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Blood Diamonds Are Mugabe’s Best Friend

Tuesday, February 14, 2012

The Kimberly Process has become a whitewash; Roger Bate reports from Africa.

CAPE TOWN, South Africa—Between 2000 and 2008, Zimbabwe collapsed.

The confiscation of white-owned farms precipitated the destruction of its economy; mad monetary policies led to the worst hyperinflation in Africa’s history; politically manipulated food distribution caused malnutrition; and, with woeful sanitation infrastructure, the already-weakened population succumbed to a cholera epidemic, plunging life expectancy to 35 years of age.

But in 2008, a political compromise was reached between President Robert Mugabe of the African National Union-Patriotic Front (ZANU-PF) and Prime Minister Morgan Tsvangirai of the opposition party, Movement for Democratic Change (MDC). They formed a power-sharing coalition, stabilized prices, and made small steps towards democracy. These steps resulted in aid returning to the country, thus ending the cholera epidemic and increasing life expectancy to just over 40 years. And while most of the credit goes to the MDC, at least ZANU-PF didn’t stand in the way.

But a seeming lull in the violence may not augur a stable and prosperous future, because Mugabe and the ZANU-PF elite may have a more devious plan to recapture full power by the end of the year.

The Diamond Dimension

The Kimberly Process has effectively ‘aided and abetted the return of the blood diamond…. ordinary Zimbabweans will pay the price. It's now a myth that there are any controls over diamonds.’

Zimbabwe’s capital city, Harare, looks far more prosperous than just a few years ago. Smart new vehicles are everywhere, its restaurants are full, and construction is underway on luxury houses in the suburbs. In the few good hotels, and in airport lounges, there are numerous businessmen, notably from China and Eastern Europe, apparently engaging in earnest conversation about business opportunities.

In rapidly emerging economies, wealth distribution can be very unequal, so the sight of conspicuous consumption by Zimbabwe’s elite is distasteful to many, but is not unexpected nor inherently worrying. Instead, Zimbabwe’s problem is unbalanced economic growth; most of the conspicuous consumption is driven by a single sector—the flourishing diamond trade.

The growth imbalance is made worse by Mugabe’s cronies, who are siphoning off funds from the Marange diamond mines in the east of the country. Tendai Biti, Zimbabwe’s finance minister and a minister of parliament (MP) of the MDC, issued a budget report claiming that the treasury was underpaid from the diamond business by at least $60 million last year. That is a conservative estimate.

MDC MP Eddie Cross told the Zimbabwe parliament last fall that the production records he had seen of one company in Marange indicate that at least $1.4 billion in diamonds was mined. Yet this is over four times more than the mining ministry reported for all mining activities in those fields.

The Kimberly Compromise

A seeming lull in the violence may not augur a stable and prosperous future, because Mugabe and the ZANU-PF elite may have a more devious plan to recapture full power by the end of the year.

Mugabe’s mining minister, ZANU-PF’s Obert Mpofu, says that everything mined has been “accounted for,” and an important independent organization apparently agrees with him. The Kimberly Process is a coalition of governments, producers, and political activists that aims to limit diamond mining in conflict areas and to stop the proceeds of illegal mining from financing bloodshed. The Process approves the mining activities of the Marange fields. Given the evidence of torture of workers at several of the Marange mines, some caught on film by the BBC, and underreporting of income from Marange, it is bizarre that the Process certifies the fields’ diamond sales.

Global Witness, a human rights pressure group, was one of the main drivers of the Kimberly Process, but left it last November because the Process allowed over 4 million carats of Marange diamonds to be sold at numerous auctions. Local sources, who wish to remain anonymous for security fears, claim that the resulting funds are being used by Mugabe’s cronies to position themselves to use violence to ensure they retain power in future elections—and the signs are that Mugabe wants that election this year.

It is common knowledge in Harare that, last November, military leaders loyal to Mugabe bought a large shipment of weapons and equipment from China. Mugabe's secret police was able to buy hundreds of vehicles and weapons from China even though it had no government budget to do so. And now Chinese interests in Marange have financed a new military academy. The main Chinese entity behind this, Anjin Investments, also announced that it was now the world's biggest diamond producer.

Global Witness is calling for a new international body to replace the Kimberly Process. In a statement, the group claims that the Kimberly Process has "dithered around wringing their hands, and now effectively have aided and abetted the return of the blood diamond…. ordinary Zimbabweans will pay the price. It's now a myth that there are any controls over diamonds."

The Kimberly Process was always flawed; it was never possible to control the flow of diamonds from poorly governed regions, since they are relatively easy to mine and very portable.

Zimbabwe’s finance minister issued a budget report claiming that the treasury was underpaid from the diamond business by at least $60 million last year.

But to provide international cover for sales of Zimbabwe’s diamonds, at a time when western nations have sanctions in place against the ZANU-PF elite, is worse than flawed— it is immoral, as it enables the politically powerful cronies of Mugabe to keep control and to make arbitrary decisions against foreign and domestic business. This deters investors, since any deals made with Mugabe’s men may be challenged by MDC or foreign governments in the near future. And, perhaps worse, it means that legitimate businessmen have to try to make rapid profits as opposed to making the best long-run decisions, because they know any deal may not last. All the uncertainty lowers the growth Zimbabwe desperately requires, and reduces the chance of a sustainable recovery.

While Global Witness may be overly optimistic about a successor to the Kimberly Process, it is right about one thing—the poor of Zimbabwe will suffer from the Kimberly Process whitewash. ZANU-PF’s elite and its allies are raking in the money, and the poor must fear that any hope of a recovery will be squashed by more election violence, probably within the next year.

Roger Bate is the Legatum Fellow at the American Enterprise Institute.

FURTHER READING: Bate also writes “Could Your Beautiful 'Bling' be Supporting a Brutal Dictator?” “Diamonds' Fake Provenance—Another Disaster for Zimbabwe,” and “An Impending Medicine Subsidy Fiasco.” With Richard Tren, Bate coauthors “Africans Tell the UN to Buzz Off,” “UN Falsehoods Cost Lives,” and “A Lethal Subsidy.”

Image by Rob Green / Bergman Group

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