Diamond forensic audit hits snag

Auditor-General Mildred Chiri

EFFORTS by government to audit diamond mining companies have practically stalled because the firms are not forthcoming with financial records and documents, Zimbabwe Independent can exclusively reveal.

By Taurai Mangudhla/Elias Mambo/Obey Manayiti

Auditor-General Mildred Chiri

Auditor-General Mildred Chiri

This news article is part of an ongoing ground-breaking investigation into the Marange alluvial diamonds discovery and subsequent plundering at various stages by state and non-state actors. The special series is supported by the Investigative Journalism Fund.

A senior government official told the Independent that the forensic audit had stalled because mining companies were not cooperating. The audit came in the aftermath of President Robert Mugabe’s claims that Zimbabwe could have been robbed of up to US$15 billion in diamond revenues from Chiadzwa.

“The audit has stalled because mining companies are not providing financial records, documents and information needed,” the official said. “ We don’t have much data to work with and now we need authorities to talk to companies to cooperate, otherwise this is going nowhere.”

The latest revelation comes as Mines minister Walter Chidhakwa last week confirmed the Marange diamond mining audit had been stalled by companies that previously operated in the diamond rich area, although he insisted government would pursue the audit to its conclusion.

Investigations showed that last year Mbada Diamonds, through its director David Kassel, wrote to the Mines ministry, saying his company would co-operate with the audit subject to certain conditions being fulfilled.

In its letter dated October 14 2016, Mbada said it did not have capacity to recall people so that they can provide the needed information since it terminated the employment contracts of some key employees in June 2016.
Mbada said it could only play ball if government was willing to pay recalled workers. Investigations revealed that Mbada also demanded the terms of reference of the audit, its plan and the process involved.

“Mbada also demanded information on the audit scope and timeframe, as well as an assurance that the cost of the audit will be paid by the Mines ministry because the diamond mining company was not receiving any income since government ordered the closure of its operations in February last year.”

Mbada also said that it could provide government with its audit reports done by KPMG to help the forensic audit.
It also demanded to have a copy of the audit report after completion of the process.

In an interview with the Independent, Chidhakwa said: “The companies that are being audited have been naturally resisting, but that doesn’t stop us from doing what we ought to be doing.”

He said once the audit companies finish, they will report to Auditor-General Mildred Chiri’s office who, in turn, would then report to Chidhakwa, who will ultimately make the findings public.

As reported by this newspaper, government at the end of June 2016 formally closed the tender for independent chartered accounting firms to audit seven diamond mining companies accused of looting billions of United States dollars in Chiadzwa.

Three audit firms — BDO Zimbabwe Chartered Accountants (BDO), HLB Zimbabwe Chartered Accountants (HLB) and PricewaterhouseCoopers (PwC) — were appointed by the end of August.

A 2014 report by civil society campaign group Partnership Africa Canada (Pac) stated that Zimbabwe lost about US$2 billion in potential revenue through undervaluation and transfer-pricing of its gems from the Marange diamond fields.

“Some of the companies are trying to hide information so that they are not exposed by the audit because there was a lot of looting, but the process will still proceed,” said a source who requested not to be named.

Efforts to get a comment from Chiri were fruitless as her mobile phone kept on ringing without being responded to.

A message sent to her mobile last night had not been replied at the time of going to print.

The audit was initiated by government last year after it ordered diamond mining firms to cease operations to pave way for the establishment of the Zimbabwe Consolidated Diamond Company (ZCDC), citing a lack of transparency and accountability, among other issues.

However, production under the ZCDC has plummeted to unprecedented levels.

“I am concerned naturally ( by low production volumes at ZCDC) because as a country we were getting inflows.

However, I think you also need to understand that when we took over the expectation was that we would have been on the ground but because of the legal cases we were  delayed,” Chidhakwa said.

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