In a televised interview on the eve of his 92nd birthday on 28 February 2016, the President of Zimbabwe, His Excellency, President Robert Mugabe publicly admitted that $15 billion was looted from diamond revenue by mining companies[1] since their discovery in Manicaland province in 2008. This admission confirms what the Zimbabwe Coalition on Debt and Development (ZIMCODD) and other organizations’ concerns for the past years supported by research concerning the illicit and organized financial hemorrhages in the extractive sector. The economic bleeding is costing ordinary Zimbabweans’ fulfillment of their social and economic rights. Communities in mining areas and the country at large are not deriving meaningful benefit from natural resources extraction. All they get is the environmental and social burdens that come with resources extraction such as pollution, loss of land and livestock, displacements and environmental degradation.

The US$15 billion diamond revenue leakage is evidence that the country is losing billions of potential resources for development through illicit financial flows (IFF). The discovery of diamonds in Marange brought hope to the nation. Revenue from the diamond sector was anticipated to restore macro-economic stability and general social and economic development for the nation as a whole. However, the exploitation of Marange diamonds did not translate into the much expected development as budget deficits have become perennial, social spending dwindling, industrial sector productivity continue to decline and the country is saddled by a public debt of US$8.368 billion[2]. It is worth noting that, Zimbabwe’s debt overhang of US$8.368 billion is below the publicized Marange$15 billion revenue loss. Taking into account that Zimbabwe is endowed with other precious minerals, this means that if our natural resources are managed in a transparent and accountable manner Zimbabwe’s resources are adequate to finance our developmental priorities and there is no need to rely on borrowing. ZIMCODD continually advocates for domestic resources mobilization as opposed to unsustainable and unpredictable borrowing from International Financial Institutions and other bilateral lenders who set conditionalities that hurt the ordinary citizens and bleed our economy.

Since 2009, former and current Ministers of Finance have lamented that the country was being swindled by mining companies as they remitted very little to the Treasury. Researches done by various civil society organizations such as ZIMCODD and other partners under the Zimbabwe Network Against Illicit Financial Flows (ZiNAIFF), the academia and other stakeholders have confirmed that the country is losing potential resources for development from the diamond sector despite the fact that the companies were making huge profits. The researches also revealed that there was a mismatch between increase in productivity and the revenue remittances[3]. ZIMCODD has consistently bemoaned the inaction by government to address this economic injustice.

Implications of revenue losses on Zimbabwe’s social and economic development

Revenue losses from the formal system have negative consequences on social and economic development. When government fails to curb resources leakages, the rights holders are deprived of their socio-economic rights as the government fails to provide social services to the citizens. Revenue leakages entail limited spending on social services such as health, education and industry support by government. The lost resources could have been invested in social service and economic development that Zimbabweans so desperately need. Social support for vulnerable groups is non-existent in Zimbabwe; pensioners are receiving paltry monthly payments whilst other vulnerable groups like the people with disabilities, the elderly and orphans do not receive any government support. There is no adequate provision of potable water to the majority of the citizens in Zimbabwe.

Currently, the government is spending below the 15% threshold of the Abuja declaration (health), 20 % Dakar Declaration (education) and the 10% Maputo declaration (agriculture). To meet these, there is heavy reliance on donors which is unsustainable.

When resources are managed effectively, the proceeds could also be channeled towards infrastructure development. Currently infrastructure is in deplorable conditions with no efforts to maintain or develop it for citizens’ benefit. The resources can also be allocated to the recapitalization of the industry which has collapsed and renders over 90% of the labor force unemployed and living below the poverty datum line. Only if these leakages were plugged out, the country would have been in a position to provide a basic income grant to each and every citizen of Zimbabwe.

ZIMCODD reiterates that …

To curb these IFFs, there is need to improve on the legal and institutional frameworks that relate to public finance management and natural resources governance to enhance transparency and accountability. The country has lost a lot of potential resources for development from the extractive sector through IFFs and this has impacted negatively on social and economic development and the general well-being of the country. Against this back drop, ZIMCODD recommends the following:

• The government of Zimbabwe should urgently set up a Commission of inquiry to establish how the US$15 billion was lost through IFFs and find ways to recover the same for the benefit of the Zimbabwean citizenry.The government bodies and public officials who were responsible of overseeing the diamond mining in Marange should be made to account for the resources and explain to the citizens how $15 billion could have been lost under their watchful eye.
• There is need to reform and strengthen the legal and institutional frameworks that govern public finance management and natural resources governance to enhance transparency and accountability to reduce revenue leakages from the formal mining system. This entails finalizing on the Mines and Minerals Bill which is still pending, realigning the public finance Management Act among other relevant pieces of legislation
• The government should conduct a geological survey to determine the current quality and quantities of the mineral resources before mortgaging our resources without knowing the true value of the resources. Data from the survey will enable the government to make informed decisions in terms of the revenue expectations from the exploration of those minerals and the life span of the mines.

WE THE UNDERSIGNED PEOPLE AND ORGANIZATIONS REAFFIRM THE ABOVE.

Dated 15 March 2016.

[1]https://www.newsday.co.zw/2016/03/07/mugabe-must-e...

[2] 2016 National Budget Statement

[3] ZELA, Tracking the trends