Here’s why Mugabe’s government is taking over diamond mining operations in Zimbabwe

Yesterday, President Robert Mugabe announced that his government will take over all diamond mining operations because illicit trading by existing miners had robbed the country of over $13 billion. To this effect, the state has created a new company to take control of the country’s deposits, after ordering all mining companies in the Marange and Chimanimani areas to end operations and leave the premises.

“The state will now own all the diamonds in the country,” Mugabe said during an interview with state-controlled ZBC TV. “Lots of smuggling and swindling has taken place and diamond mining companies have robbed us of our wealth. That is why we have decided that only the state must have a monopoly.” Therefore, the Zimbabwe Consolidated Diamond Company will take over mining.

Mining Weekly reports that on Monday, Mbada Diamonds, the largest diamond mine in Zimbabwe, sued the government and was given back control of its mining assets. Anjin Investments, a Chinese-owned mining company also took the government to the state’s High Court on Wednesday, challenging the ban. Other mining companies including Diamond Mining Company, Kusena Diamonds, Jinan Mining Limited, and Marange Resources Limited have also refused to accept the nationalization of their assets.

Hosting one of the world’s largest platinum reserves, Zimbabwe was the eighth largest diamond producer in the world with over 4 million carats in 2014. But in the last year, there’s been a slack in the country’s diamond mining industry as production fell from 660,000 carats a year earlier, to 420,000 carats a little over the first quarter of 2015. Regarding the country’s input on the global scene, industry analysts have said that Zimbabwe’s global supply will be less than 10 percent this year as opposed to over 10 percent in 2013.

Mugabe’s latest policy will certainly have broad implications across the industry; although Zimbabwe is known to be a risky jurisdiction to operate in, experts say that in the last several years, private firms were beginning to consider moving shop to the Southern African country. But with Mugabe’s latest policy, these companies are sure to have second thoughts. The 92-year old leader said he had told Chinese President Xi Jinping, during his visit to Zimbabwe last December, that his government was not gaining much from the activities of Chinese-owned mining companies.

“You cannot trust a private company in that area (Marange)…We should have learnt from the experiences of countries like Botswana, Angola, and Namibia,” Mugabe said during the interview.

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