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AN INVESTIGATION INTO THE EFFICACY OF DIAMOND
BENEFICIATION AS A FISCAL RESOURCE MOBILISATION
STRATEGY: THE CASE OF ZIMBABWE
BY
NGONIDZASHE CLEMENT NZENZEMA
DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF TH E REQUIREMENTS FOR THE MASTER OF PUBLIC ADMINISTRATIO N DEGREE
DEPARTMENT OF POLITICAL AND ADMINISTRATIVE STUDIES
FACULTY OF SOCIAL STUDIES
UNIVERSITY OF ZIMBABWE
FEBRUARY 2015
ii
Abstract Diamond mining is a highly contested area in the world, more so in Zimbabwe, while diamond beneficiation remains even more enigmatic. While some developed countries have managed to convert their natural resource riches into profitable financial gains, African countries including Zimbabwe have continued facing numerous challenges in attaining the same benefits. In Zimbabwe these challenges are especially evident in terms of shrinking fiscal space, liquidity problems, low industrial development, unemployment & underemployment, and a serious lack of appropriate skills, technology and infrastructure. This is despite being richly endowed with all manner of valuable mineral resources and precious stones, principally diamonds. The very high value and worth of the diamond therefore makes it a suitable candidate for enhancing fiscal resource mobilization. This study therefore seeks to analyse the efficacy of diamond beneficiation on resource mobilization for Zimbabwe. It relies on a mixed methods approach to get a fully nuanced perspective of the role minerals beneficiation can play in enhancing economic development through providing financing. Using various instruments, among them the survey questionnaire, the personal interview, documentary search and observations from personal encounters, the study explores the concept of beneficiation, analyzing its heuristic value to expanding the country’s fiscal space. Additionally, theoretical, conceptual and analytical frameworks were used to interrogate issues within the study. Anthony Downs’ “Issue Attention Cycle” has great significance in explaining developments within the Zimbabwean mining sector. Rational Choice Theories of Economic Action/Behaviour of public officials helped to identify and characterize decision making styles in the mining industry. Resource Nationalism, the newly emergent policy paradigm which has gained currency in developing countries has led to citizens and governments alike increasingly calling for more local ownership, processing and value added benefits to accrue to them. The major findings from the study indicate that there is scope for diamond beneficiation to enhance the country’s fiscal space, as seen in countries like Botswana, Belgium, China, India and South Africa. Although benefits from minerals beneficiation and value addition may not be perceptibly visible in the short term, the multiplier effects are easier to observe in the medium to long term and fiscal benefits may be subsequently accrued from the same. Thus there are further benefits that accrue in the long term including, employment creation, forex earnings, technology, skills and industrial development and modernization of the local manufacturing industry, leading to multiple upstream, midstream and downstream benefits. Beyond these issues, it also emerged from the study that governance issues, principally transparency and accountability frameworks, are crucial to ensure adequate remittance of mineral revenues to the fiscus.
iii
Acknowledgements I am especially grateful for the opportunity that I was given to be a Teaching Assistant in the Department of Political and Administrative Studies. This opportunity not only opened my eyes to the joys of academic life but also gave me the financial freedom to complete my master’s degree studies. I learnt new things, impacted people’s lives and made friends. Now I am certain that I want to pursue an academic career.
Profound thanks go to my Supervisor Mr. Tawanda Zinyama who guided me throughout the course of my studies and the research process. May you continue to inspire others to always break new ground? Special mention goes to academic staff in the University of Zimbabwe’s Department of Political and Administrative Studies, particularly Professor Charity Manyeruke, Professor Gideon Zhou, Dr. Donald P. Chimanikire, Dr. Alfred G. Nhema, Dr. Musafare Takaendesa Mupanduki, Dr. Heather Chingono, Mr. Eldred V. Masunungure, Mr. Tawanda Zinyama and Mr. Alouis Madhekeni; and the administration staff Mr. Charles Tapiwa Rubaya, Ms. Shamiso Gomo and Ms. Tafadzwa Chigodora.
I am grateful to the Ministry of Mines and Mining Development who afforded me the opportunity to conduct this study within the ministry, in spite of the evident challenges. I am also thankful for the assistance from the Parliament of Zimbabwe’s Clerk of the Portfolio Committee on Mines and Energy, Mrs. Chioneso Mudavanhu-Mataruka.
I also want to thank staff at the Zimbabwe Diamond Center and students at the Zimbabwean Diamond Education Centre; principally the Executive Chairman, Mr. Lovemore Kurotwi, and the Public Relations Executive, Ms. Gwendoline Mugauri, who provided invaluable insights into the diamond industry. I was particularly overwhelmed by your deep knowledge of the field and even more so the generosity of your assistance. Your contributions were invaluable and made this study a success. May the passion you have in your hearts lead to the success of your eminent and worthwhile vision.
Sincere thanks also go to the following friends and relatives who assisted in various ways for the duration of my studies: Mr. Neville Pundo, Mr. Emmerson Siziba and Ms. Masceline Dakazhe. A very special thank you goes to all those who, although not mentioned by name, also made this journey a success. Last but not least, to the MPA Class of 2013-2015, thank you for an insightful and enjoyable 2 years, may we continue to pursue knowledge till the very end!
This study was inspired by the visionary “Zibwe-King” the late Prof. Nkhoma, principles behind the ZIMASSET strategy and the following statement from the inauguration speech, by H.E. President R.G. Mugabe, on 22 August 2013:
The mining sector will be the centrepiece of our economic recovery and growth. It should generate growth spurts across sectors; reignite that economic miracle which must now happen! The sector has shown enormous potential, but we are far from seeing its optimum …we need to explore new [mineral] deposits, developing new Greenfield projects in the mining sector. Above all, we need to move purposefully towards beneficiation of our raw minerals.
iv
Dedications For my wife Marshia and our children, Rutendo-Unice & Clement-Junior
v
Contents Abstract ....................................................................................................................................... ii
Acknowledgements ................................................................................................................... iii
Dedications ................................................................................................................................. iv
List of Figures ......................................................................................................................... viii
List of Tables .............................................................................................................................. ix
Acronyms ..................................................................................................................................... x
List of Appendices ..................................................................................................................... xi
CHAPTER ONE: INTRODUCTION ....................................................................................... 1
1.1 Background to the problem......................................................................................................... 1
1.2 Statement of the problem ............................................................................................................ 4
1.3 Objectives of the study ............................................................................................................... 5
1.4 Hypothesis ................................................................................................................................. 5
1.5 Research Questions .................................................................................................................... 5
1.6 Justification of the study ............................................................................................................. 6
1.7 Limitations of the study .............................................................................................................. 6
1.8 Delimitations of the study ........................................................................................................... 7
1.9 Organization of the study ........................................................................................................... 7
CHAPTER TWO: THE LITERATURE REVIEW ................ ................................................ 9
2.0 Introduction .......................................................................................................................... 9
2.1 Theoretical, Conceptual and Analytical Frameworks ...................................................... 9
2.1.1 Conceptual or Definitional Framework .......................................................................... 9
2.1.2 Theoretical frameworks .................................................................................................. 13
2.1.2.1 Introduction .....................................................................................................................13
2.1.2.2 Dependency Theory .........................................................................................................13
2.1.2.3 Resource Curse Theory ....................................................................................................14
2.1.2.4 Modernization Theory .....................................................................................................15
2.1.2.5 Anthony Downs “Issue Attention Cycle” and Rational/Public Choice Theory ..................16
2.1.2.6 Principal-Agency Theory .................................................................................................17
2.1.2.7 Transaction Cost Economics ............................................................................................17
2.1.2.8 Resource Nationalism Philosophy ....................................................................................17
2.1.3 Analytical framework ..................................................................................................... 18
2.2.0 Possible Strategies for ensuring Beneficiation .........................................................................27
vi
2.2.2 Lessons from the Botswana Case ............................................................................................27
2.2.4.3 Lessons from the Case of Indonesia .....................................................................................30
2.2.4.4 Lessons from the Case of Belgium .......................................................................................33
2.2.4.5 Lessons from the Case of India ............................................................................................33
CHAPTER THREE: METHODOLOGY .............................................................................. 36
3.0 Introduction...............................................................................................................................36
3.1 Research Design ........................................................................................................................36
3.2 Research Methodology ..............................................................................................................37
3.3 Mixed Methods Research ..........................................................................................................37
3.4 Justification for Mixed Methods ................................................................................................38
3.5 Study Area and Target Population .............................................................................................39
3.5.1 The target population ..............................................................................................................40
3.6 Sampling Methods and Sampling Procedure ..............................................................................41
3.7 Data Collection Instruments ......................................................................................................43
3.8 Data Analysis ............................................................................................................................43
3.9 Reliability and Validity .............................................................................................................43
3.10 Ethical Issues ..........................................................................................................................44
CHAPTER FOUR: DATA PRESENTATION AND DISCUSSION .... ............................... 45
4.0 Introduction...............................................................................................................................45
4.2 Legislative and Institutional Framework for Diamond Revenue Management ............................47
4.3 International Best Practices in Diamond Revenue Collection: A Summary of Country Experiences ....................................................................................................................................52
4.20 Additional Issues .....................................................................................................................68
4.21 Ground breaking initiatives in Zimbabwe’s Diamond Sector ....................................................69
4.22 Conclusion ..............................................................................................................................70
CHAPTER FIVE: Conclusions and Recommendations ....................................................... 71
5.0 Introduction...............................................................................................................................71
5.1 Summary by Objectives ............................................................................................................71
5.2 Conclusions...............................................................................................................................73
5.3 Recommendations .....................................................................................................................74
5.4 Policy side Interventions ...........................................................................................................75
5.5 ADDITIONAL ISSUES: Governance and Capacity Building ....................................................77
5.6 Optimal Conditions required for Diamond Beneficiation ...........................................................81
5.7 Hypothesis Testing/Conclusion .................................................................................................83
vii
5.8 Direction for Future Research ....................................................................................................83
BIBLIOGRAPHY ..................................................................................................................... 84
Appendix A: Frameworks for Diamond Revenue management in Zimbabwe .................. 91
Annexure B: Letters of Approval ........................................................................................... 95
Appendix C: Organogram /Organizational Charts .............................................................. 96
Appendix D: Survey Questionnaire ........................................................................................ 97
Appendix E: Interview Guide ................................................................................................ 110
Appendix F: Zimbabwean Diamond Mining Industry and International Trade Market .................................................................................................................................................. 111
Appendix G: Glossary of Terms ........................................................................................... 112
viii
List of Figures
Figure 2.1 The Diamond Beneficiation Process: Progress along the diamond value
chain……………………………………………………………………………………………11
Figure 2.2 The Fiscal Space Diamond Conception………………………………………..12
Figure 2.3 The relationship between minerals beneficiation, mining sector taxes and fiscal
space…………………………………………………………………………………………..19
Figure 2.4 The Diamond Supply and Value Chain/the Diamond pipeline………………..20
Figure 2.5 The Four Stage Beneficiation process…………………………………………21
Figure 2.6 The diamond value chain -“The Journey from mine to finger”……………….24
Figure 2.7 The largest added value is created in retail sales……………………………...24
Figure 2.8 Indonesian mining policy environment/Legislative Framework for mining….32
Figure 3.1 The Research Design Matrix …………………………………………………36
Figure 4.1 Institutional and Legislative Frameworks for Diamond Revenue Management
………………………………………………………………………………………………...47
Figure 4.2 Diamond Revenue Management Legislative Frameworks……………………49
Figure 4.3 Proportion and Quality of Zimbabwean Diamonds …………………………..56
Figure 4.4 Average prices of diamonds per carat…………………………………………59
Figure 4.5 Diamond Production and Export Revenues…………………………………...60
Figure 4.6 Five components had an Eigen Value of more than 1 and were thus extracted
…………………………………………………………………………………………………67
Figure 5.1 Summary of Recommendations for Diamond Mining and Revenue Management
…………………………………………………………………………………………………81
ix
List of Tables
Table 3.1 Quantitative, Mixed and Qualitative Methods………………………….38
Table 4.1 Questionnaire Response Rate………………………………………......45
Table 4.2 Reliability of the Questionnaire…………………………………….…..45
Table 4.3 Major Frameworks in Diamond Management in Zimbabwe…………...50
Table 4.4 Benefits from Diamond Beneficiation according to importance……......54
Table 4.5 Challenges encountered by other countries in diamond beneficiation.....54
Table 4.6 Polished Diamond Sales for 2013……………………………………....59
x
Acronyms
AU - African Union
AfDB - African Development Bank
BRICS - Brazil, Russia, India, China and South Africa
DRC - Democratic Republic of Congo
EITI/PWYP - Extractive Industries Transparency Initiative/Publish What You Pay
EU/EC - European Union/European Commission
IMF - International Monetary Fund
IMR - Institute of Mining Research
KP/KPCS - Kimberley Process/Kimberley Process Certification Scheme
MMMD - Ministry of Mines and Mining Development
MMCZ - Minerals Marketing Corporation of Zimbabwe
MoFED - Ministry of Finance and Economic Development
OPC - Office of President and Cabinet
PARLZIM - Parliament of Zimbabwe
RBZ - Reserve Bank of Zimbabwe
SADC - Southern African Development Community
UNECA/ECA - United Nations Economic Commission for Africa
UNCTAD - United Nations Conference on Trade and Development
UNDP - United Nations Development Program
UZ - University of Zimbabwe
WB - World Bank
WDC - World Diamond Council
ZDC/ZDEC - Zimbabwe Diamond Centre/ Zimbabwe Diamond Education Center
ZELA - Zimbabwe Environmental Lawyers Association
ZGS - Zimbabwe Geological Survey
ZIMASSET - Zimbabwe Agenda for Sustainable Socio-Economic Transformation
ZIMRA - Zimbabwe Revenue Authority
ZMDC - Zimbabwe Mining Development Corporation
xi
List of Appendices
Appendix A Frameworks for Diamond Revenue Management in Zimbabwe
Appendix B Letters of Approval for Research
Appendix C Organogram/Organizational Charts
Appendix D Survey Questionnaire
Appendix E Interview Guide for Zimbabwe
Appendix F The Zimbabwean Diamond Mining Industry and International Market
Appendix G Glossary of Terms
1
CHAPTER ONE: INTRODUCTION
1.0 Introduction
This chapter focuses on the background to the problem, statement of the problem, objectives
of the study, research questions, hypothesis, justification of the study, limitations of the
study, delimitations of the study and a section on the organization of the study.
1.1 Background to the problem
The value of the global diamond trade and beneficiation industry in 2013 stood at an
estimated US$79 billion in 2013 (DeBeers 2014). Diamond processing countries like the
United Kingdom, Belgium, Russia, and the United States of America have reaped big fiscal
benefits as the entire upstream, midstream and downstream processing activities have
complemented government revenue collection efforts despite their not being traditional
diamond miners. Diamond beneficiation and value addition has thus led to improved
performance of the fiscal revenue tax heads in these countries leading.
Diamond producing countries in the global South have been leading in making calls for
more local diamond beneficiation as an economic policy, principally the Sub Saharan and
Southern African countries of Zimbabwe, Namibia, Botswana, Angola, South Africa, and
the Democratic Republic of Congo (DeBeers 2014). According to the Economic
Commission for Africa (ECA) the realization is that there is great potential in a mineral
based industrialization strategy for Africa (ECA, 2011: 47, 61). Accounting for over
seventy-eight percent (78%) of the worlds diamond production and eighty-eight percent
(88%) of the total global reserves this potential gives significant comparative advantage
(African Mining Vision, ECA 2009). Hunt (no date) argues that African diamonds are
considered among the best natural diamonds in the world. According to Bain and Company
Inc and Antwerp World Diamond Centre Reports (2011, 2013) these diamonds are a highly
sought after commodity by traders, jewelers, retailers and affluent consumers from countries
all over the world. The market is prepared to pay a premium price for this precious stone.
2
According to the inaugural DeBeers Diamond Insight Report (2014) diamonds were a major
contributor to the economic performance of Botswana at 30% of Gross Domestic Product
(GDP) and over 75 per cent of exports in 2013. In Namibia the diamond industry
contributed eight per cent of GDP and almost 20 per cent of exports in the same year
(DeBeers 2014: 35). Approximately US$6 billion worth of rough diamonds were sold from
Botswana in 2013. This statistic alone is testament of the potential which diamonds have for
an economy and also indicates the high value of the diamond industry.
It is estimated that while Zimbabwe can produce up to twenty-five per cent of the world’s
supply in diamonds (Chininga Report 2013) it has not made much by way of foreign
currency earnings. According to Mark von Boschel (2010) a Belgian diamond industry
expert of the Antwerp World Diamond Trade Centre Zimbabwe has the largest known
diamond reserves in the world at present, estimated at US$800billion judging from the
current diamond foot-print (von Bonschel Sunday Times 08/08/2010). A diamond footprint
is a pattern deduced from the quality and quantity of diamond production allowing
estimations of future production to be made. If Zimbabwe adopts diamond beneficiation, the
country stands to earn over US$8 billion annually and create 200,000 jobs (CNRG 2013;
Mbanje 2013). The statistics point to a 20% potential contribution to nominal GDP as of
2010, which is significant for one mineral alone
(http://www.chamberofmineszimbabwe.com).
Although there are currently numerous revenue streams from the Zimbabwean diamond
mining sector, not much value has been derived to the benefit of government and the local
economy. This is principally because the sector’s taxation system is inadequate leading to
discrepancies in the value of reported remittances to treasury (Chininga Report 2013: 10).
These revenue streams include royalties, resource depletion fees, levies, licencing fees, pay-
as-you-earn, corporate taxes, income taxes, profit taxes, diamond export tariffs, Value
Added Tax (VAT), profits and dividends. Furthermore, despite the boom in mineral prices
and corporate profits from 2002-2007, very little has been earned by countries with minerals
(ECA 2011: 92). Diamonds are exported in their cheap raw form and in some instances re-
3
imported as expensive finished products (Grynberg, 2013). This has contributed
significantly to the Zimbabwe’s own trade deficit growing from US$2.5 billion in 2012, to
US$4.2 billion in November 2013 and to the current projections of US$3.5 billion for 2014
(2013 National Budget Statement, 2012: 241, The Herald 10 January 2014). This is an
untenable situation given that the Zimbabwean Government currently faces an intense
liquidity crisis compounded by a big public debt overhang and a poor social services rollout.
Further, manufacturing has also continued lagging behind at 13% of exports in 2014
(Zimbabwe National Budget 2014). The IMF in its Natural Resources Per Capita Index,
concedes that Zimbabwe has the world’s best minerals per capita indices. Going forward,
Zimbabwe is projected to produce an estimated stable supply in excess of a firm assured 12
million carats of rough diamonds per year until 2023 (Bain and Company 2013: 57).
Conservatively this was 8 per cent of total global rough volumes and just 4 per cent of value
in 2013 this being production from the Chiadzwa area alone (DeBeers 2014: 42). However,
very little direct fiscal flows to government coffers have been realized thus far (KPCS 2012,
Chininga Report 2013).
Successive governments in Zimbabwe continue to face apparently insurmountable
challenges in resolving persistent fiscal problems. Chief among these being run-away public
expenditures, collapse of public services, unbridled hyperinflation in the period 1998-2008
eroding the value of the local currency, the demise of the Zimbabwean local currency in
2009, low revenue collection and inflows into the fiscus, poor savings in and dilapidation of
infrastructure, poor remuneration of the Civil Service leading to labour strikes, both
underemployment and high unemployment levels, “informalisation” of the economy,
inadequate social safety support systems, a large import bill peaking at US$7 billion in 2013
and US3 billion by June 2014, debt distress, unresolved external public debt burden
estimated at US$6.6 billion in 2010 and at US$6.9 billion in June 2014 but projected to
increase to US$7.2 billion by December 2014 {mid-term fiscal policy review 2014},
accumulation of loan repayment arrears since 2000, deindustrialization and low industry
capacity utilization (ZAADDS 2009, Kramarenko et al 2010: 3, 51-61, 2014 National
4
Budget Statement, Mid Term Fiscal Policy Review 2014, World Factbook, n.d.). Intricately
tied to this is the government’s traditional overreliance on foreign sources of grant and loan
revenue for budgetary support, principally from the duo of the Bretton-Woods Institutions,
the World Bank (International Bank for Reconstruction and Development, and the
International Development Association) and the International Monetary Fund (IMF).
Stakeholders and institutions involved in the diamond beneficiation in Zimbabwe include
the following: Zimbabwe Diamond Technology Center, Zimbabwe Diamond Education
Center, Zimbabwe Mining Development Corporation (ZMDC), Minerals Marketing
Corporation of Zimbabwe (MMCZ), Ministry of Mines and Mining Development
(MMMD), Zimbabwe Chamber of Mines, Zimbabwe Geological Survey (established in
1910 as the custodian of mineralogical data on Zimbabwe), Institute of Mining Research,
the diamond mining companies, diamond cutting and polishing companies, Zimbabwe
Investment Authority (the one stop shop for investment in Zimbabwe), Ministry of Finance
and Economic Development, Reserve Bank of Zimbabwe (RBZ - strategic minerals
management), Zimbabwe Revenue Authority (ZIMRA – tax collection, tax policy
administration) and the Office of President and Cabinet (OPC) which is the lead agency
responsible for policy implementation under Zimbabwe Agenda for Sustainable
Socioeconomic Transformation (ZIMASSET).
1.2 Statement of the problem Despite minerals contributing 16% of Zimbabwe’s +/- US$10 billion Gross Domestic
Product and 52% of the country’s US$2,4 billion export earnings, the minerals sector has
continued to perform dismally in its contribution to the fiscus. Whereas Zimbabwe is
estimated to produce about 25% of the global supply of rough diamonds by volume,
diamonds alone contribute just about 1% to the GDP and between 20 - 30% of the total
export earnings; therefore it has not managed to derive much benefit from this resource
endowment. Meanwhile, the government continues to face apparently insurmountable
liquidity challenges and is struggling to meet most of its obligations. Zimbabwe has been
exporting its diamond in the rough. This has meant government has not realized the full
value from the export of its diamond production.
5
However, no study has yet been done to assess the potential contribution that diamond
beneficiation has to improving the performance of government fiscal revenues. Unless this
study is done, the country may continue to lose out on the full value of its minerals until
they are depleted.
This study presents an attempt to bridge this gap by analyzing the potential of local diamond
beneficiation to Zimbabwe’s revenue contributions, drawing lessons from countries that
have gone before Zimbabwe.
1.3 Objectives of the study This study seeks to:
i. Examine the legal and institutional frameworks for diamond beneficiation in
Zimbabwe.
ii. Describe the state of the practice in other countries.
iii. Demonstrate the effects of diamond beneficiation to the mining fiscal regime.
iv. Recommend an appropriate diamond beneficiation model to enhance the
performance of the mining tax head/mining fiscal regime.
1.4 Hypothesis i. NULL - Diamond value addition and beneficiation has no effect on the performance
of taxation as a fiscal resource mobilization strategy.
ii. LITERARY ALTERNATIVE - The more that diamond mining companies process
diamonds, the higher the value they fetch on the international market and
concurrently the higher the revenues accruing to government from taxation of these
mineral receipts.
1.5 Research Questions
i. What are the legal and institutional frameworks governing diamond beneficiation in
Zimbabwe?
ii. What is the state of the diamond beneficiation practice in other countries?
6
iii. Does Zimbabwe conduct diamond value addition and beneficiation?
iv. What effect does diamond beneficiation have on fiscal revenues performance?
v. What are the challenges and opportunities for diamond beneficiation in Zimbabwe?
1.6 Justification of the study This study aims to demonstrate the potential that diamond beneficiation has on improving
fiscal revenue mobilization through an improved tax regime. The purpose is to demonstrate
the state of the practice in Zimbabwe, the lessons that can be learnt from other jurisdictions
where beneficiation has been adopted, and the ground covered so far in advocating minerals
beneficiation in Zimbabwe. Given that there has not been much research conducted on
diamond beneficiation in Zimbabwe, the study also seeks to add to the literature on the role
natural resources and minerals beneficiation plays in improving government revenues. A
study of this nature is imperative for Zimbabwe whereby the outcome will be used to
influence Diamond Tax policy formulation.
1.7 Limitations of the study The researcher faced challenges in accessing certain types of information due to the
sensitive nature of the area under study and the impact of the Official Secrecy Act (OSA)
and the Access to Information and Protection of Privacy Act (AIPPA 2000) which both
prohibit public officials from revealing classified information and the free access of
classified information by the general public. However, the researcher requested advance
clearance from the relevant government ministry and also gave assurance through a written
“Informed Consent Letter” indicating the material will be used for purely academic
purposes. To further mitigate this challenge the researcher relied on documentary evidence.
Furthermore, the very nature of diamond mining sector as a very secretive industry
prevented the researcher from fully accessing all the required information on beneficiation
first hand. This is because respondents who are diamond sector investors have vested
interests and thus fear industrial espionage. In this case the researcher resorted to material
which is already in the public domain through library searches, internet browsing, reviewing
conference reports or publications, and browsing newspapers.
7
Additionally, diamond mining executives were difficult to locate due to their busy
schedules, prior commitments and international travel. Some of the key informants were
also located at the Chiadzwa Diamond Fields which is a restricted cantonment area.
Therefore, respondents delayed, postponed or sometimes cancelled meetings leading to
delays in data gathering. However, to overcome these hurdles the researcher booked
appointments for meetings ahead of making site visits for data gathering and in the case of
respondents who were hard to reach sent emailed questionnaires. For the very busy key
informants the researcher conducted telephonic interviews.
1.8 Delimitations of the study This study was confined to the diamond sector within the Zimbabwean mining industry. It
limited its focus on issues to do with the potential fiscal benefits that accrue to the
Zimbabwean Government through adoption of the value addition and beneficiation strategy.
Specific focus was on tracing the diamond value chain from extraction to cutting and
polishing so as to establish the value trends as processing increases. The research also
briefly reviewed the Botswana case as a country which has adopted diamond beneficiation
drawing lessons for Zimbabwe to adopt and implement.
1.9 Organization of the study This thesis has five chapters presented in the following manner:
I. Chapter One – Introduction
This chapter introduces the thesis, outline the background of the problem, statement of the
problem, justification of the study, and state the research hypotheses. It also highlights the
pertinent research questions, objectives of the study, along with limitations and their
mitigation and delimitations demarcating the boundaries set for the study.
II. Chapter Two - Literature Review and Analytical Framework
This section outlines and critically analyses various authoritative perspectives as enunciated
by scholars on diamond beneficiation and fiscal resource mobilization. It reviews current
published work in the sector locally, regionally and globally, at the same time attempting to
identify the lacuna in knowledge. It also discusses the analytical framework within which
8
the study is being undertaken, focusing on concepts and theories that have been proffered to
explain relevant phenomena.
III. Chapter Three - Methodology
This section describes the research methodology adopted, focusing on research design,
sampling procedure and the data analysis techniques employed in the study.
IV. Chapter Four – Major findings
In this chapter major findings are presented and analyzed.
V. Chapter Five – Conclusions and recommendations
This Chapter contains concluding remarks and focuses on recommendations to improve
fiscal performance of the diamond mineral tax head.
9
CHAPTER TWO: THE LITERATURE REVIEW
2.0 Introduction
This chapter presents a review of the literature on diamond value addition and beneficiation
and minerals taxation. It discusses the theoretical, conceptual and analytical frameworks
informing diamond beneficiation and revenue management encompassing Resource
Nationalism, the Fiscal Space Diamond, Modernization Theory, and Resource Curse
Theory. Further, Anthony Downs’ “Issue Attention Cycle”, the New Institutional
Economics Theories (Public Choice, Principal-Agency and Transaction Cost Economics)
and Rational Choice Theory was reviewed in view of policy making in Zimbabwe. The
section closes with an overview of selected country cases, drawing lessons for Zimbabwe.
2.1 Theoretical, Conceptual and Analytical Frameworks
2.1.1 Conceptual or Definitional Framework
2.1.1.1 Introduction
The research builds on the concepts of manufacturing value added, value addition,
beneficiation, the Resource Curse Hypothesis,
2.1.1.2 Defining Efficacy
Efficacy in this study refers to utility, ability, usefulness or possibility. It is the “power to
produce the desired effect or result” (http://www.merriam-webster.com). Related words are
efficiency, effectiveness, effectualness and productiveness. Simply put this is the “capacity
for beneficial change” (http://www.en.wikipedia.org).
2.1.1.3 Diamond Beneficiation/Value Addition (BVA)
The South African Department of Mineral Resources (DMR)
(http://www.dmr.gov.za/beneficiation-ecnomics.html), considers the term beneficiation to
be interchangeable with value added processing. The DMR (ibid) defines beneficiation as
entailing “the transformation of a mineral or a combination of minerals (produced by mining
and extraction processes) to a higher value product, which can either be consumed locally or
10
exported.” For DeBeers (2014: 81) beneficiation is the “creation of activities beyond mining
the natural resources in producing countries.” This means diamond sorting, valuing, selling
and manufacturing. For the Zimbabwe Congress of Trade Unions (ZCTU 2011: 84)
beneficiation simply refers to the process of adding value so as to increase the quality and
value of a saleable product. According to Bwititi (The Sunday Mail Extra Analysis, 8 June
2014) “beneficiation entails the value addition of minerals by processing them to attain
higher returns.”
2.1.1.4 Synthesis Definition for Diamond Beneficiation
Therefore, simply put, beneficiation refers to any subsequent processing undertaken on a
mineral or primary product post extraction. It is the process of further manipulating the
minerals innate properties, in new and innovative ways, into useful finished products that
can be commercially sold for a pecuniary consideration. Diamond beneficiation thus refers
to the successive cleaning, cutting and polishing of the mineral until it is valuably fashioned
in various ways including the manufacture of diamond industrial tools, diamond ornaments
and diamond jewellery.
2.1.1.5 Diamond Beneficiation Principles
There are various values, principles and theories underpinning beneficiation. These include
that beneficiation entails a transformation in the value of the diamond at each stage, hence
value addition. The above definitions also recognize various things: firstly that minerals are
seldom purely and distinctly separated when they are mined and secondly, while some
minerals occur individually, others may be extracted as a combined mineral and must
necessarily be purified through processing and thirdly, this post extraction purification
enhances the value of the resultant product. The ZCTU asserts that the beneficiation process
creates industries that stimulate demand for other goods and services (ibid). For example,
this can be observed in Botswana which has diversified its raw diamonds to exports of
polished diamonds, finished diamond products and other diamond value added and services.
11
2.1.1.6 History/Origins of Beneficiation in Zimbabwe
While there is no consensus on when minerals beneficiation began in Zimbabwe, the
concept of beneficiation is not new. Early records indicate that mining began in Africa about
20000 to 40,000 years ago (Kuhn 1987, Jourdan 1995, AMV/ECA 2009). As early as the 6th
Century the indigenous Bantu speaking people occupying the area which is in Southern
African region, (present day Southern African Development Community, SADC), worked
iron ore, gold and copper through smelting (Kuhn 1987, Jourdan 1995, ibid). In the central
parts of Africa, it is evident from archeological data that mining and beneficiation of iron
and gold ores was already taking place even before the arrival of Arab and Indian merchants
(Kuhn 1987). Hence the notion of minerals beneficiation is as old as the earliest human
civilizations in Africa.
The diagrams below depict the stages of diamond beneficiation from mine extraction all the
way to retail, and the value transformations at each stage:
Figure 2.1: The Diamond Beneficiation Process: Progress along the diamond value
chain
Source: Adapted from Bain and Company 2011, DeBeers 2014
Mining,
ExtractingOre
Assaying,Cleaning, Sorting,
Valuation, Auction
Cutting,
Valuation,
Auction
Polishing, Valuation, Jewellery-making,
Valuation, Auction
Retail
Jewellery
Sales
No processing Some processing Fully beneficiated
Incr
ease
in v
alue
of d
iam
onds
2.1.1.7 The concept of Fiscal Space
Peter Heller (2005) developed
increase its fiscal space, it has basically four options
Figure 2.2: The Fiscal Space Diamond Conc
Source: Adapted from Aguzzoni (2011), Heller (2005)
There is contestation on the definition of the concept of fiscal space, however Aguzzoni
(2011: xi) asserts that fiscal space is that ability of government to provide financial
resources for its policies with the aim of attaining socio
There are basically four options for a government seeking to increase its fiscal space, i.e.
ability to provide resources for its developmental initiatives/ programmes: 1. Increasing
Official Development Assistance (ODA), 2. Enhancing the mobilization of domestic
revenue, 3. Increase borrowing and 4. Reprioritizing current expenditure to make
efficient (Aguzzoni 2011: xi). All these four strands represent an attempt by central
government to improve its resource mobilization strategies so as to provide better and more
reliable social services sustainably today and in the future.
12
The concept of Fiscal Space
Peter Heller (2005) developed the idea on the creation of fiscal space
increase its fiscal space, it has basically four options as depicted in the diagram below:
Figure 2.2: The Fiscal Space Diamond Conception
Aguzzoni (2011), Heller (2005)
on the definition of the concept of fiscal space, however Aguzzoni
that fiscal space is that ability of government to provide financial
resources for its policies with the aim of attaining socio-economic development in a country.
There are basically four options for a government seeking to increase its fiscal space, i.e.
ability to provide resources for its developmental initiatives/ programmes: 1. Increasing
Official Development Assistance (ODA), 2. Enhancing the mobilization of domestic
revenue, 3. Increase borrowing and 4. Reprioritizing current expenditure to make
efficient (Aguzzoni 2011: xi). All these four strands represent an attempt by central
government to improve its resource mobilization strategies so as to provide better and more
reliable social services sustainably today and in the future.
idea on the creation of fiscal space. For a nation to
depicted in the diagram below:
on the definition of the concept of fiscal space, however Aguzzoni
that fiscal space is that ability of government to provide financial
economic development in a country.
There are basically four options for a government seeking to increase its fiscal space, i.e. its
ability to provide resources for its developmental initiatives/ programmes: 1. Increasing
Official Development Assistance (ODA), 2. Enhancing the mobilization of domestic
revenue, 3. Increase borrowing and 4. Reprioritizing current expenditure to make it more
efficient (Aguzzoni 2011: xi). All these four strands represent an attempt by central
government to improve its resource mobilization strategies so as to provide better and more
13
2.1.1.8 Mineral Economics
Minerals have always been at the heart of the African economy even before the arrival of the
colonists. However, very little was written about this industry until the late 1800s and early
1900s on arrival of the British colonists (Summers 1969: 3). Numerous scholars have
identified mining practices in ancient Central and Southern Africa. Mining was the basis of
a thriving trade in gold, copper, iron and other minerals for fabrics from Middle Eastern
merchants of the time (Summers 1969, Kuhn 1987, Soussan 1988, and Jourdan 1995,
AMV/ECA 2009).
According to Hrebar and Gentry (2003: 517-560) there exists a unique supply – demand
relationship in the minerals trade industry which they term distinctive features, which
influence investments in the sector. This relationship may be explained by the theories and
concepts informing this study. On the supply side, the distinctive features are: capital
intensity, unique cost structures, long pre-production periods, unique deposits, obsolete
technology, depletable non-renewable assets/minerals, international competition and
recycling; while on the demand side there are: derived demand, undifferentiated nature of
metals (minerals) and slow growth (ibid). These dynamics are also observed in the
Zimbabwean minerals industry and hence influence minerals economics of the country.
2.1.2 Theoretical frameworks
2.1.2.1 Introduction This section reviews the following theories which inform the study: Dependency Theory,
Resource Curse Theory, Resource Nationalism, Modernization Theory, Fiscal Space
Diamond, New Institutional Economics (Public Choice Theory, Principal Agency Theory),
and Anthony Downs’ Issue Attention Cycle and Rational Choice Theory.
2.1.2.2 Dependency Theory Explains Center-Periphery economic relationships between nations which were molded over
Centuries of colonialism configured so that the periphery continues to supply cheap raw
materials to the Center (developed countries) which in turn conduct
14
processing/manufacturing and resell more expensive finished goods to the periphery. This
has tended to bring huge economic development to the Center but under-development to the
Periphery.
2.1.2.3 Resource Curse Theory This research is informed by the Greed vs. Grievance or Resource Curse Hypothesis which
states that mineral rich countries tend to grow less rapidly, be poorer in terms of both
economic development and accountability to the general public and are more prone to
conflict (Soussan 1988: 2, Auty 1993, Ross 1999, 2003). According to Auty (1993) and
Ross (2003) having a wide variety of minerals resources is usually not very beneficial to the
host country and in fact might even be pushing development indices in the negative
direction. The observation is that most of the countries which are rich in natural resources
tend to be overly dependent on revenue from the sale of raw materials. These raw materials
are locally in abundance and are readily exported at the expense of developing robust local
processing and manufacturing industries. In turn this leaves these countries vulnerable to the
rapid fluctuations of the prices for raw materials on the international market.
Further, this theory asserts that the government tends to be unresponsive to the demands of
the general public’s because of an entrenched patron-client system that sees public officials
controlling the allocation of mineral rights selectively to preferred individuals. This leaves
the electorate without a voice and crowds them out from the political system usually leading
to conflict and contestation.
However, there have been noteworthy critiques of the Greed vs. Grievance Theory
(sometimes variously termed the Resource Curse Theory). While some scholars like Auty
(1993) and Ross (2003) hold the view that natural mineral resources are a source of a sort of
“resource curse” or “Dutch Disease”, this writer advocates the more optimistic view of the
United Nations Economic Commission for Africa (UNECA, 2011) and scholars who argue
that minerals present an extraordinary opportunity for developing countries and have great
potential to engender significant developmental deliverables. These include deliverables
such as sustainable socio-economic development through improved livelihoods from higher
15
incomes, increased local participation in economic development, employment creation,
improved fiscal revenue contributions, infrastructural development, rapid industrialization,
technological advancements and faster modernization of the economy amongst others (ibid).
2.1.2.4 Modernization Theory
This study also builds upon Rostow’s Modernization Theory which states that in the quest
for attaining full socio-economic development, countries have to go through five stages: 1.
Primitive/Traditional Society; 2. Pre conditions for Take-Off; 3. Take-Off; 4. Drive-to-
Maturity and 5. Mass consumption. This theory was developed by a development economist
Rostow who observed that countries exhibit similar characteristics as they progress through
various stages of socio-economic transformation. The major assumption of the theory is that
economic development/progress proceeds in a linear fashion and each country must pass
through these five stages in succession on their journey to being an industrialized developed
society with a full range of economic options for its citizens.
Modernization theories indicate that development proceeds in a linear fashion passing
through various stages, i.e. development as a linear staged process. Countries cannot leap
frog from stage to stage but rather have to endure this gradual and sequential progression.
For example, even the developed nations/States began as primitive societies then gradually
moved through centuries from primitive agricultural societies, proceeding to primary
processors/manufacturing, until eventually they achieved mass production and mass/full
consumption levels. Value addition and beneficiation therefore is seen as a last stage of the
development process, e.g. processing maize to maize flour, soya beans into cooking oil,
metals into various finished products, and rough diamonds into diamond jewellery and
machinery/tools. Therefore, although Zimbabwe is progressing at a slow pace, it has
necessarily begun the journey to modernization since it has adopted the value addition and
beneficiation strategy in ZIMASSET. The country is thus making progress and is well on its
way to its own mass/full consumption. The mass consumption stage is also characterized by
an extensive service industry (the diamond retail sales and marketing services associated
with jewelry and machinery).
16
2.1.2.5 Anthony Downs “Issue Attention Cycle” and Rational/Public Choice Theory Anthony Downs writes persuasively on the nature of the policy making process and also on
the various reasons why elected officials behave in the way they do. There is a realization of
the very important role played by the “Issue Attention Cycle” in (explaining the evolution
of) the mining and minerals policy development process. According to Downs (1972: 38-50)
the cycle consists of four stages: pre-problem stage; alarmed discovery and euphoric
enthusiasm, push for change; realization of the significant costs of change; decline of
interest; and the post problem stage.
Policy development has also proceeded in this fashion in Zimbabwe’s mining sector. The
country only adopts aggressive policy stands when a major discovery is made, for example
the Mines and Minerals Act of 1962 has been up for amendment since 2007 just after the
discovery of significant deposits of diamonds in the Chiadzwa area in the Eastern
Highlands. However, not much has been done since then, a lull of 7 years only for the same
issue to come back on the agenda with the introduction of ZIMASSET in 2013. ZIMASSET
emerged after people started calling for more transparency in the way the country’s mineral
resources where being managed. This was after discovery/realization that multinational
companies (MNCs) were making huge profits but there was very little that was trickling
down to locals or to central government. At the same time the political elites saw an
opportunity to garner electoral support through promising more stringent action/intervention
in the way mining was being done (also election promise from ZANU PF manifesto. It was
part of a re-election bid.). This is particularly visible in both the indigenization and
economic empowerment (IEE) legislation and the ZIMASSET Policy Blueprint (the
converted ZANU PF election manifesto). Therefore issues gain prominence cyclically in
response to demands of the public (electorate) or the periodic preferences of the elites
(politicians). Public choice theory (a wing of the New Institutional Economics) explains that
elites aim to maximize their votes in an election and hence behave as if they are acting in the
public interest whereas they seek to achieve selfish ends.
17
2.1.2.6 Principal-Agency Theory A part of the New Institutional Economics (NIE) which seeks to explain the relationships
between Principals and their Agents. The central government ( the Principal) delegates
mining policy issues to the Ministry of Mines and Mining Development (MMMD), which in
turn forms State Enterprises (the Agents) to get into mining ventures on behalf of the
Government (the shareholder) and collect revenue on its behalf i.e. through ZIMRA, ZMDC
and MMCZ. These government companies and Joint Venture (JV) partners act on behalf of
their principals, the shareholders. The ZMDC mines either alone or in conjunction with the
JV companies, subcontracts the selling and marketing of diamonds to the MMCZ. The
Agents typically have access to more information than their Principals and tend to use this
privilege to their advantage as they interact with the principal.
2.1.2.7 Transaction Cost Economics TCE is a wing of the NIE which explains the cost reasons why certain policies are adopted
and others rejected. The various costs may be financial (sanctions), societal (displacement of
people in mining areas), environmental (degradation and pollution have become key issues
in diamond mining), or costs of acquiring skills and technology or the rights to use patented
technology. Diamond cutting is now very sophisticated relying on the use of expensive laser
technology (DeBeers 2014, McKinsey 2014).
2.1.2.8 Resource Nationalism Philosophy Internationally it has come to be accepted that a people must have rights over the minerals
under their soil and governments have the responsibility to manage these resources for the
benefit of their people (Natural Resources Charter 2011: 3). A prominent feature of the
resource nationalism discourse in Zimbabwe is the Indigenization & Economic
Empowerment (IEE) discourse. For Zimbabwe, resource nationalism has entailed
localization of ownership of mineral rights and sharing of minerals revenue between mining
companies, the government and the local communities living in the areas containing these
mineral resources.
The United Nations has previously acknowledged this in its 1962 United Nations General
Assembly Resolution where it declared that “violation of the rights of peoples and nations to
18
sovereignty over their natural wealth and resources is contrary to the spirit and principles of
the Charter of the United Nations,” (Catholic Institute for International Relations 1983: 68).
Governments must not only set the direction and purpose of mining in its country (i.e.
regulation), it must also play an active role (ibid). This is more so true for developing
countries which are vulnerable and at the mercy of large multinational mining corporations.
According to the International Council on Mining and Metals (ICMM) and the
Commonwealth Secretariat (2009: 5), “for governments the concept of taxation is directly
linked to the issue of permanent sovereignty over natural resources and to perceptions of
exploitation, revenue generation and partnering in development.” Therefore, it becomes
essential and of quintessence for governments to increasingly assert their right to exclusively
control minerals on behalf of their citizens. The main intention in adopting this philosophy
being that the State has to extract as much value for the benefit of the local community.
Taxation therefore speaks to the very heart of the question: do the costs of conducting
mining outweigh the benefits accruing from there forth (ICMM and the Commonwealth
Secretariat 2009: 5).
2.1.3 Analytical framework This section presents the adopted analytical framework explaining the relationship between
the three identified variables.
19
Figure 2.3: The relationship between minerals beneficiation, mining sector taxes and
fiscal space
Source: Adapted
The diagram above depicts the analytical framework adopted by the research to explain the
relationship between minerals beneficiation and fiscal space.
2.1.3.1 The policy process
According to Anderson (2005), public policy making proceeds in a cyclical and iterative
process consisting of several stages: problem identification/agenda setting, formulation,
legitimation/adoption, implementation and evaluation. This study focuses on the first two
stages of the process. In real life some of the stages are collapsed together or left out
altogether.
2.1.3.2 The Diamond Beneficiation Process: Analyzing the Diamond Value Chain
The key to beneficiation is the utility of the final product. Clearly beneficiation has two
complementary domains, the first being the mining sector and the second being the
manufacturing sector. The involvement of each sector increases and decreases
correspondingly as the mineral processing proceeds from mine to factory. According to
DeBeers (2014) there are four aspects to diamond beneficiation and value addition, that is
upstream (rough diamond production and diamond exploration), downstream (global
consumer demand and diamond jewellery retail), midstream (cutting, polishing and
jewellery manufacturing, rough diamond sales and distribution) and side stream value
addition (DeBeers 2014: 4-5). Side stream value addition refers to inputs namely capital
Dependent
Variable
(Expansion of fiscal space)
Intervening variable
(Mining fiscal regime)
Independent
Variable
(Minerals Value addition and
Beneficiation)
goods, consumables and services into the value chain (ibid). However, Manhize Projects
(2011) contend that the total net
just the downstream and sidestream linkages.
Figure 2.4: The Diamond Supply and Value Chain/the Diamond pipeline
Source: Bain and Company (2011, 2013)
In Africa the most influential voice on minerals beneficiation has been the African
Union/United Nations/Economic Commission for Africa initiative of the African Mining
Vision. This vision articulates the need for mineral producing countries to conduct pos
extraction processing so as to localize the full benefits and value derived from raw materials
that are in abundance in Africa (ECA/AMV 2009).
Exploration
• Excavation
20
goods, consumables and services into the value chain (ibid). However, Manhize Projects
(2011) contend that the total net beneficiation of minerals is maximized by a combination of
just the downstream and sidestream linkages.
: The Diamond Supply and Value Chain/the Diamond pipeline
Source: Bain and Company (2011, 2013)
In Africa the most influential voice on minerals beneficiation has been the African
Union/United Nations/Economic Commission for Africa initiative of the African Mining
Vision. This vision articulates the need for mineral producing countries to conduct pos
extraction processing so as to localize the full benefits and value derived from raw materials
that are in abundance in Africa (ECA/AMV 2009).
Sorting
• Cutting and polishing
goods, consumables and services into the value chain (ibid). However, Manhize Projects
beneficiation of minerals is maximized by a combination of
: The Diamond Supply and Value Chain/the Diamond pipeline
In Africa the most influential voice on minerals beneficiation has been the African
Union/United Nations/Economic Commission for Africa initiative of the African Mining
Vision. This vision articulates the need for mineral producing countries to conduct post
extraction processing so as to localize the full benefits and value derived from raw materials
Exchanges/Bourses
• Retail/Store
21
Figure 2.5: The Four Stage Beneficiation process
Source: Baxter (2005: 26)
Most developed countries have managed to acquire significant benefits through local
beneficiation of minerals, even when they do not possess natural resources. Countries like
Belgium, Israel, Japan and the USA have developed sophisticated industries that conduct
manufacturing value addition for minerals they import from foreign countries. Form crude
oil, to precious metals, to food products, which are locally sourced or imported from
producing countries in the developing world.
The biggest challenge for developing countries is the Anglo-Saxon Profit Maximization
Model of investment. This entails intense corporate specialization, leading to a dearth in
local capacity, skills, competencies and technologies (Baxter 2005: 26). Gaining a
competitive edge in this environment becomes “mission impossible” for countries just
setting off to conduct local beneficiation. However, Baxter (2005) prematurely and
erroneously asserts that “the availability of precious metals and diamonds does not
constitute an advantage” when it comes to minerals beneficiation economics. Although he
22
rightly observes and contends that the vast majority of beneficiation currently takes place in
“countries which do not mine the product at all or do not mine much of the product, but
which have focused their skills set on the manufacturing sector,” he fails to recognize the
significance of the impact of the extensive supply and availability of these minerals locally,
which in itself constitutes a source of comparative advantage, a point belabored by
McKinsey and Company (2014). McKinsey and Company aver that should producing
countries all decide to conduct their own beneficiation, this could shift the tide and improve
their competitive advantage. Therefore, Baxter’s assumptions primarily rest on an outdated
model in which the international market controls supply and demand economics, where
producer countries are compelled to sell their minerals even at give away prices.
However, with the emergence/resurgence of the resource nationalism doctrine, this scenario
could drastically change/shift in favour of producer countries if they can commit to limiting
the supply and outward export of raw unprocessed product. A similar observation was made
by McKinsey & Company (2014: 3) who acknowledge and recognize that there is a
potential negative impact or disruptive shock that could emerge should producing countries
decide to nationalize part or all of their production. This trend is emerging with increasing
demands for more local beneficiation in producing countries. McKinsey & Company
identify “three low-probability but potentially high impact shocks that could transform the
industry if they were to occur: 1. an extreme shock to demand; 2. an economic derailment in
India and China (the growth markets); and 3. resource nationalization in major producing
countries (McKinsey & Company 2014: 3).
Therefore, while the producing countries do not have free niceties like free/cheap colonial
slave labour, they could still build on the comparative advantage of owning and producing
the minerals to build an acceptable level of competitive advantage. Further, the world has
changed significantly in the 21st Century. There has been the radical sudden shift in global
economic power bases from the traditional “West” to the emergent and rising “East” which
has prominently featured more “South-South” trade, which is now increasingly perceived to
be more beneficial.
23
The Brazil, Russia, India, China and South Africa (BRICS, bank capitalization proposed at
US$100 billion) countries are expected to change the international economic landscape, thus
they present an opportunity worth pursuing. Africa has already begun to benefit from an
inward flow of US$200 billion Chinese money in the form of capital and infrastructure
investments.
Grynberg (2013) is of the opinion that diamond beneficiation being conducted in Botswana
significantly impacted the local economy. To this end Botswana localized diamond sales
and prohibited export sale of unprocessed diamonds in 2013. This greatly disadvantaged the
British where Botswana’s diamonds were previously being sent for processing, cutting and
polishing. However, their loss became the Batswana’s gain as localizing the Diamond
Technology Center has proven since 2013.
However, Baxter (2005:27) concedes that while comparative advantage from simply
possessing the minerals is difficult to attain, the shift has now moved to competitive
advantage that can be gained through/ other factors come into consideration when deciding
where to conduct minerals beneficiation. These factors include competitive production,
skills, craftsmanship, access to markets, good market intelligence, knowing which products
to sell into which markets, cost leadership in production, access to concessional funding,
technology, political stability (KPCS 2012). This makes more sense in light of the changing
global dynamics and shifting demographic with the entrance of former third world countries
into the “big leagues” economically.
24
Figure 2.6: The diamond value chain -“The Journey from mine to finger”
Source: Bain and Company (2011: 19)
The diagram below shows that manufacturing and retail sales stages create the highest value.
Figure 2.7: The largest added value is created in retail sales
Source: Bain and Company (2011: 22)
25
2.1.3.3 Minerals Sector Taxation and Fiscal Regime
There are usually two major orientations of a mining fiscal regime for any country: a) a
royalty/taxation based system, and b) a contractually agreed model where the Product/Profit
Sharing Contracts (PSCs) are agreed upon by the major stakeholders (ICMM and
Commonwealth Secretariat 2009).
The ICMM and Commonwealth Secretariat aver that because of the peculiar nature of the
mining sector, there needs to be developed a special fiscal regime exclusively for the mining
sector. They suggest the following two types of instruments, i.e. profit based taxes and
production based taxes (ibid). Profit based taxes are taxes on incomes, profits or cash flow.
This entails taxing revenue of mining companies after removing qualifying costs. The usual
types of taxes in this class are corporate income taxes, profit taxes on dividends and
royalties, and withholding taxes on remitted dividends. Production based taxes consist of a
tax on inputs and outputs. These are charges on deposits of production, inputs and services
and include Value Added Tax/Goods and Services Tax (VAT/GST) or sales and excise tax,
and ad valorem tax royalties. An ad valorem tax is a type of tax which is charged according
to worth or value of a piece of property normally imposed at the time when a transaction is
completed, for example imports duties, registration fees and licenses.
2.1.3.4 What factors influence taxation in the diamond sector?
The issue of government revenue remains contentious, especially in the Zimbabwean
diamond mining sector. According to the ICMM and the Commonwealth Secretariat
(2009:5) the taxation of minerals has at least three dimensions: 1. the level of taxation
dealing with the amount of taxes levied on the mining sector; 2. the structure of taxation
dealing with the choice of types of taxes e.g. levying royalties instead of income taxes; and
3. the transparency of the resulting revenue streams dealing with the need to track where the
revenues go once collected (ibid). The above framework ensures that the correct type of
taxes are levied, collected and properly accounted for. Taxation is a very emotive subject
world over, speaking to the heart of the need for government to raise fiscal resources so as to
be able to carry out its mandate as the provider of public goods and services (ibid).
26
However, the ICMM and Commonwealth Secretariat further acknowledge that usually the
competing interests between government (the taker) and the private sector (the taxed) lead to
failure to agree on an unacceptable level of taxation (ibid). What the government considers
as reasonable level of taxation may have a direct impact on the “bottom line” of a company
and stifle entrepreneurial spirit or investment and is effectively resisted. There is thus a need
to strike a balance between the three dimensions to taxation, especially in the minerals
mining sector which is capital intensive and requires significant FDI.
There are currently problems being experienced with repayment of investors. This has
precipitated challenges in monitoring profit repatriation, transfer pricing, tax evasion, under
valuation of diamonds and export of value. Experiences elsewhere indicate that how much
government gets by way of fiscal revenues from the mining sector largely depends on its
ownership of shares in those mining companies (CIIR 1983: 91, DeBeers 2014, McKinsey
and Company 2014). For example the Government of Botswana owns 50% of all diamond
mining companies in Botswana and 5% of the issued shares of DeBeers. The government
gets between 75-85% of the total revenue from all local diamond mining companies sales
and profits (Grynberg 2013, DeBeers 2014). As a fiscal measure the Government of
Botswana could also still tax a high proportion of the profits even if the mining companies
are fully privately owned (ibid, CIIR 1983).
Therefore the job of the Government is to ensure that the country gets something even if the
mining company is running at a loss and also make sure that when profits improve the
government can levy an “Additional Profits Tax” on these companies (ibid, CIIR 1983).
There is a need to constantly monitor financial dealings of all mines, i.e. both privately
owned and those jointly owned by the government and private sector, to ensure fair dealing
(CIIR 1983: 93). Principally this is because there is a risk of overcharging goods and
services for example the cost of toll refining of platinum in South Africa may be overpriced
for Zimbabwean ore. However, there is no sure way of telling without sufficient monitoring
of these transactions. Similarly for the diamond sector, the cutting and polishing done in
foreign countries may be quoted as being more expensive for various dubious reasons,
27
which include under pricing, and under invoicing exports. The centralized Export Marketing
Frameworks need strengthening to curtail transfer pricing, detailed scrutiny needed (ibid).
State marketing through MMCZ/RBZ is expected to minimize transfer pricing leakages,
other countries that have done it include Tanzania, Botswana, Zambia (through MEMACO),
Saudi Arabia (CIIR 1983: 92-96).
The experience of China demonstrates that the challenges with minerals securitization
model as a resource mobilization strategy (UNECA 2011). The end result is usually many
“holes in the ground” with little to show for the rapid extraction of minerals after reserves
are depleted. This negatively impacts on future generation’s ability to enjoy benefits from
these non-renewable resources.
2.2.0 Possible Strategies for ensuring Beneficiation 2.2.1 Cases in Minerals Beneficiation: Selected Country Experiences: Botswana, Indonesia, India, Belgium, Canada
This section reviews selected country cases, highlighting lessons that can be drawn for
Zimbabwe to enhance local beneficiation and value addition. The framework for comparison
consists of the following elements: Institutional (encompassing the main key players),
Regulatory/Legislative (encompassing the mining fiscal regime), what is
Botswana/India/Belgium/South Africa doing right? What challenges are faced by
Botswana/India/Belgium? and How did they overcome it?
2.2.2 Lessons from the Botswana Case
Botswana has only recently moved its diamond trade facilities from Europe to its home land
and has endeavored to undertake beneficiation on its soil (Grynberg 2013). Botswana is the
source of some of the world’s most high quality and highly valuable diamond gemstones but
until recently these have been beneficiated and processed in foreign countries, especially
Belgium, UK, USA, Russia, Israel, Dubai and India.
28
2.2.2.1 The Botswana journey towards local beneficiation
Prior to moving the Diamond Technology Center (DTC) to Botswana, DeBeers processing
was based in London. Trade was biased in favour of European countries without the mineral
(Belgium, UK). Moving the Diamond Technology Centre from Europe to Botswana has
setup a Diamond Technology Park “which is a hub for the cutting and polishing of
diamonds locally.” This DTC makes about US$1 billion a year from beneficiation of
diamonds alone.
2.2.4.2.2 Challenges for diamond beneficiation in Botswana
Botswana was among the poorest countries of the world on attaining its independence in
1966. Among the greatest challenges for the country were its landlocked position and
periodically suffering from severe droughts. Most of Botswana is barren wasteland with
extensive desert areas receiving minimal rainfall annually. This meant that the country could
not conduct any significant rain fed agriculture and had to scout for economic opportunities
from elsewhere. However, in 1967 there was a discovery of diamonds which became a
turning point and led to a rapid change in the socio-economic landscape of the country. This
immediately saw the economy growing by an average seven percent (7%) per annum
between 1970 and 1974 and significantly until the 1990s commodity slump.
This export-led mineral based high growth was sustained until the early 1990s when a
worldwide commodities price crash led to a significant slowdown in the pace of growth.
Meanwhile, despite these strides there still persisted some key challenges for policy makers:
overvaluation of the local currency due to high forex earnings leading to deteriorating
standards of living among locals due to the high cost of living, high unemployment levels
since diamond mining was largely capital intensive rather than labour intensive, and
education and skills shortages amongst the indigenous population. These indices worsened
because the revenue was concentrated in the hands of a few industry players leading to calls
for the government to re-strategize and rethink its diamond sector policies.
29
2.2.4.2.3 The call for beneficiation: How they overcame these challenges
In the late 1990s and early 2000s, Botswana started pursuing new avenues for getting
maximum returns from its minerals. Initially the country adopted a Maximum Extraction
Strategy which aimed to take advantage of the prevailing high commodity prices. However,
the key weakness of this strategy was that the economy was not diversified and heavily
reliant on diamonds revenue which revenue was vulnerable to commodity price fluctuations.
The following were found to be the obstacles to the adoption of a robust diamond
beneficiation strategy in Botswana: vested interests of middlemen in the value chain, neo-
colonialism, poor legal and institutional frameworks, skills and technological shortages,
poor internal market structures, the enclave nature of the diamond industry, lack of political
will and financing challenges. As part of their economic diversification programme,
Botswana bought 15% of DeBeers so that the country can still earn from the global growth
of DeBeers in other markets beyond diamond mining. DeBeers is a global MNC trading in
many commodities including diamonds.
The minerals price boom of 2006-2008 saw Botswana call for more beneficiation of its
minerals since diamonds are a non-renewable resource and principally because of the highly
volatile commodities prices on the world market. This has evolved to the present scenario
where Botswana emphasizes local diamond beneficiation and value addition of the mineral
before export. From 2013, the county proceeded to prohibit the export of unpolished rough
diamonds before they are processed locally. It subsequently its Diamond Technology Centre
from its London office to Gaborone. This strategy has brought about significant benefits for
the country since being introduced. Industry leaders assert that today, in 2013-4, twenty-five
percent (25%) of Botswana’s Gross Domestic Product (GDP) comes from its diamond
mining ventures which translates into and accounts for seventy-five percent (75%) of all its
exports (Bain and Company 2013, DeBeers 2014, and McKinsey and Company 2014). The
country currently produces the world’s most valuable polished gem quality stones (earning
the most in dollar terms globally); and this has led to the growth of the economy, skills
development, employment creation, trade surpluses and forex reserves being in the positive
(ibid).
30
2.2.4.2.4 Diamond Industry Regulation in Botswana
Botswana now has a robust diamond industry regulatory framework that is very
sophisticated and allows the State to earn up to 85% of the total value of their mined
diamonds. The country has over the years developed both international and local networks
of technology, manufacturing/beneficiation infrastructure, expertise, personnel, investors
and skills by investing heavily in business incubation, Research and Development, and
training.
2.2.4.3 Lessons from the Case of Indonesia 2.2.4.3.1 Challenges for nickel beneficiation in Indonesia
In 2009 and 2014 the Indonesian government adopted and implemented a compulsory
beneficiation strategy for its minerals to take effect from January 2014 2017 (Soraya and
Bellamy 2014). However, the World Bank has noted that the country could lose or forgo up
to US$6 billion each in exports and in government revenue on introducing this policy. This
revenue was lost from unrealized export sales of the mineral (Wesley 2014). Pessimistic
estimates indicate significant job losses, estimates range from 100,000 to 800,000 which
will be seen immediately on adopting this policy. Other countries have mooted taking the
Indonesian government to the World Trade Organization (WTO) for unfair trade practices
and setting up tariff barriers to international and regional trade (Wesley 2014: Online,
Business Day Live 2014). Players in the local market have also resisted these laws and
regulations by seeking judicial review (Soraya and Bellamy 2014).
Mining is designated the prime mover for regional development in Indonesia targeting
economic growth, equitable distribution of income, job creation, through sustainable and
environmentally sound mining (Lubis 2013: 9). It is envisioned to exploit energy and
mineral resources for the welfare of the local people. Lubis (ibid) cites this strategy as being
pro jobs (employment, local content), pro growth (state revenue, investment, added value,
balance of trade –production, export, domestic), pro poor (community development,
corporate social responsibility), and pro environment (good mining practice, reclamation
and mine closure).
31
2.2.4.3.2 The call for beneficiation: How they overcame these challenges
The Indonesian case demonstrates the need for a tempered approach to adopting
beneficiation. A radical sudden approach to wholesale compulsory legislation may prove to
be counterintuitive. The country is the worlds’ largest producer of nickel and in 2013
enacted legislation that directed all nickel producers to fully beneficiate locally beginning
January 2014. However, the results have been a sudden drop/fall in its status as the worlds’
biggest supplier of raw nickel as through put has suffered with huge raw nickel piling up
locally. This has been compounded by resistance from its traditional export markets of Japan
and China who have developed technology not only to recycle but also for combining nickel
with iron to make nickel-pig-iron, an alternative improved and convenient stock-feed for
stainless steel production (Business Daily Live 2014: Online). The lesson to be learned here
is that Advanced Technology and political-will in destination countries will always
combine, like in the Chinese case, to counter hostile economic strategies emerging from
minerals producing countries. However, on the positive side the progressive export duty
(bea keluar) is worth emulating. This legislation advocates for a more gradual move towards
higher tax rates for trade in specified un-beneficiated minerals (Soraya and Bellamy 2014:
http://www.whitecase .com/).
2.2.4.3.3 Minerals Industry Regulation in Indonesia
The diagram below outlines the Indonesian mining legal and regulatory frameworks in
place:
32
Figure 2.8: Indonesian mining policy environment/Legislative framework for mining
Source: Lubis (2013: 10)
2.2.4.3.4 Lessons from Indonesia and South Africa
The Indonesian case demonstrates the folly of legislating radical compulsory local
beneficiation policies. The total prohibition of the export of un-beneficiated nickel led to a
fall in most economic indices. On the contrary, although the South African Diamond Act
also prohibits export of unpolished diamonds, in their case the country has the advantage of
having an established and resilient diamond industry developed over hundreds of years.
However, on the positive side the progressive export duty subsequently adopted by
Indonesia (bea keluar) is worth emulating. This legislation advocates for a more gradual
move towards higher tax rates for trade in specified un-beneficiated minerals (Soraya and
Bellamy 2014: http://www.whitecase.com/). This is identical to the Zimbabwean 15%
mineral tax levy (initially set for platinum producers) adopted for the purpose of compelling
local miners to set up Base Metal Refiners. Companies have responded by complying and
investing in beneficiation technologies allowing them to gain tax breaks/holidays (e.g.
33
government has suspended the payment of this compulsory levy until 2016 so that the
companies get some financial wherewithal to invest locally in beneficiation infrastructure.
2.2.4.4 Lessons from the Case of Belgium Belgium houses the world’s largest diamond trade facility, the Antwerp World Diamond
Trade Center. However, it is instructive to note that the country does not have a diamond
mine but simply imports minerals from resource rich nations, and beneficiates them only to
resell them at higher values. The Belgian economy is propped up by exports of fully
beneficiated diamonds.
2.2.4.4.1 History of diamond mining in Belgium
None of the diamonds processed in Belgium are mined there, they come from Africa, mainly Democratic Republic of Congo (DRC). Of critical significance is the colonial past of the Belgium Empire, which extended to African countries. Building on this the Belgians beneficiate many minerals and commodities and have developed an advanced beneficiation industry.
2.2.4.4.2 The Belgium journey towards local beneficiation
Beneficiation is the mainstay of the Belgian economy and earns over 85 % of budget revenue principally because the world’s leading diamantaires are in Belgium.
2.2.4.4.3 Regulatory, Institutional and Legislative Framework
Antwerp World Diamond Trade Center, Diamond bourses, World Diamond Council. Belgium has set up banks and related diamond trade financial institutions (there are four banks dedicated to diamond trade alone).
2.2.4.5 Lessons from the Case of India India has been among the most successful in diamond beneficiation, having been in the
industry for the past 300 years. Diamond cutting and polishing has created over 1 million
jobs in Surat and Mumbai alone, and still growing. It has been reported that over 90% of the
diamonds produced in the Marange diamond fields are cut and polished in Surat province of
India, creating well over 90 000 direct jobs.
India boasts that 14 out of every 15 diamonds set as jewellery in the world are cut in India.
The country has developed a comparative advantage and a robust diamond and cutting and
34
polishing industry that did not exist in the 1970s, within thirty years. In 2012, India
processed 80-90 % of the world’s diamonds. Diamonds are responsible for 14% of India’s
exports (approximately US$43 billion) for financial year 2011-2012. This is a very big
contribution.
2.2.4.6 The Case of the United States of America and Canada
The Americans are the world’s largest diamond consumers; they are very influential because
they control a big portion of the market. Although Canada mines its own diamonds, it has
developed a robust beneficiation strategy for diamonds. In Canada diamonds worth US$5
billion can easily fetch US$56 billion after they have been polished and cut.
In the case of Canada’s North-West Territories (NWT), influential factors in the
development of a successful local diamond beneficiation and value addition industry were:
trade policy; access to rough diamonds; skills training; financial intermediary institutions
and security (Minister of Public Works and Government Services, 1998). Canadian trade
policy was beneficial for export oriented companies (a critical variable for the diamond
trade), the specific province had comparably competitive tax policies (with several
exemptions/incentives), it also had the natural comparative advantage of mining rough
diamonds locally (a key requirement for a sustainable cutting & polishing industry), critical
expertise could be accessed from other competent countries, while training locals in the
medium to long term (critical skills development for the immediate term were in diamond
sorting and valuation, with diamond cutters and polishers being needed latter; growing in
number over time as part of a government-led skills development programme), specialised
financial institutions with access to large amounts of capital, and development of diamond
specific legislation to reinforce security, prevent, prosecute and minimize minerals leakages.
2.2.4.7 The Case of the DRC
The DRC, a former Belgian colony, has failed to get meaningful benefits from the
exploitation of its natural diamond mineral resources. Despite being among the world’s
largest producers of diamonds (they produced approx 21 million carats in 2012), the country
has not been able to beneficiate and hence get maximum value for their minerals. Countries
35
that have continued to benefit from DRC’s mineral wealth are the neighbors Rwanda, the
foreign Europeans Belgium. These countries have also continued to benefit from the current
destabilization and rebels. The DRC has continued to be a net exporter of rough diamonds in
the process being prejudiced of billions in potential revenue.
2.3 Conclusion
This section has reviewed literature on diamond beneficiation. It has highlighted theories
like resource curse, modernization, rational choice theory and the following concepts:
resource nationalism, fiscal space, and the issue attention cycle. The various debates over
the meaning of beneficiation were outlined and the logic behind resource nationalism
outlined. Country case examples were also highlighted, drawing lessons for Zimbabwe.
CHAPTER THREE: METHODOLOGY
3.0 Introduction This section outlines the methodology used to gather data about the research problem. It
describes in detail the research design, population characteristics, sampling procedure and
data analysis techniques and analytical procedure used in the study.
3.1 Research Design The diagram below illustrates the four elements of the research design adopted for
in a matrix form:
Figure 3.1: The Research Design Matrix
Source: Adapted from Babbie 2007; Neuman 2007; Terre
2006: 37 and Creswell 2009.
This study was a data collection
industry. According to Creswell (2009: 3
research that span the decisions from broad assumptions to detailed methods of data
collection and analysis.” The background to this is that a research can
Frame (Techni
ques)
36
CHAPTER THREE: METHODOLOGY
This section outlines the methodology used to gather data about the research problem. It
es in detail the research design, population characteristics, sampling procedure and
data analysis techniques and analytical procedure used in the study.
The diagram below illustrates the four elements of the research design adopted for
: The Research Design Matrix
Source: Adapted from Babbie 2007; Neuman 2007; Terre-Blanche, Durrheim and Painter
2006: 37 and Creswell 2009.
was a data collection and examination of the Zimbabwean diamo
According to Creswell (2009: 3-5) “research designs are plans and procedures for
research that span the decisions from broad assumptions to detailed methods of data
collection and analysis.” The background to this is that a research can take any one of three
Research Design
(mixed methods)
Paradigm (Nomina-
lism)
Context
(diamond mining sector)
Purpose
(Objecti-ves)
Frame (Techni-
ques)
This section outlines the methodology used to gather data about the research problem. It
es in detail the research design, population characteristics, sampling procedure and
The diagram below illustrates the four elements of the research design adopted for this study
Blanche, Durrheim and Painter
of the Zimbabwean diamond mining
5) “research designs are plans and procedures for
research that span the decisions from broad assumptions to detailed methods of data
take any one of three
37
design orientations: quantitative, qualitative or mixed methods. These approaches to
research lie on a continuum ranging from a use of words in research (qualitative methods),
to a use of more numbers (quantitative methods), with mixed methods lying in the middle of
the two as it incorporates elements of both design typologies (ibid).
For this study, the research design entails the philosophical assumptions informing the
research (Creswell 2009: 4). Therefore, this research was structured as an exploratory case
study, relying on a positivistic philosophy. Positivism presumes that there is an objective
reality “out there” that must be discovered and the way to learn or discover new knowledge
is either through experiencing them or by objective observation of the nature of things.
However, the study also relied on pragmatism which Creswell (2009:10) citing Patton
(1990) describes as being primarily “concerned with applications (i.e. what works) and
solutions to problems.” In pragmatism, knowledge about the world around us is gained
through using an appropriate research design according to what works (ibid). Therefore, the
researcher used all available approaches by mixing methods to fully define, emphasize and
understand the research problem. According to Cherryholmes (1992) cited in Creswell
(2009: 11) pragmatists “acknowledge but are not interested in the questions about reality
and the laws of nature.” The focus is on the “what and the how” to research, based on the
intended consequences i.e. “where you want to go with the research” (ibid). The researcher
in this study therefore was interested in not only fully understanding the problem, but also in
providing recommendations on how these could be resolved or overcome.
3.2 Research Methodology These are also called strategies of or approaches to inquiry. Creswell (2009:11) identifies
three broad strategies: qualitative, quantitative and mixed methods (ibid). This study relied
on the mixed methods methodology.
3.3 Mixed Methods Research This study is formative and nascent research, being the first of its kind in Zimbabwe,
specifically focusing on diamond beneficiation and its link with fiscal resource mobilization.
Hence, it required an innovative combination of research instruments so as to come up with
38
useful findings without being bogged down by baseline survey technicalities. The study thus
triangulated both quantitative and qualitative data collection and analysis methods, hence
mixed methods. The researcher combined qualitative and quantitative research instruments
in a way that allowed and enabled the researcher to capture the pertinent issues around the
topic within the timeframe available. However, the study is in no way comprehensive but it
seeks to explore and explain the unique dynamics of the diamond and minerals mining
sector as a necessary first step.
Table 3.1: Quantitative, Mixed and Qualitative Methods
Quantitative Methods Mixed Methods Qualitative Methods
Pre-determined methods Both pre-determined and
emerging methods
Emerging methods
Instrument based Both open and closed ended
questions
Open-ended questions
Performance data, attitude
data, observational data, and
census data
Multiple forms of data
drawing on all possibilities
Interview data, observation
data, document data, and
audio-visual data
Statistical analysis Statistical and text analysis Text and image analysis
Statistical interpretation Across database
interpretation
Themes, patterns
interpretation
Source: Creswell (2009: 15)
3.4 Justification for Mixed Methods According to Creswell (2009: 4) the mixed methods approach “combines or associates both
qualitative and quantitative forms of research approach.” Mixed methods research uses both
in a complementary way so as to obtain stronger results from the study than can be acquired
39
by one method alone (ibid). Data found using one approach is used to either buttress or
complement the findings from the other approach. Creswell says this involves sequential
inquiry, using both methods in an iterative fashion.
Greene, Caracelli and Graham (1989) observe that “mixed methods have the advantage of
giving understanding to complex processes, through corroboration, convergence, expansion
and elaboration of findings; the weaknesses of one approach are complemented by the other
approach.” The greatest advantage of mixing methods is that “words can add meaning to
numbers while numbers add precision to words” (Johnson and Onwuegbuzie, 2004, in
Creswell 2009: 4).
Mixed methods acknowledges that either of qualitative and quantitative research approaches
have their limitations, which can best be minimized by triangulation so as to achieve
convergence across methods (Creswell 2009: 14). It therefore acknowledges the
multifaceted nature of research problems and attempts to compensate for this by ensuring
that one method complements the other. Creswell (ibid) highlights that mixing of methods
has the transformative effect or purpose of advocating for the case of marginalized peoples,
especially the poor. This study resonates well with and seeks to add to the concurrent
discourse on indigenization and economic empowerment as outlined within the ZIMASSET
strategy document.
Building on the conceptualization by Creswell (2009: 15) this study made use of three
general mixed methods approaches to research. Firstly, the sequential approach where
different methods were used one after the other to corroborate or follow up on a question or
response. Secondly, the concurrent method in which different research approaches were
used at the same time to provide a systematic analysis. Finally, the study entailed the
transformative approach in which the researcher also relied on theoretical conceptions for
insights into the phenomena under study.
3.5 Study Area and Target Population The study was conducted in Zimbabwe’s mining sector and specifically the diamond
mineral management policy community. However, the researcher did not attempt to conduct
40
a complete enumeration of the study population because of the inherent logistical challenges
that this would involve. However, effort was made to select as representative a sample as
possible considering that the research area is a highly technical area requiring expert
knowledge.
Within this study the identified units of analysis were public and private institutions and
officials in these institutions as described below: Minister, Permanent Secretary, Directors,
individual officers/executives, metallurgical technicians and students. The extensive
documentary search also provided useful insights, especially with respect to international
best practices and country cases as well as gathering the views of some reclusive Key
Informants. This was also useful for gathering statistical information on Zimbabwean
diamonds, especially from institutions like the United Nations mandated Kimberley Process
Certification Scheme, the Economic Commission for Africa and the African Union African
Mining Vision. To this end various publications such as books, journals, the internet,
newspapers, magazines and corporate reports and publications were used.
3.5.1 The target population The population was deemed to be heterogeneous and included key players in the diamond
mining sector within the following institutions: the Ministry of Mines and Mining
Development, Zimbabwe Mining Development Corporation (ZMDC), Minerals Marketing
Corporation (MMCZ), Institute of Mining Research (IMR), Zimbabwe School of Mines and
the Department of Geological Survey); the Ministry of Finance and Economic Development,
Zimbabwe Revenue Authority (ZIMRA) and the Reserve Bank of Zimbabwe (RBZ);
Parliament of Zimbabwe, Zimbabwe Diamond Center (ZDC), Zimbabwe Chamber of
Mines, Diamond Beneficiation Association of Zimbabwe (DBAZ), Scientific and Industrial
Research Development Corporation (SIRDC), diamond mining companies, and international
bi-lateral or multilateral agencies (UN, AU, SADC, KPCS). Appendix D lists a brief
description of each of the organizations through an organogram i.e. organizational structure
chart.
41
3.6 Sampling Methods and Sampling Procedure The study utilized non-probability sampling methods to identify respondents, hence
purposive and snowball sampling.
3.6.1 Purposive Sampling
The sample was selected deliberately using the method described by Babbie (2007: 184) and
Neuman (2007: 142-145). Thus basing on the researchers existing “knowledge of the
population, its elements and the purpose of the study”, purposive sampling allowed the
researcher to deliberately identify and select specific individuals for their technical
knowhow, expertise, experience and access to the required information (ibid). Furthermore,
this method was more useful despite the fragmented and heterogeneous nature of the
population. It would have been difficult to enumerate the entire population since the
majority of the population in the diamond mining sector is secretive and reclusive, hence
constituting a hidden population (Neuman 2007: 142).
However, Babbie (2007: 184) avers that there are risks associated with using
judgmental/purposive sampling. This is because problems usually abound with respect to the
reliability/validity of the findings. It is therefore not possible to generalize from the findings
about other similar situations elsewhere. However, the greatest utility of this method is its
ability to explore novel research areas and reveal or expose hidden facts at the least possible
cost whilst retaining an acceptable level of internal validity (i.e. elimination of bias, etc).
Neuman (2007: 218) highlights what could constitute a problem for a research of this type
when he identifies that external validity is reduced because participants are aware of being
under scrutiny. He likens this to the “Hawthorne Effect” by emphasizing that in most
research settings, participants are bound to respond in a manner consistent with the
expectations of the researcher. In this study, it emerged that diamond revenue are still
considered a secretive area, thus respondents tended to desist from providing information
they considered “sensitive”. This was even so despite the fact that permission for research
was granted in the Ministry and one of the respondents, a Key Informant, insisted on getting
42
personal clearance from the Permanent Secretary on whether to provide the information or
not.
3.6.2 Snow Ball sampling (aka, chain referral, reputational sampling or network sampling)
The study relied on snowball sampling where the first few respondents provided referrals
linking to other potential respondents in the field (Neuman 2007: 144). Snowballing was
particularly useful because the diamond mining industry is relatively secretive and sensitive,
hence usually inaccessible (from Interview with Key Informant). Therefore, snow ball
sampling helped to overcome these challenges through directing the researcher to the right
respondents and also providing a useful “first time introduction”. This helped significantly
in getting cooperation from respondents. However, the main observed disadvantage of this
method is that some of the indicated leads were inaccessible, leading to the researcher
resorting to telephone interviews.
Leedy (1985: 163) cautions that the threat of bias encroaching into research is always very
real. This study is not an exception to this truism and the researcher acknowledges the
limitations of the chosen sampling approaches. However, despite the challenges of inherent
bias in these sampling methods, most importantly these methods were chosen primarily
because the study area is highly technical hence not everyone is able to eloquently articulate
the issues under investigation.
3.6.3 Sample characteristics, size and research procedure
Few people have the specialized knowledge required to participate in the study. Therefore,
the sample size was intentionally limited to fifty (50) respondents. Of these thirty (30)
respondents had a standardized questionnaire administered on them. While fifteen (15) were
designated to be interviewed as Key Informants only eight (8) were actually interviewed in
Face-to-Face interviews while five (5) provided responses over the phone. Also included
within the sample were observations by the researcher utilizing both past and recent
personal encounters with prominent industry players, particularly current and past
executives of diamond mining companies. A further two (2) interviews were conducted with
43
academics at the University of Zimbabwe. Although ZIMRA declined to grant permission
for the research, two (2) interviews were informally conducted with two (2) executives who
however declined to be named for professional reasons.
3.7 Data Collection Instruments The researcher relied on the following instruments to collect data in line with the research
objectives. A standardized structured survey questionnaire was used to collect responses to
preset questions from officials in the Ministry of Mines and Mining Development, while the
Interview Guide was used in face to face interviews with Key Informants in several
organizations. Documentary Search entailing an extensive library and internet search was
done, focusing on a review of journals, texts, statutes, newspapers, magazines and
conference papers. Various electronic media including video and audio recordings of
meetings and conference proceedings were used. The researcher also relied on personal
observations building on past employment engagements and personal encounters.
3.8 Data Analysis The Statistical Package for Social Sciences (IBM SPSS 20.0) was used to analyse the
quantitative data collected using the survey questionnaire. This software is suited to
analyzing quantitative data in a social science research setting using the Descriptive
Statistics and Factor Analysis Modules of the software. The IBM-SPSS 20.0 was used to
produce and derive tables, charts, graphs by counting, analyzing frequencies, principal
component extraction, and factor analysis. For the qualitative data, thematic analysis was
used to analyse the data obtained from observations and key informant interviews. This was
complimented by a content analysis of data from the documentary search. In this final
report, analyses of the trends are depicted through text and various pictorial illustrations, i.e.
making use of tables, graphs, and or charts.
3.9 Reliability and Validity Reliability and validity are important concepts in social science research/theory which help
to indicate the measure of “truthfulness, credibility or believability of findings” from
research (Neuman, 2007: 116). Reliability refers to the degree to which an instrument
consistently measures a particular construct, while validity refers to the appropriateness of
44
the method of measuring the particular research constructs (ibid: 116-7). To improve
reliability of the questionnaire, this study used “clearly conceptualized constructs” by asking
specific questions about particular variables (elements under measurement) within the
questionnaire. This was done to avoid confusion between responses about the numerous
variables under review. The study also used “multiple indicators” by comparing data from
interviews, desk research and findings from the questionnaires, i.e. by a triangulation of
methods. Therefore, any inconsistency in the questionnaire responses would have been
reported from other comparable sources.
For example, interviews conducted with officials from the Ministry of Mines and Mining
Development were cross checked with data gathered through desk study of quoted
Ministerial statements, official publications or news reports. Similarly, responses from
interviews held with Zimbabwe Diamond Center officials were compared with sources
containing public statements/pronouncements. Other responses were simply compared with
the researchers own experiences from personal encounters.
3.10 Ethical Issues The researcher undertakes to abide by the following ethical standards/principles in the
conduct of the study: to seek voluntary informed consent from all targeted respondents; to
report the findings honestly and accurately; to be open and transparent so as to respect the
rights of the individuals interviewed and not to deceive them in any way; to respect the
individual’s right to privacy (anonymity, confidentiality and security of data); to maintain
the highest level of confidence and finally to use the information gathered only in the
manner agreed at the outset (i.e. for academic purposes only).
3.11 Conclusion
This section highlighted the research design, methodology, population, sampling procedure,
data collection instruments, data analysis methods and ethical issues in the study.
45
CHAPTER FOUR: DATA PRESENTATION AND DISCUSSION
4.0 Introduction
This chapter focuses on the thematic presentation, analysis and discussion of major findings
gathered through the various instruments. This was done in line with the following research
objectives: examine the legal and institutional frameworks for diamond beneficiation in
Zimbabwe, describe the state of the practice in other countries, demonstrate the effects of
diamond beneficiation to the mining fiscal regime, and recommend an appropriate diamond
beneficiation model to enhance the performance of the mining tax head/mining fiscal
regime.
4.1 Response Rate and Reliability of Questionnaire
Table 4.1: Questionnaire Response Rate
Questionnaires Issued Number Returned Response Rate
35 29 83%
Given the secretive and sensitive nature of the diamond sector, the response rate of 83% was
overwhelming and thus considered to be more than satisfactory. The diagram below shows
the reliability of the questionnaire as tested by IBM-SPSS 20.0:
Table 4.2: Reliability of the Questionnaire
Variable No. of items Cronbach’s Alpha
Value
Diamond Management Frameworks 28 0.948
Anticipated benefits from beneficiation 16 0.914
Quantity of Diamonds in Zimbabwe 2 0.725
Diamond Footprint (types of diamonds) 14 0.821
Fiscal Revenues Mobilization, Beneficiation & 17 0.911
46
the Mining Fiscal Regime
State of the Practice/Industry Best Practice 25 0.899
Challenges in Diamond Revenue Management 6 0.701
Recommendations for improving revenue 39 0.913
Source: IBM-SPSS 20.0, Field Data
Table 4.2 above shows the test for internal reliability of the questionnaire using SPSS.
According to Cronbach (1989), an instrument is considered reliable if it returns a
Cronbach’s Alpha value of greater than 0.70. The questionnaire was measuring eight (8)
constructs, which all returned a Cronbach’s Alpha value above 0.70, hence was considered
to be reliable.
47
4.2 Legislative and Institutional Framework for Diamond Revenue Management 4.2.1 The Zimbabwean Diamond Sector
This section focuses on the Zimbabwe diamond revenue management legislative and
institutional frameworks. The diagram below shows the various frameworks:
Figure 4.1: Institutional and Legislative Frameworks for Diamond Revenue Management
Source: Field Data
0
10
20
30
40
50
60
1 2 3 4 5 9
Fre
quen
cy %
Response: Reported Level of Agreeability
Zimbabwe Mineral Revenue Management Frameworks
Permanent Institutions Temporary Institutions
Constitution Act(s) of Parliament
Policy Documents Statutory Instruments
Government Directives Rules, Ordinances, Mamoranda
Other
48
4.2.3 Zimbabwe Diamond Revenue Management Institutions
From the survey questionnaire 65.4% of the respondents contend that these frameworks are
in the form of Permanent Institutions, while 48% reported the presence of Temporary
Institutions. Specifically, findings indicate that key institutions in the Zimbabwean diamond
revenue management are the Ministry of Mines and Mining Development, Zimbabwe
Revenue Authority, Zimbabwe Mining Development Corporation and Marketing
Corporation of Zimbabwe. Other institutions are listed in Appendix A.
4.2.4 Zimbabwe Diamond Revenue Management Legislation
The survey indicated that Parliamentary Acts (84%) closely followed by the Constitution
(80%) and Policy documents (73.1%) were the dominant legislative frameworks. Figure 2
below shows this distribution in a simpler way:
Figure 4.2: Diamond Revenue Management Legislative Frameworks
Source: Field Data
NB: Appendix A lists the comprehensive frameworks
The questionnaire elicited responses by asking respondents to tick
options. The top frameworks are Acts of Parliament, principally the Constitution, Mines and
Minerals Act and the Precious Stones Trade Act. This is closely followed by Policy
Documents, encompassing the Diamond Policy and Statutor
directives came in fourth, while International Treaties are the least prevalent frameworks.
0
10
20
30
40
50
60
70
80
90 84 80
70.6
Per
cent
age
%
Diamond Minerals Management Legislation
49
Figure 4.2: Diamond Revenue Management Legislative Frameworks
NB: Appendix A lists the comprehensive frameworks
The questionnaire elicited responses by asking respondents to tick among a series of several
options. The top frameworks are Acts of Parliament, principally the Constitution, Mines and
Minerals Act and the Precious Stones Trade Act. This is closely followed by Policy
Documents, encompassing the Diamond Policy and Statutory Instruments. Ministerial
directives came in fourth, while International Treaties are the least prevalent frameworks.
9.5
05.5
12
0 4
70.6
11.8
0
17.6
62.5
18.8
12.5
6.3
76.5
17.6
5.9
0
53.4
20
6.7
20
28.6
21.4 21.428.6
Response
Diamond Minerals Management Legislation
Acts of Parliament
Constitution
Statutory Instruments
Ministerial Directives
Policy Documents
Rules and Ordinances
International Treaties
Other
Figure 4.2: Diamond Revenue Management Legislative Frameworks
among a series of several
options. The top frameworks are Acts of Parliament, principally the Constitution, Mines and
Minerals Act and the Precious Stones Trade Act. This is closely followed by Policy
y Instruments. Ministerial
directives came in fourth, while International Treaties are the least prevalent frameworks.
Acts of Parliament
Constitution
Statutory Instruments
Ministerial Directives
Policy Documents
Rules and Ordinances
International Treaties
Other
50
4.2.5 Frameworks in diamond sector
The documentary search and field data both show a multiplicity of frameworks operational
in the Zimbabwean minerals management sector (see Appendix A). Evidently, there are
various institutions involved in the diamond sector policy community both at local and
global level.
Table 4.3: Major Frameworks in Diamond Management in Zimbabwe
Frameworks Components
Constitution Constitution of Zimbabwe of 2013
Policy Documents Environmental Management Policy, Diamond Policy,
Indigenization & Economic Empowerment Policy, Industrial
Development Policy, Privatization Policy
Act(s) of Parliament Mines and Minerals Act, Zimbabwe Mining Development
Corporation Act, Minerals Marketing Corporation of
Zimbabwe Act, Precious Stones Trade Act, Indigenization
and Economic Empowerment Act, Finance Act,
Environmental Management Act
Permanent
Institutions
Ministry of Mines and Mining Development (ZMDC,
MMCZ, Institute of Mining Research, Zimbabwe School of
Mines, Geological Survey and Provincial Mining
Commissioners), Ministry of Finance and Economic
Development (ZIMRA, RBZ), Environmental Management
Agency (EMA)
Temporary
Institutions
National Indigenization and Economic Empowerment Board,
Community Share Ownership Trusts
Statutory
Instruments
Statutory Instruments: 72 of 1989, 109 of 1990, 157 of 2014
Government Presidential pronouncements (e.g. the directive to pay civil
51
Frameworks Components
Directives servants salaries from diamond proceeds of 2009-13)
Rules, Memoranda,
Ordinances
Special Mining Leases
Other United Nations, Kimberley Process Certification Scheme,
African Mining Vision, Southern African Development
Commission, World Diamond Council
Source: Field Data
NB: Refer to Appendix A for a detailed listing of incidental policies, statutes and institutions
Although there are numerous pieces of legislation and institutions to do with minerals
management in Zimbabwe (see Appendix A), there is currently no legislation dealing with
the diamond specifically. An interviewee from the Zimbabwe Diamond Centre believes the
mineral is still generally considered as a “new mineral” in Zimbabwe, hence the lack of
attention by government. A Key Informant in the Zimbabwe Geological Survey disclosed
that one weakness is that there have been no geological surveys conducted by government to
ascertain the occurrence and quantum of Zimbabwean diamonds. Therefore, the
Zimbabwean Government has been slow to respond to the calls to set up special legislation
and institutions dealing with diamond mining, processing and marketing. Therefore the laws
to manage diamond revenues are grossly inadequate in various ways. A Key Informant in
the Parliamentary Portfolio Committee on Mines and Energy believes government has been
slow to respond to the calls for special legislation institution dealing with diamond mining
specifically. The interviewee disclosed that the proposed Minerals Development Policy and
the Mines and Minerals Bill (2007) have been stalled at the Cabinet Committee for
Legislation stage since 2007. Thus the legislation in place right now is obsolete, having been
put in place since before independence (1961 for Mines and Minerals Act and the Precious
Stones Trade Act). However, there is a need to enact the Diamond Act, finalize the Minerals
Development Policy and amendments to the Mines and Minerals Act (pass the new Mines
and Minerals Bill of 2007).
52
4.3 International Best Practices in Diamond Revenue Collection: A Summary of Country Experiences To achieve the objective of: Describe the state of the practice in other countries. This part
also answers the question: Does Zimbabwe currently conduct value addition and
beneficiation?
An in-depth review of documentary evidence, indicated that in the country cases reviewed
there was a general association in the amount of beneficiation a country conducted and the
taxes collected. Although this might not come directly through benefits from beneficiation,
there were numerous spinoffs that were encountered by countries that conducted minerals
beneficiation. These findings from the documentary search were consistent with results from
the field survey and interviews with Key Informants who indicated that there are various
benefits to be accrued from adopting minerals beneficiation.
The Government of Zimbabwe had imposed a blanket ban on the export of all raw minerals
(15% starting with platinum). While about half of the survey respondents (48%) indicated
that government must ban mineral exports, the experiences elsewhere show this is ill
advised. However, as indicated in Chapter 2 the, Indonesian case demonstrates the folly of a
wholesale ban on the export of diamonds/minerals. The Minister of Finance has however
made announcements of a deferment of this tax (until 2017) to encourage a buildup of
capacity for local beneficiation, this is laudable intervention.
The Belgian case shows how the country of Zimbabwe can better benefit from the
comparative advantage it has in possessing mineral resources. While Belgium does not
produce diamonds, it has built a large beneficiation industry and economy from processing
commodity imports. Belgium has four specially designated diamond trade banks to facilitate
payments. A key informant with the Zimbabwe Diamond Centre has proposed the setting up
of a model diamond beneficiation centre in Zimbabwe which will serve as “One-Stop-Shop”
for diamond buyers, processors and related industries. It will encompass banking and
financial services facilities amongst others, with many positive spinoffs anticipated.
53
The Botswana case provides a lesson that Zimbabwe must build its own local beneficiation
industry. This would entail engaging in skills development, partnering foreigners in win-win
relationships (for example Russian, Chinese ICBC, BRICS etc. investments). South-South
cooperation presents big challenges and opportunities for the future in the commodities trade
domain. Zimbabwe can learn from India which has a centuries old low cost diamond
processing industry.
Interview respondents indicated that while other countries have experienced similar or
worse challenges to those Zimbabwe currently faces, they had to adopt innovative strategies
so as to overcome them. Zimbabwe has recently constituted a Sovereign Wealth Fund Act
and the body awaits constitution and resourcing. However, there are challenges in
operationalising the Fund given that international best practice dictates that it be resourced
from surpluses (Nadia Piffaretti, former World Bank Country Director for Zimbabwe).
Zimbabwe has consistently run a budget deficit since independence (with the exception of
the GNU era) and is under a heavy debt burden. Despite these challenges, there are abundant
prospects in Zimbabwe’s diamond sector, discussed in the recommendations section.
The tables below show these findings:
54
Table 4.4: Benefits from Diamond Beneficiation according to importance/rank
Rank Benefits Strongly
Agree
Agree Somewhat
Agree
Disagree Strongly
Disagree
Don’t
know
1 Technology
Modernization
14
(53.8%)
9
(34.6%)
3 (11.5) 0 0 0
2 Improved
Incomes
14
(53.8%)
9(34.6
%)
3 (11.5%) 0 0 0
3 Infrastructure
Development
14
(58.3%)
7(29.2
%)
1(4.2%) 1(4.2%) 0 1(4.2
%)
4 Improved
Livelihoods
14
(56.0%)
6(24.0
%)
5(20.0%) 0 0 0
5 Skills
Development
13
(56.5%)
5(21.7
%)
4(17.4%) 1(4.3%) 0 0
6 Better
Revenues
12
(46.2%)
8(30.8
%)
4(15.4%) 2(7.7%) 0 0
Source: Field Data
The table above is a summary/illustrates the benefits accrued from the diamond
beneficiation in accordance of most reported benefit by survey respondents, ranked in
ascending order from 1 (most important rank) to 6 (least important rank). However, survey
respondents also reported challenges faced by these countries. The table below shows
challenges encountered by other countries in diamond beneficiation:
Table 4.5: Challenges encountered by other countries in diamond beneficiation
Rank Challenges Strongly Agree
Agree Somewhat Agree
Disagree Strongly Disagree
Don’t know
1 Skills Shortages
8(32.0%) 10(40.0%
)
5(20.0%) 1(4.0%) 0 1(4.0%)
2 Financial Problems
9(36.0%) 9
(36.0%)
2(8.0%) 2 (8.0%) 0 3(12.0%)
55
Rank Challenges Strongly Agree
Agree Somewhat Agree
Disagree Strongly Disagree
Don’t know
3 Revenue Management Challenges
9(34.6%) 9
(34.6%)
3(11.5%) 4(15.4%) 1
(3.8%
)
0
4 Technology Shortages
8(33.3%) 8(33.3%
)
3(12.5%) 5(20.8%) 0 0
5 Supply of Rough Diamonds
3(12.5%) 7(29.2%
)
6(25.0%) 5(20.8%) 1(4.2%) 2(8.3%)
6 Marketing Problems
4(16.7%) 5(20.8%
)
5(20.8%) 9(37.5%) 0 1(4.2%)
Source: Field Data
The table above highlights the most critical challenges faced by countries which have
adopted minerals beneficiation.
4.4 Beneficiation as Industrialization: Conceptualizing BVA in Zimbabwe
The Zimbabwe Chamber of Mines (2014) asserts that Zimbabwe currently conducts a
significant amount of beneficiation, particularly in the metals sector (gold, zinc, nickel,
platinum, chrome, etc). However, there has been a lack of significant progress towards
adoption of diamond beneficiation. One Key Informant attributed this to discord between
the various policy community members. In fact, there are allegations of possible sabotage by
government officials, especially through frustration of the existing investors. A former
executive of a State mining company also indicated that there is loss of progress or direction
in adopting diamond beneficiation due to policy inconsistency and numerous problems at
policy implementation due to this discord and vested interests. The episodic fashion of
formulating and implementing strategies in diamond mining sector is characteristic of
Anthony Downs’ Issue Attention Cycle.
Although the Chamber of Mines President Alex Member stated at the Zimbabwe Mining
Indaba in 2014 that Zimbabwe currently conducts a lot of beneficiation in the minerals
sector, according to interviews with Key Informants, this is still at a very small scale in the
diamond sector. A Key Informant Interview with a former ZMDC executive disclosed that
this might be because diamond cutting and polishing technology is
Zimbabwe.
4.5 Impact of Diamond Beneficiation on Fiscal Resource
The section seeks to demonstrate the effect of diamond beneficiation to the mining fiscal
regime, and answer the question: What effect does diamond bene
revenues performance? However, while information from this section was not available and
could not be accessed from the MMMD due the provisions of the Official Secrecy Act,
various documentary sources, including internet sources, w
for this section.
4.6 Characteristics of the Zimbabwean Diamond Footprint
The diamond footprint refers to the quality of diamonds mined from a certain location. A
Key Informant with the Geological Survey indicated that Zimbabwe currently mines alluvial
and conglomerate diamond deposits. The diagram below shows the profile of the
diamonds (the diamond footprint) mined in Zimbabwe.
Figure 4.3: Proportion and Quality of Zimbabwean Diamonds
Source: Field data
56
diamond sector. A Key Informant Interview with a former ZMDC executive disclosed that
this might be because diamond cutting and polishing technology is not readily available in
Impact of Diamond Beneficiation on Fiscal Resource Mobilization
The section seeks to demonstrate the effect of diamond beneficiation to the mining fiscal
regime, and answer the question: What effect does diamond beneficiation have on fiscal
revenues performance? However, while information from this section was not available and
could not be accessed from the MMMD due the provisions of the Official Secrecy Act,
various documentary sources, including internet sources, were used to collect information
Characteristics of the Zimbabwean Diamond Footprint
The diamond footprint refers to the quality of diamonds mined from a certain location. A
Key Informant with the Geological Survey indicated that Zimbabwe currently mines alluvial
and conglomerate diamond deposits. The diagram below shows the profile of the
diamonds (the diamond footprint) mined in Zimbabwe.
3: Proportion and Quality of Zimbabwean Diamonds
Industrial/Boart64%
Near Gem25%
Gem11%
Zimbabwe Diamond Fotprint
diamond sector. A Key Informant Interview with a former ZMDC executive disclosed that
not readily available in
Mobilization
The section seeks to demonstrate the effect of diamond beneficiation to the mining fiscal
ficiation have on fiscal
revenues performance? However, while information from this section was not available and
could not be accessed from the MMMD due the provisions of the Official Secrecy Act,
ere used to collect information
The diamond footprint refers to the quality of diamonds mined from a certain location. A
Key Informant with the Geological Survey indicated that Zimbabwe currently mines alluvial
and conglomerate diamond deposits. The diagram below shows the profile of the quality of
Industrial/Boart
57
4.7 Diamond valuation: Colour, Cut, Clarity and Carat (4Cs)
The value of a diamond varies and is difficult because diamonds come in many shapes,
colours and sizes. However, the valuation process depends primarily on the “4Cs”
classification (Colour, Cut, Clarity and Carat). Colour refers to the appearance of the
diamonds; Clarity refers to the deflection of light; Cut refers to the dimensions of the
diamond allowing it to be fashioned into different shapes for setting in jewellery; and Carat
refers to the size/weight of the diamond. These four factors (4Cs), in combination, act to
determine the value and selling price of a diamond.
4.8 Diamond cutting and polishing companies in Zimbabwe
A Key Informant indicated that while some of the diamond mining companies conduct
elementary processing of diamonds through cleaning in their sorting and valuation centres,
there are not many companies involved in diamond cutting and polishing in Zimbabwe. This
was corroborated by a senior official at the Ministry of Mines and Mining Development who
indicated that at one point there were about twenty-six (26) diamond cutting and polishing
companies in Zimbabwe, this number has since reduced to just sixteen (16), as most were
driven out of business for various reasons. The Minerals Marketing Corporation of
Zimbabwe (MMCZ) in its 2013 Annual Report recognizes Akin Investments, Gemgrade,
Supertrend Enterprise and Vivid Facets as the companies which conducted polished
diamond sales in 2013.
Table 4.6 below shows that diamond polishing improves the value of the mineral
significantly.
58
Table 4.6: Polished Diamond Sales for 2013
Producer Volume (carats) Value (USD)
Akin Investments 639.95 $ 870,882.36
Supertrend 355.69 $ 773,534.00
Vivid Facets 150.48 $ 357,895.80
Gemgrade 3.23 $ 6,542.56
GRAND TOTAL 1,149.35 $ 2,008,854.72
Source: MMCZ Annual Report (2013: 22)
This means polished diamonds averaged one thousand seven hundred and forty seven
dollars and eighty two cents per carat (US$1,747.82/carat). This was made from part of the
eight thousand seven and ninety seven carats (8,797 carats) valued at two million nine
hundred thousand dollars sold to local manufacturers by the MMCZ.
A senior executive at the Zimbabwe Diamond Centre and the Zimbabwe Diamond
Education Centre also highlighted that basic cleaning of the diamond may treble the value
gained from rough diamonds. Statistics in the MMCZ Annual Report for 2013 detail that for
the year 2012 and 2013, the per-carat price of Zimbabwe’s rough diamonds doubled
because of cleaning that was conducted before the Belgium auction. This cleaning is a first
stage of the beneficiation process. A Key Informant with the MMMD and an academic at
the University of Zimbabwe reported that much more value can be gained from cutting and
polishing the diamonds, citing the Botswana and Canadian experience both whose
diamonds gain value by over 10 times after cutting and polishing (subsequent stages of
diamond beneficiation).
The figure below shows the average prices of diamonds per carat from 2009-2014:
Figure 4.4: Average prices of diamonds per carat
Source: Adapted from MMCZ 2013Annual Report,
Mines 2014, Diamond Gazette 2014, KPCS, MMMD, MMCZ, DeBeers
The trend line shows that the value of Zimbabwean diamonds was generally increasing between the years 2009 – 2014.
NB: * in 2014 the prices for rough diamonds fl
closing at US$78 at the last diamond auction for 2014.
based on the highest value attained in 2014 and on the average price of similar diamonds
sold in neighbouring countries of Botsw
diamond earnings per carat was partly as a result of the country conducting preliminary
cleaning before selling the diamonds, principally at the Belgian Antwerp diamond tender
auctions. A Key Informant interview
above is consistent with an increase in value
2009
USD/carat 21.42
0
20
40
60
80
100
120
140
160
Av
era
ge
Pri
ce /
Ca
rat
in U
S$
59
: Average prices of diamonds per carat
Source: Adapted from MMCZ 2013Annual Report, ZMDC Website, Zimbabwe Chamber of
Mines 2014, Diamond Gazette 2014, KPCS, MMMD, MMCZ, DeBeers
The trend line shows that the value of Zimbabwean diamonds was generally increasing 2014.
in 2014 the prices for rough diamonds fluctuated between US$70 and US$143,
closing at US$78 at the last diamond auction for 2014. ** the figure for 2015 is an estimate
based on the highest value attained in 2014 and on the average price of similar diamonds
sold in neighbouring countries of Botswana and South Africa. The change in value of
diamond earnings per carat was partly as a result of the country conducting preliminary
cleaning before selling the diamonds, principally at the Belgian Antwerp diamond tender
auctions. A Key Informant interviewee revealed that the trend indicated in the diagram
above is consistent with an increase in value after further processing of diamonds.
2010 2011 2012 2013 2014*
38.01 54.31 49.54 33 78
Years
USD/carat
ZMDC Website, Zimbabwe Chamber of
The trend line shows that the value of Zimbabwean diamonds was generally increasing
uctuated between US$70 and US$143,
the figure for 2015 is an estimate
based on the highest value attained in 2014 and on the average price of similar diamonds
ana and South Africa. The change in value of
diamond earnings per carat was partly as a result of the country conducting preliminary
cleaning before selling the diamonds, principally at the Belgian Antwerp diamond tender
ee revealed that the trend indicated in the diagram
further processing of diamonds.
2014*2015**
est.
78 150
60
Figure 4.5: Diamond Production and Export Revenues
Source: MMMD, MoFED, KPCS, MMCZ, ZMDC, Diamond Gazette 2014, National
Budgets, Field data with Microsoft Office Excel 2007
The figure above demonstrates that diamond exports are significant sources of foreign
exchange (forex) earnings in Zimbabwe. These earnings can concurrently translate into tax
revenues for the government in various ways.
4.9 Marange Diamonds: Geology and Beneficiation
According to a Key Informant with the Zimbabwe Geological Survey, the primary sources
of diamonds are kimberlitic pipes extruded from the centre of the earth through geological
processes over billions of years. Zimbabwean diamonds have differing occurrences amongst
them being alluvial, conglomerate and kimberlitic. The most common Zimbabwean
diamonds from Marange occur in alluvial deposits. The alluvial deposits at Marange were
2009 2010 2011 2012 2013 20142015
est.
Carats (ct.)millions 1,349,17 8,424,38 7,787,92 15,104,0 9,420,31 12,000,0 8,000,00
USD$millions 28,900,7 320,237, 422,926, 768,244, 455,891, 600,000, 624,000,
28,900,799.00
320,237,120.00422,926,507
768,244,000
455,891,000
600,000,000.00
624,000,000
1,349,172.44
8,424,384.40
7,787,923
15,104,028.00
9,420,317
12,000,000.008,000,000.00
0.00
100,000,000.00
200,000,000.00
300,000,000.00
400,000,000.00
500,000,000.00
600,000,000.00
700,000,000.00
800,000,000.00
900,000,000.00
Valu
e in
US
$
Years
Zimbabwean Diamonds Exports Revenue
61
eroded and transported in rivers from elsewhere and where exposed to harsh geological
processes leading to some of them getting a brown encrustation, or a deposition of some
other minerals on their surface as they were affected by intense heat and irradiation over
time. This is why the majority of the rough diamonds at the Chiyadzwa/Marange fields look
black, dark brown and or dirty (industrial diamond quality). They have therefore hitherto
been sold cheaply for this reason. However, some of this dirt can be removed, significantly
changing the size and shape; and improving the colour and clarity of the diamonds. This
“cleaning” can be done by deep boiling these dirty diamonds in acid under high pressures.
According to a Key Informant who is a Lecturer at the Zimbabwean Diamond Education
Centre (a diamond cutting, polishing and training institution) “cleaning is the first stage of
the diamond beneficiation process.”
4.10 Mineral Marketing Dynamics in Zimbabwe
A former senior executive with the ZMDC disclosed that African countries still face
immense challenges in the diamond trade. They are currently selling their minerals at very
cheap prices for various reasons: African producer countries are all intensely competing for
the same market and due to fragmented marketing strategies amongst leading producers, the
buyers of rough diamonds have an advantage, typically using “divide and rule” tactics. This
was supported by an interviewee from the Zimbabwe Diamond Centre who also indicated
that buyers tend to prefer buying in countries with fewer restrictions. Dependency Theory
presents an in depth expose of the dynamics at play in this instance.
The African Capacity Building Foundation (ACBF, 2013: iv) identifies factors that have
caused African countries to continue receive limited revenues from their minerals as
contractual arrangements, (skewed against producers but in favour of buyer countries),
transfer pricing and tax avoidance, leading to African countries collecting just 40% of
potential revenues from their mineral wealth. This has led most African governments
nationalizing all mineral resources and actually getting into business alone or in partnership
with private sector companies. However, DeBeers (2014) caution that the government could
62
possibly get nothing from a company in which it owns all the shares due to the inefficiencies
associated with “bureaucrats in business.”
4.11 Problems with “Bureaucrats in Business”
An interview with a Key Informant from the academia stated that “problems with
bureaucrats in business” have been experienced in Zimbabwe where some publicly/State
owned companies have consistently failed to declare either profit or dividend. However, the
reasons for this failure to declare dividends are complex, many and varied. In depth
interviews with a senior Ministry executive implicated the effect of political contingencies,
for example government requested funds from ZMDC & MMCZ during GNU to adjust civil
servants cost of living allowances (COLA). The ZMDC also indicated that the multiplicity
of compulsory statutory payments, charges and levies on operators by the regulatory
institutions depletes their finances (ZMDC Annual Reports for 2011, 2012). These
sentiments, although inconclusive, may indicate that this could partially explain the
“missing” diamond revenues – the complex web of regulatory requirements dilutes the funds
before they get to the central government. These funds are usually used for the specific
agency’s operational expenses, like salaries, vehicles, rentals & rates, conferences and also
paradoxically their own statutory payments.
One interviewee disclosed that negligent management of public resources or bureaucratic
bungling is also a key causal factor. Economists have termed this the “moral hazard
problem” where public officials tend to take more uncalculated risks with large sums of
public funds where there are few or minimal controls or negative incentives (Meyerson,
2014).
This demonstrates inefficiency in revenue collection as some of these agencies perform no
meaningful functions, or where they duplicate the functions of other agencies. The New
Institutional Economics (NIE) explains this behaviour of public officials through the Public
Choice Theory which states that some agencies may exist for their own sake or as “pet
projects” of powerful elites who have to pursue and maximize self interests, by giving “jobs
63
for the boys” or expanding the agency budget to show they have power in the government
resource allocation matrix. This also brings truth to Harrold Laswell’s assertion that politics
(and by extension public policy) is about “who gets what, when, how and with what effect?”
4.12 The Problem of Diamond Revenue Leakages
A former ZMDC executive interviewed indicated that most diamond mining companies in
Zimbabwe are managed by expatriates earning management fees. DeBeers (2014) assert that
the greatest threat to government revenue generation is in exorbitant management fees
charged by these expatriates. This leaves the government sharing with the joint venture (JV)
partner company a highly depleted profit pool (ibid). Further, overpricing imports,
equipment and services may eat away at revenues effectively externalizing profits.
Organized international syndicates specializing in tax evasion/avoidance, under invoicing,
transfer pricing or blatant smuggling prejudice the State of significant revenues. Concerted
attention to the mining fiscal regime will help to alleviate these challenges and minimize
losses in the process. These Illicit Financial Flows pose a very serious threat to government
revenue. However, while these present significant hurdles, the greatest threat lies in the
export of un-beneficiated minerals to foreign countries which in turn get the full benefit
from the mineral by simply conducting beneficiation and value addition.
4.13 Challenges to be Expected when introducing Beneficiation in Zimbabwe
Survey respondents, although cautious, anticipated challenges in beneficiation to include:
skills shortages (62.5%), corruption (48%), technology (45.8%), multi-national company
(MNC) domination (40%), poor management of revenues (37.5%), poor workmanship
(31.8%) and anti-competitive behaviour (30.4%). These low indices for challenges indicate
that respondents were optimistic that beneficiation will lead to more benefits than costs
accruing to the country.
Consistent with the above, Key Informant Interviews and experience from personal
encounters indicates that the big challenges faced by the diamond sector in Zimbabwe are:
lack of appropriate technology, poor investment levels, uncertainty in policy on
64
indigenization, low Foreign Direct Inflows (FDI), lack of skills for diamond cutting,
polishing, marketing and jewellery and poor accountability and transparency indicators.
The Executive Chairman of one diamond mining company, in a personal encounter, also
emphasized the negative effect of the targeted sanctions on the country. The sanctions on
State owned companies (ZMDC and ZB Bank) and specification of certain key individuals
were a significant hindrance to the sale of Zimbabwean diamonds before the country
acquired Kimberley Process Certification (KPC) in late 2009.
A Zimbabwe Diamond Education Centre senior executive, highlighted other challenges
including the punitive and high cost of diamond cutting & polishing licenses
(US$100,000.00 per year as set by Statutory Instrument 157 of 2014, US$500.00 export fee
regardless of quantity exported), lack of the appropriate “mindset” (diamonds are quickly
and easily convertible to liquid cash and are in high demand world over”), lack of proper
skills and knowledge about the true value of the diamond its processing and subsequent
marketing, and the “unjustifiable favouritism of foreigners who are not subjected to the
same requirements as for locals”. Although the US$100,000.00 permit for diamond cutting
and polishing has since been replaced with a US$20,000/10 year permit (still much higher
than South Africa and Botswana), there are still significant constraints for local processors.
Findings from the demographic survey questionnaire and an Interview with an Academic
Researcher at the UZ disclosed that there are youthful staffs/officers in key positions at the
Ministry of Mines and Mining Development (as across the rest of the civil service), well
educated but with little institutional memory. This demographic profile could partially
explain the pessimistic short term forecast of minimal immediate benefits from beneficiation
reported by the survey questionnaire. However, it is prudent to note that this could have
been an unintentional effect from the sampling methods chosen for the research.
4.14 Creating Fiscal Space for the Zimbabwean Government
An academic at the University of Zimbabwe highlighted that the “obesity of Parliament” (at
over 300 members) poses a huge drain on the fiscus. This obesity extends to the civil service
65
which is currently estimated to constitute a complement of just above half a million
members. There is a need to urgently rationalize the civil service so as to create fiscal space
for government. This rationalization exercise should also extend to inefficient or non-
performing State enterprises. This is consistent with Heller’s fiscal space diamond
conception where reprioritization of expenditures should be married with increased
mobilization of domestic resources, minimizing consumptive borrowing and reduction in the
over reliance on development assistance to fund government programmes.
4.15 Global Diamond Industry Value Sharing Ratios
Documentary evidence shows that while diamond producing companies globally shared
only US$18 billion from the sale of rough diamonds in 2013, those countries which engaged
in both diamond jewellery manufacturing and retail sales shared a windfall of over US$50
billion. This same trend was observed for 2014 and is expected to persist in the industry. A
Key Informant with a local diamond cutting and polishing training institution (ZDEC)
disclosed that while possession of the diamond mineral and producing the actual rough
diamonds counts for a lot, it does not come close in terms of earnings potential compared to
manufacturing value added jewellery. According to reports by Baines and Company (2011
& 2013), DeBeers (2014) and McKinsey & Company (2014), the two most valuable stages
which produce the greatest value along the diamond value chain are the jewellery
manufacturing and retail sales segments. However, these are also very capital intensive
(Bain & Company 2013: 6; DeBeers 2014). The challenge for Zimbabwe is that the value of
its jewellery industry is currently unknown, leaving room for under declaration of
production, worsening uncertainty for policy level planning.
4.16 Diamond classification
A Key Informant in the Zimbabwe Geological Survey (ZGS) disclosed that there are many
factors to consider when evaluating the value of a diamond. While some diamonds are
extracted from the mine clearly gem quality, others require basic cleaning (by boiling in acid
under pressure) to remove the tough outer coating of brown dirt. Most of Zimbabwe’s
Diamonds are dirty and considered industrial and thus sold at very low prices (even at
66
$30/carat vs. $1000/carat for polished gems). The Country may have been prejudiced greatly
in the past by selling its diamonds without cleaning, which would then be done cheaply by
middle men who get most of the true value of the diamonds. Interviews with Key Informants
and officials from the Ministry, ZMDC and ZDC identified/indicated the problem of a
strong lobby with vested interests in the diamond industry.
4.17 Anticipated benefits from beneficiation in Zimbabwe
Respondents reported anticipated benefits from diamond beneficiation including:
employment creation (88%); higher retained local value (84%); improved livelihoods
(84%); infrastructural development (82.6%); increased government revenue (78.5%); and
industrialization (72%). Respondents were not very optimistic about improvements in
transparency (65.2%), accountability (52.1%) or economic diversification (66.7%).
4.18 Proposed ways of Increasing the Contribution of Diamonds to the Fiscus through Beneficiation
This section seeks to recommend an appropriate model for Zimbabwe to obtain optimal
revenues from its diamonds. It highlights the challenges anticipated and the opportunities
available for exploitation to improve diamond mining fiscal regime.
The recommended model is a modification of the Belgian, Botswana and South African
experiences. The majority of respondents indicated that government must neither reduce nor
remove the current tax levels (64% and 62% respectively), and 52% actually advocated for
an increase in taxes. Alternatively the government can introduce new tax measures (60%).
However, almost half believe the country should ban export of rough diamonds (48%).
Interviews and documentary search however indicate this might be counterintuitive.
To achieve the objective of recommendations to enhance the fiscal contributions of
diamond, the SPSS Factor Analysis was used and it extracted the most important variables
and issues to focus on in the beneficiation discourse. To recommend appropriate strategies
for beneficiation, factor analysis determined that the principal determinants for beneficiation
include only four components out of the total 16 accounting for a total variance of 84%.
67
Only components with an Eigen Value of one (1) or greater were extracted. The Scree Plot
below illustrates these results, showing the distribution of the extracted components
indicating the cut-off level for all components with an Eigen Value of greater than one (1).
Figure 4.6: Five components had an Eigen Value of more than 1 and were thus
extracted
Source: Principal Component Factor Analysis of Field data with IBM-SPSS 20.0
The key is such that component one is the most important, while component four is the least
important.
4.19 Explaining the Principal Factors for Beneficiation
The Extracted Principal Component Matrix illustrates the variables which constitute each
component basing on a loading factor of 0.80. The matrix indicates the composition of each
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component extracted based on how each variable is correlated with other variables. Basing
on a Loading Factor (cut-off point) of 0.80, the principal factors extracted in component one
(1) were Technology (0.959), impact on livelihoods (0.908), skills (0.956), workmanship
(0.925), anti-competitive behaviour of companies (0.895) and improved transparency
(0.824). Component two (2) was composed of only two variables: government revenue
(0.924) and industrialization (0.945). The greater the loading factor, the greater the impact
of the variable in terms of the impact on value addition and beneficiation. Those variables in
component one (1) are considered to have the greatest impact. Elements in component two
(2) are of lesser impact than those in one (1), while subsequent components (3, 4 & 5) are of
even lesser importance and were ignored. Technology was found to have the greatest impact
followed by skills. These findings were consistent with evidence emerging from interviews
with key informants and other respondents.
4.20 ADDITIONAL ISSUES These include issues which were beyond the scope of this study but which emerged
nonetheless.
4.20.1 Governance in Zimbabwe’s Diamond Sector
Although governance was beyond the purview of this research, there is a need to analyse the
governance frameworks in Zimbabwe’s minerals management sector generally and the
diamond sector specifically. Most survey and interview respondents reported that issues to
do with corruption, transparency and accountability need to be addressed for the country to
get full benefit from its mineral resources. This would also help demystify the enigma
surrounding the minerals sector while improving transparency and concurrently enhancing
democratic governance.
4.20.2 Industrial espionage
A Key Informant indicated industrial espionage is hindering growth of Zimbabwean
economy, undermining the contribution of minerals to the fiscus and it has also significantly
constrained full adoption of local beneficiation. This works to perpetuate a state of
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dependency by modernizing economies on the developed economies as the relationship
remains an unbalanced one, favouring the latter.
4.21 Ground breaking initiatives in Zimbabwe’s Diamond Sector
4.21.1 Resource Nationalization
Public Choice Theory can be used to explain the behaviour of policy makers. The policy
process inevitably has winners and losers, benefits and costs. An interview with a Key
Informant revealed that although there is nationalization of natural resources in Zimbabwe
(with key strategic mineral rights vested in the State), minerals policy somehow still
emerges as elite preferences.
4.21.2 Indigenisation and Economic Empowerment
As part of the broad based growth and development strategy blueprint, the Zimbabwe
Agenda for Sustainable Socio Economic Transformation (ZIMASSET), which relies heavily
on the Resource Nationalism discourse, the Minister of Mines Walter Chidhakwa
emphasizes that Zimbabwe embarked on an intensive programme of localizing ownership of
natural resources. Through the Constitution of Zimbabwe of 2013, the Indigenisation and
Economic Empowerment Act, the new Diamond Policy of 2014, the Community Share
Ownership Scheme Model and various other sector specific interventions, including the
proposed consolidation of all of mining companies and government’s shareholding in one
corporation/company, the country is well on course to improve revenue collection, achieve,
consolidate and retain more local benefits from diamond mining. This is consistent with the
Resource Nationalism philosophy. However, the episodic fashion/manner in which policy is
made or changes in the sector still presents challenges. Anthony Downs’ Issue Attention
Cycle, transaction cost economics theory and public choice theory explains some of the
policy inconsistency in the sector. The “regular paradigmatic flip-flopping” exhibited by
government officials and functionaries in the diamond mining policy community depicts the
intense contestations and powerful power dynamics within the sector.
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4.22 Conclusion This Chapter has presented and discussed the major findings of the study as analyzed using
IBM-SPSS 20.0, content and thematic analyses. The next Chapter deals with
recommendations and conclusions encompassing findings emerging from the study, through
field research, identification of industry best practices and lessons learnt from other
countries.
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CHAPTER FIVE: Conclusions and Recommendations
5.0 Introduction
This section, informed by the research objectives, literature review and field data, discusses
the findings and conclusions. It furthermore proffers recommendations on how Zimbabwe
can attain more value from its minerals through beneficiation:
5.1 Summary by Objectives
5.1.1 Frameworks
There are numerous frameworks governing the mining and minerals sector in Zimbabwe,
however, without any being specific frameworks for the management of diamond revenues.
The antecedent legislation is obsolete, antiquated and grossly inadequate to deal with this
“new” mineral.
5.1.2 Industry Best Practice
Many countries have reaped huge fiscal benefits after investing in diamond beneficiation
infrastructure, despite not being traditional miners of diamonds. These benefits are very big
because diamonds are valuable. Sector specific interventions which other countries have
adopted include: a radical shift towards resource nationalization, introduction of a robust
minerals management fiscal regime, investing in skills development, adopting modern
technology applications, localizing minerals processing by setting up beneficiation
infrastructure at home, formulating enabling legislation and setting up institutions
responsible for knowledge transfer, providing adequate finances, partnering with friendly
financiers and rationalizing the mining fiscal regime to encourage investment, from both
local and foreign sources. It was also seen to be helpful to start small, gradually growing and
managing capacity issues and creating a savings facility to conserve the surplus.
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5.1.3 Impact of beneficiation on mining fiscal regime
The fiscal potential and contribution of the diamond mineral largely depends on the
adequacy of the mining fiscal regime. A strong mining fiscal regime enhances more local
beneficiation and significantly improves the performance of the various tax heads. It was
found that while there is significant beneficiation currently being done in Zimbabwe, this is
either insignificant or non-existent in the diamond sector. This is despite the fact that the
diamond sector holds the greatest potential for fiscal resource mobilization. A single carat of
diamond is sold for between US$30.00 and US$18,000.00 depending on various factors
including (but not limited to) whether it is sold in the rough, polished, cut or set in jewellery
and importantly the 4Cs (carat, clarity, colour and cut). The price at which it is sold
determines the portion that is due to government by way of royalties and the numerous taxes
in the sector.
Therefore, after thorough consideration, the study accepted the alternate hypothesis and
rejected the null hypothesis. It is this study’s conclusion that conducting more minerals
beneficiation locally will lead to an increase in the value of the final processed product or
commodity. This in turn leads to more fiscal revenue collection opportunities for the
government. Additional to this, there are further benefits that will accrue to a country
namely: skills development, adoption of modern technologies, infrastructural development,
improved standards of living for locals through improved incomes and social services and
more importantly industrialization and the growth of multifarious upstream and downstream
business enterprises within the economy. These create multiplier effects whose impact will
be felt on the mining fiscal regime.
5.1.4 Recommendations
The study found that Zimbabwe has great potential to improve the contribution of diamond
revenues to the fiscus. It is possible to improve the performance of the mining tax regime by
instituting timely changes and adopting industry best practices that have been used
successfully by other countries. This study recommends a combination model, building on
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the experiences of other countries, which will enable the country to derive maximum
benefits from its minerals.
5.2 Conclusions 5.2.1 Realities of the Zimbabwean diamond/mining industry
The Zimbabwean minerals management sector is excessively fragmented with numerous
institutions and pieces of legislation all having an effect/impact on the diamond mineral.
There is a need to enact a comprehensive Diamond Act which combines all relevant
legislation to do with the diamond mineral in one piece of legislation. This creates certainty
for policy level planning and implementation. At the same time, government must also
finalize the Minerals Development Policy and the Mines and Minerals Act.
5.2.2 Mining Sector Policy Communities and Paradigms
For Zimbabwe, mining is still an enclave industry largely capital intensive, foreign owned
mostly extractive and dependent on trading in raw mineral resources. This is
notwithstanding that Zimbabwe has made concerted efforts to rectify this anomaly through
various pieces of legislation, imposing tariffs and adopting Joint Venture models through the
concept of Public-Private-Partnership (PPPs). It is implicit that all governments seek to
maximize fiscal revenue hence they impose resource rents on minerals exploitation. They
are usually less concerned about when this revenue is earned. Conversely, political pressures
compel governments to collect this revenue sooner rather than later (ICMM and the
Commonwealth Secretariat 2009: 8). This has been observed in Zimbabwe where the
government is financially hamstrung and is always eagerly awaiting for revenue that comes
from diamond sales. All this revenue is immediately used to finance recurrent expenditures,
principally to meet immediate obligations like civil servants salaries and operational funds
for government programs. There is thus very little scope for savings and investment in key
infrastructure from the minerals earnings. The key observation here is that for developing
countries that are overly reliant on mineral revenues, the objective of maximizing revenue
over the long run is not practical due to political constraints impinging on delaying the
accrual of benefits from minerals.
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5.2.3 Beneficiation as Industrialization
For Zimbabwe, minerals beneficiation and value addition is of paramount importance as it
resonates directly with the re-industrialization discourse. To the extent that beneficiation is
defined as the setting up of new factories, side stream and downstream activities it is well in
line with the Zimbabwe’s strategy of re-industrialization in ZIMASSET. In this light it can
thus be seen that the beneficiation discourse is not exclusive to the mining and extractive
industries sector alone but extends to other sectors where commodities need further
processing beyond the raw state.
5.3 Recommendations 5.3.1 Diamond Mining Lifespan/Prospects
Given that alluvial diamonds (the easy picks) are now considerably depleted, beneficiation
is even more imperative now. Mining tends to be a short lived enterprise with its lifespan
typically lasting for just under 20 years under effective mining regimes, and the equipment
is relocated to another site. Afterwards the land is usually polluted, barren and unsuitable
for any other commercial activity without proper rehabilitation being done.
5.3.2 Impact and Fiscal Potential of Diamond Beneficiation
In general the following specific recommendations are made for diamond beneficiation to
succeed in Zimbabwe: government must develop incentives for FDI which assure win-win
investments; invest in infrastructure the greatest enabler for industrialization; conduct skills
development programmes; adopt and adapt appropriate technologies; strengthen
indigenization and empowerment frameworks to provide real tangible deliverables for the
common man on the street; and more research into minerals beneficiation that can be done
locally to both explore its feasibility and build a credible knowledge base.
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5.3.3 Private Sector Initiatives
The private sector cannot simply wait for the government to do everything; there must be
innovative initiative from entrepreneurs forging partnerships with both local and foreign
financiers and investing time and money to make diamond beneficiation a success.
Government is recognized as an enabler, creating the conditions necessary for proper
functioning of economic activity. Government cannot and indeed must not be seen as the
only aggressive player in the minerals beneficiation discourse, private sector organisations
(banks, companies, academia, civil society organisations, schools, researchers, politicians
and individuals) must all take their place.
5.3.4 Technology Transfer and Skills Development
Skills and adoption of appropriate technology are fundamental to the full adoption of
beneficiation. Harare Poly/Institute of Technology now fabricating diamond polishing
benches, while the Zimbabwe Diamond Center training diamond cutters and polishers.
5.4 Policy side Interventions 5.4.1 Legal and Institutional Frameworks for Diamond Beneficiation
5.4.1.1 Legislative Improvements
To resolve the problem of multiplicity of legislation and institutions involved in managing
diamond revenues, government must formulate an integrated legislative framework by
finalizing the Minerals Development Policy; enacting a new Mines and Minerals Act;
revamping indigenization and economic empowerment legislation so as to create certainty in
the policy and simplify and unify all the legal frameworks for diamond management under a
single Diamond Act responsible for all diamond issues.
5.4.1.2 Institutional Improvements
Institutional interventions must include the setting up the Minerals Prospecting Company to
conduct minerals surveying and mapping; set up model beneficiation centers countrywide to
bring minerals beneficiation to the local communities across the country. For
intergenerational equity the Sovereign Wealth Fund must also be made operational, to
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promptly build savings. The Special Economic Zones/Export Processing Zones (SEZ/EPZ)
must include special factories for diamond processing.
5.4.1.3 Sector Specific Interventions
The Government of Zimbabwe also needs to strengthen tax frameworks in Zimbabwe’s
diamond sector. This can be done by compelling companies to use local facilities in their
mining and processing activities. This includes doing diamond cleaning, cutting, polishing
and jewellery manufacturing locally, use of local auction floors to sell diamonds, open more
diamond processing centers locally, train more local people in diamond processing, open
banks specifically designated to do banking for the diamond trade between Zimbabwe and
other foreign countries, increase the number of diamond beneficiation training schools, set
up a diamond beneficiation/minerals beneficiation centre after the Non-Aligned Movement
(NAM) model. The ZDC already has the status as a designated NAM Centre for
Beneficiation in Zimbabwe.
5.4.2 Mainstreaming Issues: Gender, Indigenization and Economic Empowerment
Economic empowerment is not complete until there is a mainstreaming component.
Government must ensure consistency and certainty in policy pronouncements. To ensure
that there are lasting benefits from engaging in diamond beneficiation there is need to
provide incentives for local beneficiation and value addition. This can be done by issuing
concessions to and encouraging partnerships between locals and foreign funders in the
setting up of diamond processing facilities within Zimbabwe. This will increase the number
of locals involved and helps retain more of the diamond revenues in the local economy.
It is also an imperative for the Government of Zimbabwe to also structure arrangements for
the inclusion of not only a gender component (through sector specific empowerment
initiatives) but by also encouraging and allowing inclusion and transition of the informal
sector into the formal economy. This must be incorporated into the diamond mining and
beneficiation sector as part of the empowerment module. The purpose of gender
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mainstreaming is not only to achieve equality between the sexes but also to get their full
contributions.
5.5 ADDITIONAL ISSUES: Governance and Capacity Building Although governance was beyond the scope of this study, it emerged as an integral aspect in
management of diamond revenues.
5.5.1 Incidental Interventions: Oversight
There is a need to improve and strengthen supervisory and oversight functions of the various
bodies, e.g. by capacitating Parliamentary Committees. Government must also curb
corruption by prosecuting perpetrators of fraudulent practices. Public officials must be
forthcoming with information or data, especially by making it accessible to researchers and
engender trust between government and business; this is the bedrock for successful nations.
5.5.2 Governance, Transparency and Accountability in Extractive Industries
Zimbabwe is a signatory and fully fledged member of the Kimberley Process (KP) a United
Nations (UN) mandated multilateral organization. The Kimberley Process Certification
Scheme (KPCS) under Section V of its Core Document, titled “Cooperation and
Transparency” and in Annex III titled “Statistics” sets out prerequisites for cooperation
among KP member organisations and for managing statistics relating to diamond production
figures and revenues and availing it to “interested parties for analysis.” The Government of
Zimbabwe needs to do more to ensure diamond revenue statistics are readily available to the
general public, in the interest of transparency and for purposes of accountability. The World
Bank sets out responsiveness of governmental authorities as part of the good governance
frameworks; this must be adopted in Zimbabwe.
There is a strong need to eliminate corrupt practices, by fully investigating and resolving
criminal cases. Initiatives that may be adopted by the diamond sector industry players to
increase transparency in diamond revenue management include the Zimbabwe Environment
Lawyers Association’s (ZELA) Publish-What-You-Pay campaign a part of a bigger
Extractive Industries Transparency Initiative (EITI). This campaign encourages diamond
78
producers to publicly disclose its production figures, earnings and related statistics; thereby
enhancing transparency and accountability in natural resources management.
5.5.3 International Relations
Zimbabwe must focus on beneficial international bilateral and multilateral partnerships
which produce win-win arrangements, circumvent sanctions by re-integrating into the
family of nations through appealing to progressive nations. Countries with vested interests
in Zimbabwe have hindered this re-integration.
5.5.4 Capacity Building, South-South Cooperation and the Look-East Policy
Zimbabwe needs to engage in more South-South cooperation with willing partners to
counter the impact of sanctions. Those countries which have imposed sanctions on the
country (targeted or not) are doing so with the purpose of pursuing the National Interest of
their own economies. The Zimbabwean government must now make bold moves to reassess
these relationships or outright disengage with these countries and form stronger partnerships
with friendly countries which are willing to partner through win-win arrangements. The
Brazil, Russia, India, China and South Africa (BRICS) frameworks will prove useful for this
purpose. The BRICS countries have proposed to set up a development finance bank
(capitalization US$100 billion) for the purpose of providing loans at concessionary rates.
This proposed bank has the potential backing of the world’s biggest bank, the Industrial and
Commercial Bank of China (ICBC), which is crucially important. Zimbabwe must therefore
increase South-South cooperation by engaging cash rich countries (like China with forex
reserves of US$4 trillion) to fund its developmental programs, for example ZIMASSET.
5.5.5 Look East Policy: Impending Rise of the Asian Economies
Middle-Eastern, Asian and some Latin American countries, principally the United Arab
Emirates, China, India and Brazil are poised for magnificent growth in the near future riding
on the back of rapidly modernizing economies, growing affluence in the population and
juxtaposed against the decline of and global financial crisis afflicting the “Global West”.
Although Zimbabwe’s economy is still intricately integrated with its former colonial
79
master(s) and debtors in the Global West, it is imperative for the country to reassess the
benefits that have accrued from these relationships with the future in mind. The economies
of countries in the East are fast rising and demand for resources is high. Zimbabwe stands to
benefit by reorienting the structure of its economy in line with these Asian economies.
Further, as reciprocity for bilateral support from countries in the East (China, Russia) it is an
imperative for the country to bring this political engagement to a more commercial and
tangible form. McKinsey &Company (2014) assert that the Chinese market is growing
rapidly and has a voracious appetite for commodities and natural resources, including
diamonds.
5.5.6 The Modernizing Economy: With specific reference to FDI
Modernization Theory models the process of development, while Dependency Theory
explains the challenges faced by modernizing economies. The country needs to fully engage
in more “South-South” cooperation, particularly by building bridges and linkages with
friendly and cooperative partners in sourcing loans for FDI investments. The country must
pursue full engagement with the BRICS Development Bank (US$100 billion, cap.) and
China’s ICBC (reserves US$4 trillion, cap.). This will be additional to existing cooperating
agencies: United Nations Development Program (UNDP), the World Bank (WB), the
International Monetary Fund (IMF), European Union (EU/EC), and African Development
Bank (AfDB) among others.
5.5.7 Funding frameworks
Dollarization brought about economic stability in Zimbabwe from 2009 onwards. However
this has precipitated an intense liquidity crisis. Zimbabwe must change the currency of
choice for international trade and reintroduce a local currency based on the mineral wealth
of the country. This deals with the liquidity crisis and returns monetary policy control to the
hands of an autonomous, development orientated Central Bank of Zimbabwe.
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5.5.8 Plugging Diamond Leakages
There is a need to plug leakages of minerals from smuggling and illicit financial outflows.
This can be done by increasing the physical surveillance of mines, mining areas and
international borders using advanced technological tools like X-Ray scanners, Closed
Circuit Television (CCTV) systems and Geographic Positioning Satellites (GPS). This
would enhance revenue tracking by curbing leakages. The digital CADASTRE System
recently adopted by the Ministry of Mines for registration of mining claims is thus very
valuable. Revenue management means little if there is no control of ownership structures.
Technology can also be used to reduce inefficiencies i.e. set mineral size capture thresholds
for mine extraction of diamonds and full exploitation of mine dumps. Regularizing Artisanal
and Small Scale Miners (ASSM, illegal panners, makhorokhoza/magweja) will minimize
leakages in diamond mining. This removes the incentive to externalize their produce
through informal channels.
5.5.9 Renegotiate Mining Agreements to Regain Control over Mineral Resources
Historically, the exploitation of minerals has been skewed in favour of foreign companies.
The country must therefore renegotiate all unfair mining contracts in line with the
indigenization and economic empowerment legislation to salvage control over the country’s
mineral wealth.
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5.6 Optimal Conditions required for Diamond Beneficiation The following factors must be considered when introducing beneficiation:
Figure 5.1: Summary of Recommendations for Diamond Mining and Revenue
Management
Source: Developed from Field Data NB: Environ1, PWYP2 & 3Ps3
1 Environ refers to the five types of environment within which the model subsists i.e. political, economic, social, technological and cultural 2 PWYP stands for Publish-What-You-Pay a facet of the Extractive Industries Transparency Initiative driven by the Zimbabwe Environment Lawyers Association (ZELA). 3 3Ps refers to Public-Private-Partnerships
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5.6.1 The Model Diamond Beneficiation Centre
The model diamond beneficiation center must be a “one stop shop” for the entire diamond
industry with all the requisite facilities. It must also be in-line with the NAM Beneficiation
Centre Model. The proposed Zimbabwe Diamond Centre has gone some way in setting up
the prerequisite infrastructure for a similar facility. Government must support such private
sector initiatives.
5.6.2 Minerals Securitization
The Chinese experience with securitization of minerals or mineral rights shows that this
strategy is not desirable. The purchasers of the issued securities usually onward trade these,
through speculative financial transactions on the international financial markets, leading to a
failure to develop the minerals themselves until the financial claim on the securities far
exceed the true value of the actual mineral deposits. Problems arise when the holders of the
securities make a call (a demand to withdraw their investment) on their investment and the
subsequent worth of the securities held far exceeds the net realizable value from exploitation
of the mineral’s rights. The consequences, as with China, will be a rapid extraction of the
mineral until exhaustion/depletion in order to settle the demands by the investor, leaving the
country highly indebted and with neither the mineral nor the financial benefits that must
accrue from exploitation of its minerals.
5.6.3 Diamond Beneficiation and Fiscal Resource Mobilization
Minerals beneficiation can be touted as the savior for the Zimbabwean economy because it
presents an opportunity for the government to mobilize fiscal resources relatively easily with
little hindrance. Government can ride on the comparative advantage which the country has
by way of natural resources endowment to improve its collections from taxpaying
organisations and individuals. Diamond revenues, because of the significant wealth creating
potential of the mineral, have played an important role by earning foreign exchange for
Zimbabwe until now. It can be said that it was the Marange diamond revenues which
brought Zimbabwe out of a worsening and downward spiraling economic predicament in
2009 pitching the path towards economic stabilization and recovery. The country can build
83
from this base towards higher goals. Diamond beneficiation holds great promise for quickly
modernizing the economy concurrently transforming the sociopolitical realities of the
country’s citizens. This study made significant findings to this effect, and recommends
suggestions for improvement.
5.7 Hypothesis Testing/Conclusion Key informant interviews and experiences from other minerals in Zimbabwe like gold,
nickel, chrome and platinum, indicate that there is in fact a positive correlation between the
level of mineral beneficiation and the contribution of that mineral to the various tax heads
like value added tax (VAT), corporate income tax, pay as you earn (PAYE), National Social
Security Authority (NSSA), AIDS Levy, royalties, and excise duties. This is expected to
hold true for the diamond sector. One key informant indicated that “although there may not
be many immediate financial benefits to the government from diamond beneficiation these
will come in due course from the multiplier effects of benefits including skills development,
technological advancement, infrastructural improvement, tourism, employment creation and
improved livelihoods from higher incomes.”
In the final analysis, basing on the comprehensive data from all the sources (SPSS analysis
of questionnaire responses, desk study and interviews with KIs) while beneficiation has no
immediate effect on the minerals fiscal regime, ultimately there will be multiplier effects on
the whole economy in the medium to long term as downstream and sidestream activities
develop. This study therefore rejected the null hypothesis and accepted the literary
alternative hypothesis. The more diamond beneficiation a country conducts, the more fiscal
revenues are gained from taxation of overall increased economic activity.
5.8 Direction for Future Research This chapter focused on conclusions and recommendations. However, the area of
governance in the Zimbabwean mining sector needs further interrogation through focused
research.
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Lubis, S. “Indonesian Mining Policy Update: Bauma Forum,” 30th International Trade Fair for Construction Machinery, Building Material Machines, Mining Machines, Construction Vehicles and Construction Equipment held in Munich on 17 April 2013. Indonesian Ministry of Energy and Minerals: Bauma
Ludnicka, E., Mamros, L., De Riggi, B., and Munshaner, B. 2010. “The diamond value chain.”
Mungoshi, J. 2011. “Beneficiation in the mining industry” SAIMM Zimbabwe Branch Conference. Manhize Projects.
McKinsey & Company. 2013. “Reverse the curse: Maximizing the potential of resource-driven economics,” McKinsey Global Institute Report December 2013
Minister of Public Works and Government Services Canada. 1998. “A study of the value-added aspects of the Canadian Diamond industry: North-West Territories.” Minister of Indian Affairs and Northern Territories: Ottawa.
Ross, M. 2003. “The Natural Resource Curse: How Wealth Can Make You Poor.” in Natural Resources and Violent Conflict: Options and Actions. Ian Bannon and Paul Collier (eds.). World Bank: Washington.
United Nations Economic Commission for Africa. 2011. “Minerals and Africa’s Development” The International Study Group Report on Africa’s Mineral Regimes. United Nations Economic Commission for Africa (UN/AU): Addis Ababa.
United Nations Economic Commission for Africa. 2012. “Unleashing Africa’s Potential as a Pole of Global Growth” Economic Report on Africa 2012. United Nations Economic Commission for Africa: Addis Ababa
Zimbabwe National Chamber of Commerce. 2014. Public Policy Advocacy for Business Viability Research Papers. Chapter 4 by Ernst and Young Zimbabwe titled “The analysis of the Zimbabwean Tax Regime,” pp 82-98. ZNCC: Harare.
Chapter 5 by Mutuso Dhliwayo and Veronica Zano titled “Future legal framework for mining in relation to transparency for growth,” pp 99-126. ZNCC: Harare.
Newspapers
Bwititi, K. The Sunday Mail.8 June 2014. “Diamond beneficiation long overdue.” Zimpapers: Harare.
88
The Herald Friday 22 August 2014. “Zimbabwe loses US$ Billions in illicit financial flows”. Zimpapers: Harare.
The Sunday Mail. “Sovereign Wealth Fund: Zimbabwe’s brave new world.” Zimpapers: Harare
Sunday Times (SA). “Fabulous wealth in Marange Diamonds” 8 August 2010.The Chronicle, Friday 5 September 2014 – “Zimbabwe losing out in raw tobacco sales.” Zimpapers: Bulawayo.
Websites
Centre for Natural Resource Governance. November 2013. “A tale of two countries: A comparison of Botswana and Zimbabwe’s diamond industries.” Viewed 16 September 2014 from http://www.ddiglobal.org/login/resources/a-comparison-of-botswana-and-zimbabwe-diamond-sectors.pdf.
Central Intelligence Agency of the United States of America. n.d. The World Factbook: Zimbabwe. Viewed 16 September from https://www.cia.gov/library/publications/the-worldfactbook/geos/print/country/countrypdf_zi.pdf.
DeBeers Group. 2014. “The Diamond Insight Report 2014,” Accessed at http://www.debeersgroup.com/en/news/company-news/company-news/global-diamond-demand-reaches-record-levels.html.
Downs, A. 1972. ‘Up and Down with Ecology: The Issue-Attention Cycle.” Public Interest, nr 28 (summer): 38-50, Available from http://www.anthonydowns.com/upanddown.html.
Government of the Republic of South Africa. 2011. “A beneficiation strategy for the minerals industry of South Africa.” June 2011, Department of Mineral Resources: Pretoria, Available at http://www.dmr.gov.za/beneficiation -economics.html.
Hunt, P. (no date) “Zimbabwe’s ‘Conflict Diamonds’ Controversy and the Flawed Kimberley Process in Marange.” Accessed at http://www.iloapp.waalmdiplomacy.org/.../journal?...
Kimberley Process Certification Scheme. 19 June 2013. “Kimberly Process Statistics 2012,” Viewed 16 September from https://kimberleyprocessstatistics.org/static/pdfs/public_statistics/2012/2012GlobalSummary.pdf.
Mafoti, R. n.d. “Opportunities for value addition in Zimbabwe” Scientific and Industrial Research and Development Centre, accessed at http://zimtrade.co.zw/pdf/presentations/Mafoti%20.pdf on 14 October 2014.
89
Mbanje, P. 27 October 2013. “Value addition trough polishing diamonds will increase revenue” Accessed from http://www.zimbabwesituation.com/news/zimsit_value-addition-through-polishing-diamonds-will-increase-revenue/.
McKinsey & Company. 2014. “Perspectives on the diamond industry.” September 2014. Accessed at http://www.mckinsey.com/ on 31 October 2014.
Natural Resources Charter. 2011. Accessed at http://www.naturalresourcescharter.org.
Soraya, N. and Bellamy, V. 2014. “Domestic Minerals Processing and Beneficiation in Indonesian Mining Sector,” Client Alert released February 2014 by MD & Partners accessed on http://www.whitecase.com on 2 December 2014.
The Free Dictionary. N.d. “Hypothecation.” Accessed at http://financial-dictionary.com/_/dict.aspx?rd=1&word=Hypothecation on 04 November 4, 2014.
Wesley, T., W. 2014. “Lessons on mineral beneficiation: the stick or the carrot?” Webber Wentzel in Alliance with Linklaters, 2 June 2014. Accessed from http://www.webberwentzel.com/wwb/content/en/ww-in-the-news?oid=50623&sn=Detail-2011&pid=32635 on 1 December 2014.
Vechiatto, P. “Compulsory beneficiation knocks Indonesia nickel exports” article in the Business Day Live of 4 February 2014, accessed at http://www.bdlive.co.za/business/mining/compulsory-beneficiation-knocks-indonesia-exports on 2 December 2014.
Public Lectures
Eskelinen, T. 2014. “Sovereign debt: negotiating the legitimacy of sovereign debts.” Held at the University of Zimbabwe, 13 August 2014.
Kaimila-Kanjo, G. 2014. “Building Capacity for gender mainstreaming in Africa: Lessons for African Capacity Building Foundation.” Organized by the ACBF, held at Mount Pleasant, March 2014.
Meyerson, R. 2014. “Democratic decentralization and economic development.” Public lecture organized by the University of Zimbabwe and Old Mutual Group held at the University of Zimbabwe, June 2014.
Statutes /Acts of Parliament
Appropriation Act Chapter 23: 05.
Audit Office Act Chapter 22: 18.
90
Constitution of Zimbabwe Amendment Number 20 of 2013.
Finance Act Chapter 23: 04.
Minerals Marketing Corporation of Zimbabwe Act Chapter 21: 04.
Mines and Minerals Act Chapter 21: 05.
National Budget Statements, Zimbabwe.
Public Finance Management Act Chapter 22: 19.
Precious Stones Trade Act Chapter 21: 06.
Sovereign Wealth Fund Act Chapter 22: 20.
Zimbabwe Mining Development Corporation Act Chapter 21: 08.
Policy Documents
Zimbabwe Diamond Policy
Zimbabwe Industrial Development Policy
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET) 2013-2018
91
Appendix A: Frameworks for Diamond Revenue management in Zimbabwe Framework Legislative Institutions Policies Funds Other
Constitutional Framework
Constitution of Zimbabwe Act 20 of 2013
Parliament of Zimbabwe (Upper and Lower Houses)
Minerals Policy, pending, mining rights, governance, transparency, accountability
Consolidated Revenue Fund
Ministry of Industry and Commerce
Economic Strategic Blueprint
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET)
Office of the President and Cabinet (OPC)
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET)
Department of Policy implementation; Dept responsible for Modernization. The six ZIMASSET clusters
Primary legal instruments for administration of diamond mining revenues
Mines and Minerals Act Chapter 21: 05
Ministry of Mines and Mining Development, Diamond Board, Mining Affairs Board,
Diamond Policy
Community Share Ownership Trust/Schemes
Geological Survey Institute; Institute of Mining Research; Zimbabwe School of Mines; Zimbabwe Chamber of Mines
Affiliated Instrument for precious stones management
Precious Stones Trade Act Chapter 21: 06
Precious Stones Commissioner
Diamond Policy
Kimberley Process Certification Scheme
Zimbabwe Mining Development Corporation
Zimbabwe Mining Development
PPPs Policy (Joint Venture Model)
Special Dividend from gvts 50%
United Nations Divisions on Public Administration
92
Framework Legislative Institutions Policies Funds Other
(ZMDC) Act Chapter 21:08
Corporation shareholding in JV companies
; ECA, African Mining Vision
Minerals Marketing Corporation of Zimbabwe (MMCZ) Act Chapter 21:04
Minerals Marketing Corporation of Zimbabwe
Kimberley Process Certification Scheme, Mining Promotion Corporation
Strategic Minerals Management Framework
Reserve Bank of Zimbabwe (RBZ) Act Chapter 22: 15
Exchange Control Act Chapter 22: 05
Reserve Bank of Zimbabwe (RBZ)
Strategic Minerals Management Framework, Exchange control regulations, international payments management
Management of all national strategic mineral reserves in Zimbabwe
Fiscal Frameworks
Public Finance Management Act Chapter 22:19
Ministry of Finance and Economic Development
Procurement Act Chapter
Finance Act Chapter 23: 04 and Appropriation Act Chapter 23:
Accountant General; Paymaster General (Treasury)
Audit Office Act Chapter 22: 18
Auditor General
Revenue Authority Act (ZIMRA) Chapter 23:
Zimbabwe Revenue Authority
Consolidated Revenue Fund, Diamond
Royalties, Licence Fees, Value Added Taxes,
93
Framework Legislative Institutions Policies Funds Other
11
Income Tax Act Chapter 23: 06
(ZIMRA) Revenue Fund
Customs and Excise Taxes,
Pay As You Earn
Intergenerational Equity, Wealth Transfer
Sovereign Wealth Fund Act Chapter 22: 20
Sovereign Wealth Fund
Sovereign Wealth Fund
Empowerment Indigenization and Economic Empowerment Act
Ministry of Indigenization & Economic Empowerment
Empowerment
Community Share Ownership Schemes/ Trusts (CSOT/S)
National Indigenization and Economic Empowerment Board (NIEEB)
Public Private Partnerships
Privatization Authority Act
Privatization Authority of Zimbabwe
Joint Venture Model/Bill
Joint Venture companies
Local Authorities
Environment Management Act (EMA)
Rural District Councils & Urban Councils Act
Environment Management Agency (EMA)
Rural District Councils, Urban Councils
Environment Management
Regional & Town Planning
Research and Development
Scientific and Industrial Research and Development Center,
Non-Aligned Movement Center for Beneficiation (ZDEC)
94
Framework Legislative Institutions Policies Funds Other
Education and skills Development
Zimbabwe School of Mines, Institute of Mining Research, Diamond Education Center
Harare Institute of Technology & Polytechnic, Pan African University, School of Jewellery- Diamond
Multi-lateral Agencies
UN, ECA, AU, SADC, WB, IMF, AfDB, EU
KPCS, WDC, OECD
Source: Adapted from field data
95
Annexure B: Letters of Approval University of Zimbabwe
Ministry of Mines and Mining Development
Parliament of Zimbabwe
96
Appendix C: Organogram /Organizational Charts Ministry of Mines and Mining Development
Parliament of Zimbabwe
97
Appendix D: Survey Questionnaire UNIVERSITY OF ZIMBABWE
FACULTY OF SOCIAL STUDIES
DEPARTMENT OF POLITICAL AND ADMINISTRATIVE STUDIES
QUESTIONNAIRE FOR MINISTRY OF MINES AND MINING DEVE LOPMENT
Section A
My name is Ngonidzashe Nzenzema, a post graduate student studying towards a Master of Public
Administration Degree with the University of Zimbabwe. I am currently conducting fieldwork for my
dissertation titled: “An investigation into the efficacy of diamond beneficiation as a fiscal resources
mobilization strategy: The case of Zimbabwe.” I have selected you as one of my respondents and kindly
request your participation by filling out the following Questionnaire. The information you provide will be
treated with the strictest of confidence and will only be used for academic purposes. No identifying
information (e.g. names of individuals, designations) will be used when analyzing the final data collected from
the questionnaires.
� This study seeks to achieve the following objectives:
� Examine the legal and institutional frameworks for diamond beneficiation in Zimbabwe.
� Describe the state of the practice in other countries.
� Demonstrate the effects of diamond beneficiation to the mining fiscal regime.
� Recommend an appropriate diamond beneficiation model to enhance the performance of the mining
tax head/mining fiscal regime.
Researcher’s Contact Details:
Should you have any questions please do not hesitate to contact me:
Cell phone Number Email Address Physical Address
+263 775 219 015 [email protected] University of Zimbabwe, Department of POLAD , P.O.
Box MP167, Mt. Pleasant, Harare, Zimbabwe
Section B: Respondent’s Profile
Date of interview: _______/______/_______ Title/Designation: __________________________
Gender: Male Female
Age: >20 20-30 31-40
41-50 51-60 < 60
Period with Organization: 0-1 year 2-4 years
5-10 years <10years
Questionnaire No.
98
SECTION C: RESEARCH QUESTIONS
Survey Instructions
The questions are followed by a list of choices; please tick the option that best represents your
response. Do not disclose any personally identifying information. Your participation and contribution
is greatly appreciated in this study. If you have other comments, please make them on the space
provided at the end of the questionnaire or on a separate piece of paper.
1. What is the role of the Ministry of Mines and Mining Development in diamond resource/revenue
management?
Possible Roles Intricately Involved
1
Involved 2
Somewhat Involved
3
Not Involved
4
Expressly Excluded
5
Don’t Know
9 Revenue Collection/Assessment
1 2 3 4 5 9
Policy Recommendations
1 2 3 4 5 9
Audit of Revenue 1 2 3 4 5 9 Minerals Development
1 2 3 4 5 9
Sales and Retail 1 2 3 4 5 9
Regulation 1 2 3 4 5 9
NB: This includes the receipts from diamond exports by Zimbabwe (inclusive of all diamonds rough, cut, polished or
jewellery).
2. Zimbabwe is a minerals mining country. Does the country have a mining/minerals management
framework?
YES NO
3. What are the frameworks for diamond minerals management? (i.e. are there Institutions, Legislation,
Ordinances, Memoranda, Cabinet Directives or relevant Statutes used in minerals management)
Possible Minerals Frameworks
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Permanent Institutions 1 2 3 4 5 9 Temporary Institutions 1 2 3 4 5 9 Constitution 1 2 3 4 5 9 Act(s) of Parliament 1 2 3 4 5 9 Policy Documents 1 2 3 4 5 9 Statutory Instruments 1 2 3 4 5 9 Government 1 2 3 4 5 9
99
Possible Minerals Frameworks
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Directives Rules, Memoranda, Ordinances
1 2 3 4 5 9
Other 1 2 3 4 5 9
(Please attach the specific documents if available or a schedule listing of the relevant frameworks)
4. From the following, what types of taxes/revenues are being collected from the diamond in Zimbabwe
(both rough and beneficiated)?
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Corporate Income tax
1 2 3 4 5 9
Value Added Tax 1 2 3 4 5 9
Excise Tax 1 2 3 4 5 9
Export Duties 1 2 3 4 5 9
Import Duties 1 2 3 4 5 9
Royalties 1 2 3 4 5 9
Pay-As-You-Earn 1 2 3 4 5 9
N.S.S.A 1 2 3 4 5 9
AIDS Levy 1 2 3 4 5 9
Other 1 2 3 4 5 9
5. What would you say are the various uses for the different types of diamonds mined from Zimbabwe?
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Equipment/Machinery/Tools 1 2 3 4 5 9 Jewellery Manufacture 1 2 3 4 5 9 Other 1 2 3 4 5 9
6. What is the quantum of diamonds mined in Zimbabwe annually?
a) As a percentage of global production
Less than 19% 20-29% 30-49% 50-69% over 70%
b) In actual carat terms
100
Less than 1 million ct. 1 - 5million ct. 6-
10million ct.
11 - 15 million ct. over 16 million ct.
7. How would you classify the Zimbabwean diamond footprint? What types of diamonds are mined in
Zimbabwe currently?
Types of diamonds Very Few 0 - 20%
1
Few 21 – 40%
2
Average 41 – 60%
3
Some 61 – 80%
4
Mostly 81 – 100%
5
Don’t know 9
Industrial/Boart Quality 1
2
3
4
5
9
Gem Quality 1 2 3 4 5 9 Near Gem Quality 1 2 3 4 5 9 Conglomerate 1 2 3 4 5 9 Kimberlitic 1 2 3 4 5 9 Alluvial 1 2 3 4 5 9 NB: This does NOT refer to the “TYPES” Classification system, but rather to the DIAMOND FOOTPRINT.
8. a. Does Zimbabwe currently conduct any diamond beneficiation/value addition?
YES NO
b. If YES: What is the extent of this beneficiation/value addition along the value chain in
Zimbabwe?
Stage in Value Chain Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Basic Processing 1 2 3 4 5 9 Secondary Processing 1 2 3 4 5 9 Jewellery Manufacture 1 2 3 4 5 9 Retail Sales 1 2 3 4 5 9 (NB: Basic processing means ground extraction, washing and sorting; while secondary processing entails cutting and polishing.)
9. In your opinion what are the feasible prospects for improving tax revenue collection from the
diamond mineral in Zimbabwe?
Possible Options Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know 9
Increase taxes % 1 2 3 4 5 9 Introduce new tax measures
1 2 3 4 5 9
Reduce Current Taxes %
1 2 3 4 5 9
101
Remove Current Taxes
1 2 3 4 5 9
Maintain Current Taxes
1 2 3 4 5 9
Ban Export of rough diamonds
1 2 3 4 5 9
Other 1 2 3 4 5 9
10. What has been the performance (US$) of the Zimbabwean diamond sector for the years 2009-14:
Combined Taxes, Royalties and other Revenues collected from the diamond from 2009 to 2014
Revenue Earned from Diamonds
2009
USD m
2010
USD m
2011
USD m
2012
USD m
2013
USD m
2014
USD m
2015
Est. USD m
Rough Stones
Cut Stones
Polished
Jewellery
Machinery
Sales and Retail
Other
NB: This section requires the combined totals of tax earned for each segment of the diamond value chain for each year in millions of
United States of America Dollars.
11. What has been the disaggregated contribution of diamond mining companies to the fiscus over the years?
Contributions of the various tax heads (types of taxes) from diamonds alone
Type of Revenue for Government
Rate (%) (AVG.)
Value in USD millions
2009 2010 2011 2012 2013 2014 Corporate Income Tax
Value Added Tax (V.A.T.)
102
P.A.Y.E.
Royalties
AIDS Levy
NSSA
Duties on imports
Duties on exports
NB: Here the taxes are aggregated across the entire value chain but disaggregated by tax head.
12. Given the above statistics, in your opinion, how would you rate/rank the performance of the diamond
minerals tax head?
Scale: 1 is the lowest performance and 5 the highest performance. (1 Low; 3 Medium; & 5 High)
Possible Options LOW MEDIUM HIGH
Excellent 1 2 3 4 5
Very Satisfactory 1 2 3 4 5
Satisfactory 1 2 3 4 5
Not Satisfactory 1 2 3 4 5
Inadequate 1 2 3 4 5
Poor 1 2 3 4 5
13. In your opinion, compared to other minerals would you say that the diamond has a special role to play
in government/fiscal revenue generation?
Possible Options Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know 9
Yes. A big part 1 2 3 4 5 9
A small part 1 2 3 4 5 9
14. What influences(d) the financial contribution of the diamond to the fiscus/government purse?
Here add other types of reven-ues not listed
103
Possible Reasons Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Efficient Revenue Collection
1 2 3 4 5 9
Robust tax framework
1 2 3 4 5 9
Transparency 1 2 3 4 5 9
Accountability 1 2 3 4 5 9
Beneficiation 1 2 3 4 5 9
Value Addition 1 2 3 4 5 9
Illicit Financial Flows
1 2 3 4 5 9
Corruption 1 2 3 4 5 9
15. What benefits have other countries accrued from diamond Beneficiation/Value Addition?
Possible Benefits Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Technology Modernization
1 2 3 4 5 9
Skills Development
1 2 3 4 5 9
Better Revenues 1 2 3 4 5 9
Infrastructure Development
1 2 3 4 5 9
Improved Livelihoods
1 2 3 4 5 9
Improved Incomes 1 2 3 4 5 9
16. What challenges have other countries faced in conducting beneficiation/value addition?:
Possible Challenges
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9
Skills Shortages 1 2 3 4 5 9
Marketing Problems 1 2 3 4 5 9
104
Supply of Rough Diamonds
1 2 3 4 5 9
Financial Problems 1 2 3 4 5 9
Technology Shortages
1 2 3 4 5 9
Revenue management challenges
1 2 3 4 5 9
17. In your opinion, do you think diamond Beneficiation/Value-Addition could be of any value for
Zimbabwe?
Possible Options
Strongly Agree 1
Agree 2
Somewhat Agree 3
Disagree 4
Strongly Disagree 5
Don’t know 9
Very Valuable 1 2 3 4 5 9
Not Valuable 1 2 3 4 5 9
18. What do you think influenced the decision to adopt Beneficiation/Value-Addition in Zimbabwe?
Possible Options Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Government Revenue Collections
1 2 3 4 5 9
Policy Decisions 1 2 3 4 5 9 Alignment with SADC/ African Mining Vision
1 2 3 4 5 9
Private Sector Investment Decision
1 2 3 4 5 9
Logical Industry Growth 1 2 3 4 5 9 Popular demands by electorate
1 2 3 4 5 9
105
19. How would you rank the importance of local diamond Beneficiation/Value-Addition for revenue
generation in a country?
Rank Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9
Extremely important
1 2 3 4 5 9
Somewhat important
1 2 3 4 5 9
Important 1 2 3 4 5 9
Not important 1 2 3 4 5 9
Don’t know 1 2 3 4 5 9
20. In the table below please rank the anticipated benefits/costs (advantages/disadvantages,
opportunities/challenges) that could accrue to a country if Beneficiation/Value Addition is conducted
locally:
Expected Benefit/Cost
Opportunities/Challenges
Advantages/Disadvantages
Strongly
Agree
1
Somewhat
Agree
2
Agree
3
Disagree
4
Strongly
Disagree
5
No idea
9
Employment creation locals 1 2 3 4 5 9
Higher local retained value 1 2 3 4 5 9
More government revenue 1 2 3 4 5 9
Industrialization 1 2 3 4 5 9
Infrastructural Development 1 2 3 4 5 9
Improved Transparency 1 2 3 4 5 9
Improved Accountability 1 2 3 4 5 9
Improved local livelihoods 1 2 3 4 5 9
Economic diversification 1 2 3 4 5 9
Increased corruption 1 2 3 4 5 9
Poor revenue management 1 2 3 4 5 9
Anti-competitive behaviour 1 2 3 4 5 9
Poor workmanship 1 2 3 4 5 9
106
Expected Benefit/Cost
Opportunities/Challenges
Advantages/Disadvantages
Strongly
Agree
1
Somewhat
Agree
2
Agree
3
Disagree
4
Strongly
Disagree
5
No idea
9
Inadequate skills 1 2 3 4 5 9
Inappropriate technology 1 2 3 4 5 9
MNC Domination 1 2 3 4 5 9
21. Is there legislation to regulate diamond taxation specifically in Zimbabwe?
YES NO
a. If YES: In what form is this legislation?
Types of Legislation
Strongly
Agree
1
Agree
2
Somewhat
Agree
3
Disagree
4
Strongly
Disagree
5
Don’t
know
9
Acts of Parliament
1 2 3 4 5 9
Statutory Instruments
1 2 3 4 5 9
Ministerial Directives
1 2 3 4 5 9
Policy Documents
1 2 3 4 5 9
Rules and Ordnances
1 2 3 4 5 9
International Treaties
1 2 3 4 5 9
Other
1 2 3 4 5 9
b. If NO: How has diamond revenue been managed?
Frameworks For Revenue Management
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Government Institutions
1 2 3 4 5 9
Private Sector Companies
1 2 3 4 5 9
107
Frameworks For Revenue Management
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Multi-lateral Based Organisations
1 2 3 4 5 9
Civil Society Organisations
1 2 3 4 5 9
Family Based Ownership
1 2 3 4 5 9
Other 1 2 3 4 5 9
22. What model of ownership/revenue management is more effective
Most Appropriate Ownership/ Revenue Management Models
Very Effective
1
Effective 2
Somewhat Effective
3
Ineffective 4
Very Ineffective
5
No Idea
9 Government controlled 1 2 3 4 5 9
Private Sector controlled 1 2 3 4 5 9
Multi-lateral institutions controlled
1 2 3 4 5 9
Community controlled 1 2 3 4 5 9
Civil Society Based revenue control
1 2 3 4 5 9
Family based ownership/control
1 2 3 4 5 9
23. How would you rate the adequacy of the mining fiscal regime? In your opinion would you say the
Zimbabwean mining fiscal regime is adequate?
Adequacy Ranking
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know 9
Excellent 1 2 3 4 5 9 Adequate 1 2 3 4 5 9 Average 1 2 3 4 5 9 Inadequate 1 2 3 4 5 9 Poor 1 2 3 4 5 9
108
24. In your view what challenges are currently being faced in the Zimbabwean mining sector, with
respect to taxation?
Challenges in Diamond Taxation
Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t Know 9
Leakages 1 2 3 4 5 9 Smuggling 1 2 3 4 5 9 Under-invoicing
1 2 3 4 5 9
Tax Evasion 1 2 3 4 5 9 Tax Avoidance 1 2 3 4 5 9 Poor frameworks
1 2 3 4 5 9
Artisanal Mining
1 2 3 4 5 9
MNC Domination
1 2 3 4 5 9
Illicit Financial Flows
1 2 3 4 5 9
Other 1 2 3 4 5 9 NB: MNC refers Multinational Companies (companies which operate in several countries).
25. What would you recommend to improve the contribution of the diamond mineral to the fiscus:
Possible Strategies Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Exploration 1 2 3 4 5 9
Seek loans for FDI 1 2 3 4 5 9
Open up diamond mining to more players
1 2 3 4 5 9
Reduce the number of mining companies
1 2 3 4 5 9
Renegotiate all existing diamond mining agreements
1 2 3 4 5 9
Expedite Indigenization Program
1 2 3 4 5 9
Increase Local Ownership
1 2 3 4 5 9
109
Possible Strategies Strongly Agree
1
Agree 2
Somewhat Agree
3
Disagree 4
Strongly Disagree
5
Don’t know
9 Strengthen Joint Venture Model
1 2 3 4 5 9
Conduct more local Beneficiation
1 2 3 4 5 9
Increase taxes % 1 2 3 4 5 9
Introduce new tax measures
1 2 3 4 5 9
Reduce Current Taxes
1 2 3 4 5 9
Remove Current Taxes
1 2 3 4 5 9
Maintain Current Taxes
1 2 3 4 5 9
Ban Export of Rough Diamonds
1 2 3 4 5 9
Other 1 2 3 4 5 9
NB: FDI stands for Foreign Direct Investment
26. Do you have any other comments: __________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
(Please continue on separate sheet if more space is needed.)
THANK YOU FOR YOUR TIME.
110
Appendix E: Interview Guide The study seeks to achieve the following objectives:
� Examine the legal and institutional frameworks for diamond beneficiation in Zimbabwe.
� Describe the state of the practice in other countries. � Demonstrate the effects of diamond beneficiation to the mining fiscal regime. � Recommend an appropriate diamond beneficiation model to enhance the
performance of the mining tax head/mining fiscal regime.
Please respond to the following questions:
1. What role does the Ministry of Mines and Mining Development/Zimbabwe Diamond Center/Zimbabwe Diamond Education Center/Zimbabwe Diamond Beneficiation Association play in diamond beneficiation/in the sale of polished diamonds?
2. What are the legal and institutional frameworks governing diamond beneficiation in Zimbabwe? What is the Zimbabwean diamond/minerals development policy? Is there a framework? What statues, laws, rules, regulations govern the global trade in diamonds?
3. What/Which are the major markets for Zimbabwe’s diamonds? What are the dominant models for marketing of diamond? What have been the trends for diamond beneficiation?
4. What do you understand by the term beneficiation? Does Zimbabwe conduct any form of diamond Beneficiation/Value Addition? What influenced your decision to adopt the diamond beneficiation policy?
5. What, in your opinion do you think has been the effect of diamond mineral beneficiation on the fiscus? What effect does diamond Beneficiation/Value addition have on the performance of the mining fiscal regime (i.e. the performance of mining sector taxes)?
6. What are the challenges that have been faced or are anticipated to be faced in adopting or implementing diamond beneficiation? What technology is required to conduct diamond beneficiation and is this technology easily available locally?
7. What are your recommendations with respect to diamond Beneficiation and Value Addition in Zimbabwe? What would you recommend for Zimbabwe to overcome these challenges?
8. Are there any other comments you wish to make that you think may be relevant to this study?
THANK YOU FOR YOUR TIME!
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Appendix F: Zimbabwean Diamond Mining Industry and International Trade Market
Source: Adapted from annotations/thoughts on a presentation titled “Assessing Vertical
Mergers” by Thando Vilakazi in a European Union Workshop held at the Holiday Inn 02 –
06 February 2015. Training of Trainers: Introductory Course on Competition Law and
Economics, A project funded by the European Union Commission and UNCTAD.
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Appendix G: Glossary of Terms
Beneficiation /Value Addition - entails the value addition of minerals by processing them to attain higher returns; the creation of activities beyond mining the natural resources.
bea keluar – Indonesian policy of progressive minerals taxation instead of sudden radical compulsory wholesale prohibition of exports
“Blood diamond” – a phrase referring to diamonds mined or traded by insurgents to finance wars against legitimately elected governments. May also refer to diamonds mined using forced labour and child labour whose revenues are used to commit “crimes against humanity”
Diamondiferous – refers to an ore/pipe (kimberlitic/alluvial) containing diamonds; diamond bearing ore/pipe
Efficacy – effectiveness, efficiency, usefulness, worth, value; in this study this refers to the ability or potential of something to do something
Extractive Industries Transparency Initiative (EITI ) - an initiative championed by the Zimbabwe Environment Lawyers Association (ZELA) which calls upon mining companies to publish any revenues they pay to government so as to increase transparency in the management of minerals revenues.
Gender Mainstreaming – an inclusive approach that involves harnessing the potential capacities of both sexes; the process of assessing the implications for women and men of any planned action, including legislation, policies or programmes, in any area and at all levels. The ultimate aim is to achieve gender equality (ILO).
Kimberlite/Kimberlitic – may be non/diamondiferous, i.e. diamond bearing, containing diamonds
Kimberly Process Certification Scheme (KPCS) – a United Nations mandated multilateral scheme for diamond certification which functions to eliminate the trade in “blood diamonds”
Publish What You Pay (PWYP) - a facet of the Extractive Industries Transparency Initiative which calls upon mining companies to publish any revenues they pay to government so as to increase transparency in the management of minerals revenues.
Zimbabwe (Transition to) Democracy and Economic Recovery Act (ZTDERA/ZDERA) - American sanctions law on Zimbabwe
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