Zimbabwe's Diamond Curse

Last week I attended a National Endowment for Democracy (NED) roundtable discussion on Africa’s resource curse led by eminent scholar Larry Diamond. The Council on Foreign Relations recently published Diamond’s article Petroleum to the People, co-authored with  Jack Mosbacher , in which they explain how Africa’s vast oil deposits could be a curse as politicians and those connected to them collect rents and use them to entrench their power at the expense of social and economic development. They make a number of poignant observations, which I found compelling as I reflected on Zimbabwe’s diamonds.

A point that they make is that Africa’s rich oil endowment has become a curse as it has fuelled corruption and bad governance in countries that are already reaping revenues from it and that those countries that are yet to exploit their deposits are likely to suffer the same fate unless there is a change in the way the revenues are used.   They cite the case of Equatorial Guinea to illustrate their point. Blessed with one of Africa’s  richest oil deposits estimated at one billion barrels, Equatorial Guinea started selling oil in 1995 and has earned billions of dollars but its citizens remain poor, thanks to massive corruption by the President and those close to him. Teodoro Obiang Mangue, son to the country’s president, Teodoro Obiang Nguema Mbasogo lives like a rock star. In the United States he has a multi-million dollar mansion in Malibu, California, a fleet of luxury cars, a collection of speedboats worth millions of dollars and Michael Jackson memorabilia valued at $3.2 million dollars.

I remember reading somewhere last year that French authorities had seized a $200 million property in a wealthy Paris suburb that belonged to the Nguema dynasty, where a collection of art, antiques and fine wines was found. Ironically three quarters of citizens of this country subsist on less than $2 a day and those opposed to the regime have found themselves at the notorious ‘Black Beach’ prison where torture, beatings and starvation are the order of the day.  Nguema is one of Africa’s most vile dictators and counts Zimbabwe’s Robert Mugabe among his closest allies. Nine years ago a group of mercenaries led by Simon Mann was intercepted and captured at Harare International Airport as it attempted to make its way to Malabo to depose Nguema’s government in a coup. Mugabe promptly handed Mann and his gang over to Nguema who sent them to ‘Black Beach’. Since then the two have become close allies. The opposition Movement for Democratic Change (MDC) alleges that Nguema has doled millions of dollars to Mugabe and his party in times of need, including for the 2013 election campaign. 

The Nguema dynasty’s profligacy will not surprise many Zimbabweans. Since the discovery of diamonds in Marange district in the country’s eastern province of Manicaland, Zimbabwe’s ruling class has developed a taste for the finer things in life. There are reports of luxurious homes with helipads owned by the political class. Harare has more Mercedes Benz vehicles than any other city in the world per capita. Two years ago a Zimbabwean government minister who officially earned $300 a month paid nearly $30 million cash to acquire a majority stake for his family trust in a local bank. Just last year the Mail & Guardian newspaper of South Africa reported that Zimbabwean businessman Robert Mhlanga, Chairman of Mbada Diamonds, one of the companies awarded a mining concession in Marange, had splashed close to $20 million on prime real estate in that country. The paper also reported that Mhlanga was a close associate of the Zimbabwean first family.

Mugabe himself has publicly acknowledged the existence of corruption in the murky diamond sector but has done nothing to curb it. Three months ago he revealed on national television that a former chairman of the government owned Zimbabwe Mining Development Cooperation (ZMDC), a state owned company with diamond mining concessions in Marange, had received a $6 million bribe from a Ghanaian investor and vowed to take action. As I write the said fraudster is a free man.  Investigators must have developed cold feet after realising that the net would catch some really big fish.  In a country where proceeds from crime have been used to buy political influence, it is probable that part of the $6 million bribe found its way into Mr. Mugabe’s party coffers.

A majority of Zimbabwean citizens lives in grinding poverty. Eight in ten of those eligible to work are jobless. Citizens spend hours in darkness as the country has failed to meet its energy requirements. Infrastructure is derelict and companies are closing, rendering thousands more jobless. As I write the government has shelved the announcement of the annual budget that was scheduled for November because it has no money. Ironically in Surat, a diamond trading hub in India, the price of diamonds has plummeted because of an oversupply of the precious stones. The source?  Zimbabwe’s Marange diamond fields. Diamonds are being illicitly exported and the proceeds are lining the pockets of political elites and their networks. 

Another point that Diamond and Mosbacher make, which rings true for Zimbabwe, is that the resource curse breaks the ‘social contract between a population and its government’. When governments no longer have to tax citizens or tax them less because they are deriving revenues from the sale of natural resources, they have no incentive to serve the people. Citizens are unlikely to demand that the government delivers jobs and social services from the tax revenues that they pay. Governments will become less accountable and will use patronage to retain political power.

While in the case of Zimbabwe the social contract was already broken before the discovery of diamonds in Marange, thanks to repression, rapid economic decline, joblessness and citizen despondency, the discovery of the precious gems threw a financial lifeline to a regime that was on the verge of collapse. By the time elections were held in 2008 Mugabe had become so severely weakened that he could not financially sustain the election rigging machinery, resulting in him losing to opposition leader Morgan Tsvangirai in the first round of a presidential election.  Forced to share power with the opposition following a sham second round election, Mugabe set out to regain his stranglehold on the polity and to build robust infrastructure for election rigging. He deployed the military to take control of the diamond fields before awarding mining concessions to Chinese companies that went into joint venture agreements with state security linked firms. He then ran a parallel government in which the treasury, now controlled by the former opposition, was bypassed as revenues from diamonds were deployed to strategic institutions such as state intelligence, the military, the police and party structures. Diamond revenues were also allegedly used to buy support from African leaders ahead of the July 31 election. He also paid millions of dollars to an Israeli firm to forge the voter register in his favour. 

Diamond and Mosbacher suggest that African countries can avoid the resource curse by distributing oil revenues to citizens through what they call an ‘oil-to-cash’ system where the government transfers cash to citizens directly and then taxes them a portion of it. The idea is that the pain of taxation will force citizens to demand service delivery and accountability, thereby maintaining the social contract between the population and the government. I add that for such a system to work, it must be born out of citizen agency and must not be pushed from outside. As long as Zimbabwean citizens do not demand accountability in the mining and sale of the country’s diamonds and other natural resources, politicians and their associates will continue to line their pockets and the country will not prosper. 

'Sanctions' inimical to democratic transition

To the average African on the continent and maybe even beyond, Zimbabwean President Robert Mugabe is a hero. Excited crowds greet him every time he graces African Union and SADC summits. And when he gives his annual ‘history lecture’ at the United Nations General Assembly in New York, many on the African continent and the Global South in general look at him in awe and secretly admire his courage for standing up to “Uncle Sam”. By excoriating George Bush and Tony Blair for warmongering in Iraq and Afghanistan and telling Tony Blair to ‘keep your England and let me keep my Zimbabwe’ Mugabe was presenting himself as a strong leader with the courage to challenge Western hegemony.  

Mugabe is revered not only because to many he fought and defeated colonial domination. He is also admired because he is a clever orator who has carefully crafted an anti imperialism narrative that has found resonance African leaders who revile the West for asking pesky questions about human rights and democracy. Many African leaders would rather just get the much-needed aid and not be asked irritating questions about their governance record. This explains why China’s ‘no questions asked’ approach has found many takers.  So when Mugabe tells the West to go hang, he is saying the things that many talk about in private but would dare not say publicly, lest they lose that much-coveted budgetary support, which Zambian born economist Dambisa Moyo calls ‘dead aid’.

But behind the aura of heroism is a vile and cunning dictator with an insatiable thirst for power and on whose watch one of Africa’s most promising African countries has been ravaged by conflict and poverty.  In 2000 when his decades-long stranglehold on Zimbabwean politics came under threat from the newly formed Movement for Democratic Change (MDC), Mugabe unleashed a violent pogrom that left hundreds murdered and thousands more dismembered. He had used a similar strategy to liquidate Joshua Nkomo’s ZAPU in the early 80s when it stood in the way of his one party state agenda. A North Korean trained military crack team was dispatched to the Southern part of the country and it left 20 000 ethnic Ndebeles dead. The international community paid a blind eye, as Mugabe was still their darling then, having charmed them with his British chivalrous demeanor and flawless mastery of the English language.

The European Union, the United States, Australia, New Zealand and Canada slapped Mr. Mugabe and his coterie with travel restrictions and an asset freeze after bloody election in 2000 and 2002. But looking back it is almost as if the restrictions were a Godsend for Mugabe and his party. Faced with growing opposition internally and externally, he set out to craft an anti-imperialism narrative whose central message was that the West was out to get him and sanctions were a ‘regime change’ strategy.   

While the travel ban and asset freeze did not create a  ‘rally around the flag effect’, Mugabe has carefully manipulated them to portray himself as a victim of Western a conspiracy. His ‘regime change’ refrain has struck a cord with many on the continent who have a cynical view of the West and doubt its sincerity in helping Africa overcome poverty and deprivation. Mugabe and his henchmen have couched the sanctions narrative in the language of ‘colonial injustices’ and invariably the land issue, emotive as it is, has become the centre of the debate.  They have advanced a very compelling argument that the West wants to punish Mugabe because he has dared to smash colonial vestiges by redistributing land to black people. African leaders have fallen for it. They have looked the other way as Mugabe has thrown away the democracy rulebook to stay in power through hook and crook.

After Mugabe had lost the 2008 Presidential election to the MDC’s Morgan Tsvangirai, African leaders in the Southern Africa Development Community (SADC) led by then South African President Thabo Mbeki, forced Tsvangirai to a re-run. Mugabe launched a violent run-off campaign, which forced Tsvangirai to withdraw from the race. In a sham election Mugabe declared himself the winner and again SADC leaders looked the other way. They then stitched a political agreement in which the two would co-govern but strangely Tsvangirai was made the junior partner as Prime Minister in spite of having won the first round of elections.

For four years following the consummation of the power sharing government Mugabe openly defied SADC, refusing to fully implement the terms of the political pact that gave birth to the coalition government. He then unilaterally declared an election in July 2013, which he rigged. Not surprisingly SADC gave the election a clean bill of health in spite of glaring irregularities that included a forged voter register, outright manipulation of the public media and intimidation of voters. When the opposition complained to SADC, its Election Observer Mission head, Tanzania’s Foreign Affairs Minister Mr. Bernard Membe told them they would never win an election ‘in a hundred years as long as sanctions remained in place’.

Mugabe has also used the sanctions narrative to mask his atrocious governance record.  When his chaotic land grab plunged the once self-sufficient country into hunger and starvation, he blamed it on sanctions. In 2008 Zimbabwe became the poster country for economic collapse with record hyperinflation of 200 million per cent. Mugabe blamed it on sanctions. He claimed that the economic collapse was a result of sanctions that had precluded his government from accessing credit from multilateral funding institutions. What he has not told his supporters is that in fact Zimbabwe lost its borrowing rights because of its poor repayment record. Zimbabwe started defaulting on its payments to the IMF in 1998, way before the imposition of restrictive measures in 2002.

But the biggest lie that Mugabe and his propagandists have repeated is that Zimbabwe is under a blanket economic embargo. Nothing can be further from the truth. The travel and asset freeze has targeted less than 200 individuals. To be fair a handful of corporations that are seen as undermining democratic transition in Zimbabwe have also been targeted. But unlike the UN backed sanctions on Rhodesia after Ian Smith’s 1965 unilateral declaration of independence (UDI), Zimbabwe is still able to trade with virtually every country in the world. Unlike Mugabe’s Zimbabwe, Ian Smith’s Rhodesia was isolated both politically and economically, forcing him to pursue import substitution industrialization (ISI) and other sanction-busting strategies. Rhodesia became self sufficient and Smith was able to build a robust manufacturing sector whose contribution to GDP would have matched that of today’s advanced economies because Smith could not import or export to any country.

The truth of the matter is that Zimbabwe is not under a trade embargo as Mugabe and ZANU (PF) allege. A quick glance at Zimbabwe’s trade data shows that the European Union is still one of Zimbabwe’s biggest trading partners and that the country still does good business with the United States of America. In fact there is more trade between Harare and Brussels than there is between Harare and Beijing, in spite of Mugabe’s ‘Look East” rhetoric. In addition, over the last ten years, the same Western countries that Mugabe maligns have poured in humanitarian aid worth billions of dollars to support food aid, healthcare, education, water and sanitation among other things.  

Perhaps it is time for a strategic reconsideration on the restrictive measures by the West. I posit the point that they have been inimical to democratic transition as Mugabe has manipulated them to his political advantage and maybe it is time the West called Mugabe’s bluff and removed them. He is desperate for legitimacy and is prepared to broker a deal with them. He has a legitimacy crisis and is also desperate for financial aid. His charm offensive to civil society, the media and business is part of a grand strategy to re engage with his former adversaries. He has also kept the door open for negotiation with international financial institutions, signaling that he wants to negotiate.

However, the relaxation of the travel ban and asset freeze must be calibrated in response to institutionalisation of genuine reforms by the regime. Mugabe must fully implement the constitution, including the establishment of a devolved state in line with new constitutional provisions. Legislative reform bust be undertaken, the electronic media must be freed up and the voter register must to be cleaned up before the next election. This is the only way to ensure a genuinely free and fair election that produces a legitimate government in Zimbabwe.