAIIA/CIA WASHDC RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK RHMFISS/EUCOM POLAD VAIHINGEN GE RHEFDIA/DIA WASHDC RUEHGV/USMISSION GENEVA 1690 RHEHAAA/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 05 HARARE 001016    SIPDIS    AF/S FOR B. WALCH  DRL FOR N. WILETT  ADDIS ABABA FOR USAU  ADDIS ABABA FOR ACSS  STATE PASS TO USAID FOR E. LOKEN AND L. DOBBINS  STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN    E.O. 12958: DECL: 11/12/2018  TAGS: PGOV EMIN ASEC PHUM ZI SUBJECT: REGIME ELITES LOOTING DEADLY DIAMOND FIELD    REF: 2007 HARARE 319    Classified By: Ambassador James D. McGee for reason 1.4 (d)    -------  SUMMARY  -------    ¶1.  (C) The CEO of a British mining company described to us  how high-ranking Zimbabwean government officials and  well-connected elites are generating millions of dollars in  personal income by hiring teams of diggers to hand-extract  diamonds from the Chiadzwa mine in eastern Zimbabwe.  They  are selling the undocumented diamonds to a mix of foreign  buyers including Belgians, Israelis, Lebanese, Russians and  South Africans who smuggle them out of the country for  cutting and resale elsewhere.  Despite efforts to control the  diamond site with police, the prospect of accessible diamonds  lying just beneath the soil's surface has attracted a swarm  of several thousand local and foreign diggers.  The police  response has been violent, with a handful of homicides  reported each week, though that number could grow as diggers  arm themselves and attract police and army deserters to their  ranks.  END SUMMARY    ---------------------------------------  High-Ranking Officials Trading Diamonds  ---------------------------------------    ¶2.  (C) On November 6, poloff met with Andrew Cranswick, the  CEO of African Consolidated Resources (ACR), the  publicly-traded British firm that had its Chiadzwa diamond  claim in the Marange district of Manicaland seized by the  government parastatal Minerals Marketing Corporation of  Zimbabwe (MMCZ) in 2006 (reftel).  According to Cranswick,  there is a small group of high-ranking Zimbabwean officials  who have been extracting tremendous diamond profits from  Chiadzwa.  Cranswick said that RBZ Governor Gideon Gono,  Grace Mugabe, wife of President Robert Mugabe, Vice President  Joyce Mujuru, Mines and Mining Development Minister Amos  Midzi, General Constantine Chiwenga and wife Jocelyn, CIO  Director Happyton Bonyongwe, Manicaland Governor Chris  Mushowe, and several white Zimbabweans, including Ken Sharpe,  Greg Scott, and Hendrik O,Neill, are all involved in the  Marange diamond trade.    ¶3.  (C) On October 14, econ specialist traveled to the  periphery of the no-go area around the Chiadzwa diamond site  located about 60 km southwest of Mutare in Manicaland.  Repeated inquiries about who was involved in the diamond  trade elicited many of the same names mentioned by Cranswick.    ¶4.  (C) Econ specialist also met with Manatsawani Mutasa, a  ZANU-PF Central Committee member and Manicaland resident, who  added that Justice Minister Patrick Chinamasa, Women's  Affairs Minister Oppah Muchinguri, and Sabina Mugabe--sister  of President Mugabe--have also been profiting from the  purchase and sale of Chiadzwa diamonds.    ------------------------------------  How the Chiadzwa Diamond Trade Works  ------------------------------------    ¶5.  (C) The GOZ possesses the diamond mining rights to  Chiadzwa, but the Zimbabwe Mining Development Corporation  (ZMDC) does not do any extraction itself.  The ZMDC brought  in some mining equipment in 2006 after seizing the mining  rights from ACR, but their efforts were minimal and soon  halted altogether.  According to Cranswick, all extraction is  now being done by hand panners who merely sift the top meter  of soil.  Some of these panners operate in teams that sell    HARARE 00001016  002 OF 005      their diamonds to representatives of the above-named  officials and connected elites.  Other panners are individual  operators who merely sell to the highest bidder.  Often the  panners who are affiliated with a particular regime buyer,  will only sell a portion of their diamonds to that person's  representative, holding back the remainder to sell for higher  prices to foreign buyers offering hard currency.    ¶6.  (C) The diamonds that are sold to regime members and  elites are sold for freshly printed Zimbabwean notes issued  by the RBZ.  These diamonds are aggregated and resold to  foreign buyers for US dollars or rand in nearby Mutare, in  Harare, over the border in the Mozambican towns of Manica and  Chimoio, or even in South Africa.  (NOTE:  Econ specialist  reported that Mutare was awash with diamond money. The  Holiday Inn was booked with guests checking in for weeks at a  time. Food prices in shops near Marange were exorbitant, with  meat prices four times higher than in Harare.  END NOTE.)    ¶7.  (C) The diamonds that are not sold to regime members and  elites, but instead are sold directly to foreign buyers,  actually constitute the majority of the diamond trade in  Chiadzwa.  Cranswick said that around 85 percent of the  diamonds extracted from Chiadzwa are sold directly to foreign  buyers.  Even so, he conservatively estimated that Mujuru,  Gono and the rest were probably each making several hundred  thousand dollars a month.    ¶8.  (C) Whether bought first by regime members or not,  eventually the diamonds are sold to a mix of Belgians,  Israelis, Lebanese (the largest contingent), Russians, and  South Africans.  A well-known buyer named Gonyeti fronts for  Gono, as do two other buyers named Tendai Makurumidze and  Takunda Nyaguze, according to Mutasa.  Once sold to  foreigners, the majority of the diamonds are smuggled to  Dubai and sold at the Dubai Multi Commodities Centre  Authority, a dedicated economic free-trade zone created in  2002 for the exchange of metals and commodities, most notably  gold and diamonds.  Although Zimbabwe is a participant in the  Kimberley process, the diamonds from Chiadzwa are  undocumented and therefore are not in compliance with  Kimberley, which requires loose uncut diamonds to be  certified.    ¶9.  (C) The highest quality diamonds are not sent to Dubai,  but are shipped to Belgium, Israel, or South Africa for  cutting.  Despite this wide dispersal, Chiadzwa diamonds are  very distinctive because of their age, color, and clarity and  can easily be traced back to the Marange mine, according to  Cranswick.  He implicated Ernie Blom, president of South  Africa's Diamond Merchants Association in the illicit trade  of Chiadzwa diamonds, and said that Blom had been known to  boast of his involvement in illegal Zimbabwean diamonds.  When asked why purportedly reputable diamond dealers would  involve themselves in Chiadzwa, Cranswick said that the site  was "massive" with tremendous profit potential that was  attracting numerous buyers.  One such group consisted of  Russians who had recently bought US$500,000 worth of diamonds  at an MMCZ auction, paying US$29/carat.  They bought eight to  ten carat rough diamonds, five to ten percent of which were  gem quality.    --------------------------------  Diamond Trade a Violent Business  --------------------------------    ¶10.  (C) The diamond frenzy in Chiadzwa has led to hundreds  and possibly thousands of homicides.  Word of easy diamonds  spurred a rush of Zimbabwean and foreign diggers to the area  including Angolans, Congolese, Mozambicans, South Africans  and Zambians, as well as diggers from as far away as Sierra    HARARE 00001016  003 OF 005      Leone and Cote D'Ivoire  Cranswick estimated there are  currently around three or four thousand diggers swarming over  the 70 hectare Chiadzwa site.  The police have unsuccessfully  tried to prevent the site from becoming overrun, and  routinely use live fire to chase away diggers.  Anyone trying  to enter the area has to present a Zimbabwean national  identification card with a registration number that ends in  "75", signifying the person is a resident of the Mutare  region of Manicaland.    ¶11.  (C) During the first weekend of November, police killed  at least five panners in Chiadzwa, according to the on-line  newspaper Zimbabwe Times.  While usually operating on foot  with attack dogs, this time the police used a helicopter to  shoot at panners.  Passmore Nyakureba, a lawyer with the  Zimbabwe Lawyers for Human Rights said, "This has become an  everyday scenario.  Up to five people die every week as a  result of being shot at by police or after being bitten by  dogs."  Cranswick said that at the peak of the frenzy in  2007, up to a hundred panners were shot in a week.    ¶12.  (C) In response to aggressive police action, diggers  began arming themselves with handguns and in some cases  automatic weapons.  They also formed loose gangs in an  attempt to protect themselves as well as "claimed" areas.  Cranswick said that some members of the police and army have  deserted in order to join the digging, and they typically  brought their firearms with them.  Some former police even  still wear their uniforms as they search for diamonds.    -------------------------------------  Police Corrupted; Community Destroyed  -------------------------------------    ¶13.  (C) Cranswick said that the police were rotated into the  area on two-week shifts to control the mining and keep  unauthorized diggers out, but they were immediately  corrupted.  Police officers routinely charged 100 rand or  US$10 a person for a day's digging in Chiadzwa.  The military  has largely avoided the area out of fear that commanding  officers would lose control of their troops, according to  Cranswick.    ¶14.  (C) Cranswick maintained that local chiefs were on ACR's  side in its pending court battle to win back its claim.  They  realized that the "curse" of diamonds had wreaked havoc in  the community. Children were no longer attending school, the  environmental degradation was severe, lawlessness and  violence reigned, and the community was not benefiting from  the resource.  According to an independent weekly newspaper,  three quarters of the schools in Marange, Buhera, and  Chimanimani districts failed to open this term because  teachers and students alike were digging for diamonds.    ----------------  What's At Stake?  ----------------    ¶15.  (C) Chiadzwa has the potential of being a major source  of industrial and gem quality diamonds.  What makes it so  commercially valuable is that it possesses a diverse mix of  different size and color stones, all within just a few meters  of the surface.  It also has a high carat per hundred tons  (CPHT) ratio, a measure the industry uses to characterize the  diamond concentration.  Cranswick told us he was  confidentially shown a report prepared for the De Beers  Corporation by noted geologist John Ward.  The report  estimated that Chiadzwa had a CPHT of over 1,000.  By  comparison, the Rio Tinto/Rio Zimbabwe-owned Murowa diamond  mine near Zvishavane in Midlands province has a CPHT of 120.      HARARE 00001016  004 OF 005      ¶16.  (C) Eye witnesses and panners told us that they were  extracting both industrial and gem quality stones, but  predominantly the former.  Cranswick believed that the site  had 30 to 40 percent industrial diamonds and the rest gem  quality, including very good quality five to 30 carat colored  diamonds.  In his view, the area could be commercially  exploited for five to 25 years, including excavation of  diamond yielding hard rock that ran deeper than the one meter  depth currently being worked.  Econ specialist also was told  that another diamond field was discovered this year within  five km of Chiadzwa at the village of Chirasika.  Panners had  begun working the site and it had not yet become a  police-restricted area.  We have no estimates for the  potential of this new diamond discovery.    ¶17.  (C) On October 27, Gono publicly declared that the  Zimbabwean economy could be turned around by stemming losses  caused by illegal mining at Chiadzwa.  According to Gono, "A  reliable estimate shows that US$1.2 billion per month would  be realized from diamond sales in the country, enough to  solve the economic challenges the country is currently  facing."  Cranswick said that while the estimate is probably  exaggerated, Gono may be looking for a large one time  dividend by selling a share of the mine or the mining rights  to an outside investor.  This would dwarf the relatively  small profits he is now accruing from the mine.    ¶18.  (C) ACR has offered the government a deal in which ACR  would take a 49 percent share of all diamond proceeds and  give the rest to the GOZ, but Cranswick did not seem  optimistic that the government would accept the deal.    -----------------------------  Two Other Major Diamond Mines  -----------------------------    ¶19.  (U) Murowa is a well-regulated mine operated by the  British multinational mining giant Rio Tinto, which since  2004 has held a 78 percent share in the open-pit Murowa  diamond mine in Zvishavane district, in southern Masvingo  province.  Murowa is a deep kimberlitic deposit that requires  heavy machinery to extract the soil and rock.    ¶20.  (U) River Ranch is partially owned by retired General  Solomon Mujuru (husband of Vice President Joyce Mujuru) and  is located in Beitbridge in Matabeleland South.  Mujuru  gained a 20 percent stake in the mine at the expense of a  local company, Bubye Minerals, which was pushed out to  Mujuru's benefit.  Bubye Minerals contested the ownership  change, but was thwarted by the Zimbabwean courts.  It is  unclear if Mujuru purchased his stake.    -------  COMMENT  -------    ¶21.  (C) In a country filled with corrupt schemes, the  diamond business in Zimbabwe is one of the dirtiest.  Mining  in general remains the largest single source of foreign  exchange, but the potential of Chiadzwa is being lost to  Zimbabwean corruption.  While Gono talks about using diamonds  to stabilize the Zimbabwean economy, he would only do so if  he thought he could personally make more in the process.  At  present, police trying to bring order to Chiadzwa are  benefiting Zimbabwean officials who see the diamond field as  a new source of illegitimate income; the people of Zimbabwe  are seeing little return.    ¶22.  (C) It is also clear that Cranswick is a businessman  trying to find any pressure point he can through which to  leverage his own claim.  At the same time, he sheds light on    HARARE 00001016  005 OF 005      an industry that is enriching many of the same old corrupt  Zimbabwean elite--and causing violence and deaths that so far  have received little attention.  END COMMENT.    MCGEE