Zimbabwe turns to Dubai deals
Arab emirate is a diamond conduit, write Simeon Kerr and Andrew England
ZIMBABWE has found a crucial route to global markets. Dubai has become a significant conduit for legal exports of rough diamonds.
FOR years, President Robert Mugabe’s Zimbabwe has faced opprobrium for its human rights abuses, farm seizures and political repression. International sanctions have targeted the president’s inner circle and the country’s economic pillars such as the diamond industry, revenue from which has allegedly been used to finance the ruling party and security forces.
But the country has found a crucial route to global markets. Over the past five years, Dubai — known for its relentless pursuit of new markets and willingness to deal with all manner of regimes — has become a significant conduit for legal Zimbabwean exports of rough diamonds. “Dubai was our saviour,” said Christopher Mutsvanga, chairman of the Minerals Marketing Corporation of Zimbabwe, which is under US sanctions.
According to the latest available figures, Dubai imported $408m worth of Zimbabwean diamonds in 2011, up from $1.7m in 2008. While it is not illegal for Dubai to buy them, some gems from Zimbabwe’s Marange fields — which account for the vast majority of Zimbabwean stones — are tantamount to “conflict diamonds”, human rights activists say.
With the diamond fields allegedly under the control of the military — which is loyal to Mr Mugabe’s Zanu (PF) party — his opponents say profit is siphoned off to fund the security forces, which have been repeatedly accused of human rights abuses.
For his part, Obert Mpofu, Zimbabwe’s mines minister, says sanctions are “politically motivated” and the measures of “former colonisers”.
Most rough stones that arrive in Dubai are re-exported for polishing, mainly to the manufacturing centre of India. Other destinations include Belgium, China and Thailand.
In 2011, the Kimberley Process, a cooperative system between 80 states to certify that diamonds are not contributing to conflict, approved Zimbabwean gems for sale.
One of its founders, Global Witness, which campaigns against the abuse of natural resources to fund repressive regimes, then withdrew, saying the process had become an accomplice to diamond laundering.
Global Witness says there is not enough oversight of the provenance of stones arriving in western markets. The pressure group says Dubai has become a popular staging post for such “tainted goods”, allowing companies to avoid scrutiny in western markets by reexporting gemstones via the emirate.
“Dubai is crucial,” says Emily Armistead of Global Witness. “It is not covered by sanctions and so it’s an easy route for diamonds to pass through and avoid these restrictions.”
For Zimbabwe’s cash-strapped government, diamond sales should be an important source of revenue. However, Finance Minister Tendai Biti, who is also a member of the Movement for Democratic Change party (MDC), which shares power with Zanu (PF), regularly complains about the murkiness of the industry and the small amount it contributes to state coffers. Mr Biti has battled for increased transparency in the management of diamond revenue without success, underscoring the limited powers of MDC members in the unity government.
Last year, the country exported $760m worth of diamonds — its secondbiggest export earner after tobacco — while the government’s official take was $84m. Opposition politicians fear the diamond money will go towards keeping the security forces on Mr Mugabe’s side and could be used to help to fund the Zanu (PF) political campaign.
Global Witness says its investigations have revealed links between some joint-venture diamond mining companies and the military, police and intelligence organisations loyal to Mr Mugabe. “Global Witness’s investigations point to a serious risk that diamond revenues could be used to fund violence in this year’s election,” the advocacy group said this year.
Officials in Dubai say they did not import Zimbabwean gems when the Kimberley Process restricted Marange gem trade. They also deny claims made several years ago by its former CE that the Dubai bourse had turned a blind eye to “conflict diamonds”.
The trade with Zimbabwe comes as Dubai’s share of the global gem business has risen. Larger volumes from bigger producers such as Russia, Botswana and Angola has pushed the value of the diamond trade in Dubai from negligible rates in 2005, when the emirate set up its diamond bourse, to $39bn in 2011.
The diamond bourse is in Almas Tower, the region’s tallest commercial tower, part of the fast-growing Dubai Multi Commodities Centre, which boasts five new corporate registrations a day. Zimbabwe’s Mr Mpofu says the government is setting up an office at the centre to boost exports.
The centre plans more incentives to boost the trade in gems. “Dubai has a clear African strategy,” says Peter Meeus, chairman of the Dubai Diamond Exchange, home to 600 diamond companies. “We are here to assist African states to trade here,” says Malcolm Wall Morris, CEO of the centre.
This year, the European Union suspended most sanctions after voters Zimbabwe’s approved a new constitution, limiting presidential powers and paving the way for elections. For now, sanctions remain on the Zimbabwe Mining Development Corporation, the state-run diamond mining company, though these could be lifted after elections later this year amid pressure from Belgium, home to the world’s biggest diamond trading centre in Antwerp.
The deepening links between Dubai and sub-Saharan Africa go beyond precious stones, with trade rising 56% between 2010 and 2011.
Not only has the emirate become a go-to hub for African business, but many Asian firms also now choose Dubai as a bridgehead into sub-Saharan Africa, observers say, as well as a Middle East centre.
Similarly, African companies are opening offices in Dubai as they seek easier finance and faster access to Asia, says Farooq Siddiqi, Standard Chartered’s regional head of transaction banking. Three big Chinese banks have moved to Dubai, joining other international lenders that use their global presence to finance Chinese construction and manufacturing companies, according to Ben Simpfendorfer of consultancy Silk Road Associates. “Really, Dubai should be Asia’s banker for Africa,” he said. Financial Times