Zimbabwe diamond company failing transparency test

The Auditor General noted that ZCDC made a loss of $7 445 606, negative working capital amounting to $7 981 756 and a total negative equity of $7 445  576.

Even worse, ZCDC is owed $20 307  027 by related companies – SOEs that have closed. That figure could not be verified by the Auditor General.

The fact that ZCDC’s owed $20 million by related companies shows that the mismanagement of SOEs is contagious. There is a huge risk that ZCDC could have been used as a conduit to milk public funds through propping up companies that have since closed.

The “missing $15 billion” from Marange diamonds has attracted great public attention, overshadowing environmental issues, rehabilitation and mine closures.

The Auditor General failed to verify $11 068 975, a provision for rehabilitation of dumps left by the companies that used to mine diamonds in Marange.

ZCDC’s response was that an expert will be hired to establish the budget needed to rehabilitate the mines and funding will be requested from the shareholder – government.

As a regulator and player in Marange diamond mining operations, the state should lead by example. Unfortunately, the situation at ZCDC is painting a picture that is no different from the careless opulence of previous operators and disregard for accountability and corporate governance norms.

The Auditor General noted the Audit and Risk committee and Human Resource and Remuneration committees were not constituted properly in line with best practice on corporate governance. The chief executive and the executive audit officer are part of the Audit and Risk committee, while the CE and the human resource executive are part of the Human Resource and Remuneration Committee.

This compromises the fundamental oversight role of such committees as well as bringing reputational risks. President Emmerson Mnangagwa has repeatedly trumpeted a desire to fight corruption, the scourge stifling Zimbabwe’s economic growth. This war cannot be achieved without good corporate governance.

The Auditor General’s report is silent on the widely reported illegal diamond mining activities in Marange. Such activities are a loss to ZCDC and ultimately, government.

As part of audit preparations, the Auditor is required to gain an understanding of the context under which the entity that he or she is planning to audit is operating under. Recently, ZCDC announced that it is planning to empower the community through artisanal mining to curb illegal mining activities and attendant losses through smuggling of diamonds.

The business case, especially in the diamond sector is growing beyond profitability. Because diamond industry is all about global value chain systems, from mining, cleaning and sorting, marketing of rough diamonds, cutting and polishing, jewellery production and marketing, consumer behaviour cannot be ignored.

Increasingly, diamond consumers are demanding that beauty of diamonds should be preserved by ethically sourced diamonds which deliver sustainable development to communities impacted by mining operations.

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