President Robert Mugabe of Zimbabwe complained recently that his country has been robbed of as much as $15 billion in diamonds, leading to a shortfall in government revenue. His government has a plan to fix the problem. From now on, a government-owned monopoly will manage the diamond mining.
Under the new plan, the nine private mining companies operating in eastern Zimbabwe have been stripped of their mining licenses. A new company, called the Zimbabwe Consolidated Diamond Corporation (ZCDC), will take over mining. The government will own 50 percent in the ZCDC and the mining companies will split the remaining 50 percent.
Before getting to the merits of the plan, it’s worth noticing the first part of what Mugabe said—that his country has lost billions in diamond profits. Since 2008, when one of the world’s biggest diamond deposits was found in eastern Zimbabwe, the country’s diamonds have been systematically looted. The looting has deprived the Zimbabwean treasury of money it could have used to invest in the future of the impoverished country. Mugabe complains that the entire haul of stolen diamonds is worth $15 billion. In 2012, the advocacy group Partnership Africa Canada estimated that loss at $2 billion, a significantly lower number. In any case, Mugabe is at least being candid about the problem, and that candor makes him and his government serious about tackling it—right?
Don’t bet on it. Because the person who bears much of the responsibility for the theft of Zimbabwe’s diamonds is—you guessed it, Mugabe.
Mugabe is an authoritarian ruler who, at age 92, has led Zimbabwe for more than three decades. In 2008, following the discovery of one of the world’s biggest diamond deposits in eastern Zimbabwe, his army raided the diamond fields, massacred hundreds of people, and enslaved local residents as miners. When the international community objected, Mugabe’s government turned over the mining to private mining companies. That didn’t stop the looting, however. The companies are owned by combination of foreigners and senior government officials and military officers. It is believed that these companies have been stiffing the government by smuggling diamonds or by underreporting the value of the gems they export.
This looting has gone on right under Mugabe’s nose and probably with his blessing or involvement. In fact, illicit diamonds may have provided Mugabe’s political party, Zanu PF, with the funding it needed to rig the last presidential election. One columnist in a Zimbabwean newspaper joked that Mugabe would have needed to be in a coma the last few years to have missed the diamond looting that took place. As a former finance minister told the same newspaper: “If stealing was a religion, Zanu PF would be the Pope and Harare [Zimbabwe’s capital] the Vatican City.”
All of this is relevant background for considering the mining changes just announced. To be sure, in a different country, the analysis would center on different issues. There might be a discussion of the fairness to the companies who lost their mining licenses; those companies are challenging the government’s plan in court. There might be more focus on whether the government’s stake is too high or low or whether a public-private company can manage the mining effectively.
With respect to Zimbabwe, however, the main question is really whether this deal will reduce corruption or simply shift control of Zimbabwe’s diamonds from one group of looters to another. The plan assumes that the reason for the corruption is that the existing mining companies have cooked the books and have not allowed proper government oversight. But it’s not clear that more involvement by Mugabe’s corrupt government would solve the problem. Much of this comes down to the details—whether the people running the new mining company will be trustworthy and whether they will put in place controls to prevent theft. Mugabe is so elderly that he may not be in power a lot longer. But for now, given the history of his government and his party, it would be best to keep expectations low.