Are Zimbabweans deluding themselves over missing $15 billion diamond revenue?

Marange’s diamond are generally small, with a brownish-green, somewhat tarnished tint. A large percentage of Marange’s production goes into industrial use.

However, the stones have a lower cost of production per carat, in the $20-$45 range, significantly lower than the global average of $100 per carat, according to industry expert Paul Zimnisky.

This is largely due to the fact that the Marange diamonds are alluvial and are easily extractable, compared to deposits which require large-scale commercial open-pit or underground mining.

By 2013, mining companies operating in Marange were already indicating that the near-surface deposits in their concessions were exhausted and the firms were considering the economy of mining deeper-lying conglomerate rocks.

Between 2010, when Zimbabwe’s diamond production surged 775 percent to 8.4 million carats, and 2012, when it reached its peak output of 12.1 million carats, former Mines Minister, Obert Mpofu, repeatedly claimed the country would become the world’s top diamond producer. Mpofu projected 40 million carat output annually, which would earn Zimbabwe an average $2 billion, at the $50 carat price.

However, output has been trending downward since 2012, for a variety of reasons, including diminishing alluvial deposits.

To sustain the $15 billion revenue claim by Mugabe, Zimbabwe would have produced at least 40 million carats annually, between 2009 and 2015, the year preceding his claim.

This level of production would not have escaped the global diamond industry, which is always on the look-out for supply dynamics, given the impact of a supply glut on prices.

Industry figures do not show any impact in global rough diamond production since Zimbabwe entered the industry in 2009.

Conclusion

Zimbabwe did not produce diamonds worth $15 billion.

There is no evidence to back up Mugabe’s claim, which has since been taken up and repeated by media, politicians and civic society groups, that Zimbabwe earned “15 or more billion dollars” from Marange diamond sales.

The global rough diamond market averaged $12.63 billion between 2009 and 2015, with production averaging 126 million carats. During that time, Zimbabwe produced a cumulative 50 million carats, earning just over $2.4 billion for the seven years under review, according to data provided by industry watchdog, Kimberley Process Certification Scheme as well as other industry players.

Critics of the Kimberley Process Certification Scheme have, over the years, pointed out loopholes in the watchdog’s systems, but their indications are that any leaks from the process amount to trades worth millions of dollars, not billions.

To reach the level of earnings claimed by Mugabe, of $15 billion or more, Zimbabwe would have produced an average 40 million carats annually, output which could not go unnoticed in the industry, given its impact on global supply.

Zimbabwe’s level of production implied in the claim would have seen the country supplanting Russia, currently the world’s largest producer, whose output averaged37 million carats in the period under review.

By Nelson Banya for Zimfact

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