Zimbabwe will not need the IMF if it sorts out its gold industry-Eddie Cross

Lessons from our Past

One thing that we all have to bear in mind is that if you do not remember the mistakes of our past, you condemn us to making the same mistakes again. This is true in life, true in business and in the life of nations. History is littered with examples of this truth.

If you read Greek history from several thousand years ago you quickly discover that not a great deal has changed since then, we are still the same sort of beings and still make the same mistakes. We should know by now what works and what does not. One thing that towers above most other truths is that you cannot buck the markets, the image of King Canute sitting on the beach and defying the tide is just one example of how stupid the powerful and the mighty can be.

In the early months after the turn of the Century, a de Beers geological team found evidence of diamonds in the alluvial sands of Marange in Zimbabwe. Previously we had found diamonds on the banks of the Limpopo and lower down the Sabi River Valley. This discovery was nothing like those, it was alluvial in character and in 2006, when the company decided to abandon their discovery a small group of investors in London took the claims over and within weeks found gem quality diamonds.

In days they fell afoul of the Ministry of Mines, the very agency that is supposed to protect our national interests. They were driven off their legally acquired claims and their discovery handed over to the people of the District. Well and good until those who were in power at that time discovered how rich the area really was. In 2008 the army moved in and forcibly removed thousands of small scale miners who were making a living by excavating the sands by hand and sorting out the diamonds for sale.

By 2012, half a dozen companies were on site and satellite images of the area showed over 60 000 hectares of alluvial deposits under exploitation. The same images showed an air strip with a control tower and heavy equipment on site. It was clear this was no small operation.

Information obtained from workers on site, revealed that the machines on site were processing thousands of tonnes of sand daily and producing millions of carats of diamonds. Over 80 per cent were of little value but 15 to 20 per cent were gem quality and one such diamond, a clear yellow stone, was sold in the Far East for US$11 million. A computer disc obtained from Mbada Diamonds controlled by the State President, showed that they were extracting diamonds in large quantities and listed the grades and prices obtained.

A simple extrapolation of these numbers across the whole site using the volumes being processed by the equipment involved, yielded an extraordinary result – annual production could exceed US$4 000 000 000. In the period from 2008 to 2017 it is now estimated that some US$23 billion in diamonds were extracted from this site. At its peak it was supplying a third of global demand and forced a worldwide reduction in diamond prices to the detriment of other producers, especially Botswana.

About a third of this value was absorbed by costs but it still meant that diamond revenue to the value of US$15 billion simply vanished. It caused a national scandal when the aging President of Zimbabwe, Mr Mugabe, stood up at a rally and said that this money was ‘missing’. They were never able to erase that mistake – but the ‘old Man’ – always very sharp in these matters was spot on.

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