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C O N F I D E N T I A L SECTION 01 OF 05 HARARE 001016 

SIPDIS 

AF/S FOR B. WALCH 
DRL FOR N. WILETT 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
STATE PASS TO USAID FOR E. LOKEN AND L. DOBBINS 
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN 

E.O. 12958: DECL: 11/12/2018 
TAGS: PGOV EMIN ASEC PHUM ZI
SUBJECT: REGIME ELITES LOOTING DEADLY DIAMOND FIELD 

REF: 2007 HARARE 319 

Classified By: Ambassador James D. McGee for reason 1.4 (d) 

------- 
SUMMARY 
------- 

¶1. (C) The CEO of a British mining company described to us 
how high-ranking Zimbabwean government officials and 
well-connected elites are generating millions of dollars in 
personal income by hiring teams of diggers to hand-extract 
diamonds from the Chiadzwa mine in eastern Zimbabwe. They 
are selling the undocumented diamonds to a mix of foreign 
buyers including Belgians, Israelis, Lebanese, Russians and 
South Africans who smuggle them out of the country for 
cutting and resale elsewhere. Despite efforts to control the 
diamond site with police, the prospect of accessible diamonds 
lying just beneath the soil's surface has attracted a swarm 
of several thousand local and foreign diggers. The police 
response has been violent, with a handful of homicides 
reported each week, though that number could grow as diggers 
arm themselves and attract police and army deserters to their 
ranks. END SUMMARY 

--------------------------------------- 
High-Ranking Officials Trading Diamonds 
--------------------------------------- 

¶2. (C) On November 6, poloff met with Andrew Cranswick, the 
CEO of African Consolidated Resources (ACR), the 
publicly-traded British firm that had its Chiadzwa diamond 
claim in the Marange district of Manicaland seized by the 
government parastatal Minerals Marketing Corporation of 
Zimbabwe (MMCZ) in 2006 (reftel). According to Cranswick, 
there is a small group of high-ranking Zimbabwean officials 
who have been extracting tremendous diamond profits from 
Chiadzwa. Cranswick said that RBZ Governor Gideon Gono, 
Grace Mugabe, wife of President Robert Mugabe, Vice President 
Joyce Mujuru, Mines and Mining Development Minister Amos 
Midzi, General Constantine Chiwenga and wife Jocelyn, CIO 
Director Happyton Bonyongwe, Manicaland Governor Chris 
Mushowe, and several white Zimbabweans, including Ken Sharpe, 
Greg Scott, and Hendrik O,Neill, are all involved in the 
Marange diamond trade. 

¶3. (C) On October 14, econ specialist traveled to the 
periphery of the no-go area around the Chiadzwa diamond site 
located about 60 km southwest of Mutare in Manicaland. 
Repeated inquiries about who was involved in the diamond 
trade elicited many of the same names mentioned by Cranswick. 

¶4. (C) Econ specialist also met with Manatsawani Mutasa, a 
ZANU-PF Central Committee member and Manicaland resident, who 
added that Justice Minister Patrick Chinamasa, Women's 
Affairs Minister Oppah Muchinguri, and Sabina Mugabe--sister 
of President Mugabe--have also been profiting from the 
purchase and sale of Chiadzwa diamonds. 

------------------------------------ 
How the Chiadzwa Diamond Trade Works 
------------------------------------ 

¶5. (C) The GOZ possesses the diamond mining rights to 
Chiadzwa, but the Zimbabwe Mining Development Corporation 
(ZMDC) does not do any extraction itself. The ZMDC brought 
in some mining equipment in 2006 after seizing the mining 
rights from ACR, but their efforts were minimal and soon 
halted altogether. According to Cranswick, all extraction is 
now being done by hand panners who merely sift the top meter 
of soil. Some of these panners operate in teams that sell 

HARARE 00001016 002 OF 005 


their diamonds to representatives of the above-named 
officials and connected elites. Other panners are individual 
operators who merely sell to the highest bidder. Often the 
panners who are affiliated with a particular regime buyer, 
will only sell a portion of their diamonds to that person's 
representative, holding back the remainder to sell for higher 
prices to foreign buyers offering hard currency. 

¶6. (C) The diamonds that are sold to regime members and 
elites are sold for freshly printed Zimbabwean notes issued 
by the RBZ. These diamonds are aggregated and resold to 
foreign buyers for US dollars or rand in nearby Mutare, in 
Harare, over the border in the Mozambican towns of Manica and 
Chimoio, or even in South Africa. (NOTE: Econ specialist 
reported that Mutare was awash with diamond money. The 
Holiday Inn was booked with guests checking in for weeks at a 
time. Food prices in shops near Marange were exorbitant, with 
meat prices four times higher than in Harare. END NOTE.) 

¶7. (C) The diamonds that are not sold to regime members and 
elites, but instead are sold directly to foreign buyers, 
actually constitute the majority of the diamond trade in 
Chiadzwa. Cranswick said that around 85 percent of the 
diamonds extracted from Chiadzwa are sold directly to foreign 
buyers. Even so, he conservatively estimated that Mujuru, 
Gono and the rest were probably each making several hundred 
thousand dollars a month. 

¶8. (C) Whether bought first by regime members or not, 
eventually the diamonds are sold to a mix of Belgians, 
Israelis, Lebanese (the largest contingent), Russians, and 
South Africans. A well-known buyer named Gonyeti fronts for 
Gono, as do two other buyers named Tendai Makurumidze and 
Takunda Nyaguze, according to Mutasa. Once sold to 
foreigners, the majority of the diamonds are smuggled to 
Dubai and sold at the Dubai Multi Commodities Centre 
Authority, a dedicated economic free-trade zone created in 
2002 for the exchange of metals and commodities, most notably 
gold and diamonds. Although Zimbabwe is a participant in the 
Kimberley process, the diamonds from Chiadzwa are 
undocumented and therefore are not in compliance with 
Kimberley, which requires loose uncut diamonds to be 
certified. 

¶9. (C) The highest quality diamonds are not sent to Dubai, 
but are shipped to Belgium, Israel, or South Africa for 
cutting. Despite this wide dispersal, Chiadzwa diamonds are 
very distinctive because of their age, color, and clarity and 
can easily be traced back to the Marange mine, according to 
Cranswick. He implicated Ernie Blom, president of South 
Africa's Diamond Merchants Association in the illicit trade 
of Chiadzwa diamonds, and said that Blom had been known to 
boast of his involvement in illegal Zimbabwean diamonds. 
When asked why purportedly reputable diamond dealers would 
involve themselves in Chiadzwa, Cranswick said that the site 
was "massive" with tremendous profit potential that was 
attracting numerous buyers. One such group consisted of 
Russians who had recently bought US$500,000 worth of diamonds 
at an MMCZ auction, paying US$29/carat. They bought eight to 
ten carat rough diamonds, five to ten percent of which were 
gem quality. 

-------------------------------- 
Diamond Trade a Violent Business 
-------------------------------- 

¶10. (C) The diamond frenzy in Chiadzwa has led to hundreds 
and possibly thousands of homicides. Word of easy diamonds 
spurred a rush of Zimbabwean and foreign diggers to the area 
including Angolans, Congolese, Mozambicans, South Africans 
and Zambians, as well as diggers from as far away as Sierra 

HARARE 00001016 003 OF 005 


Leone and Cote D'Ivoire Cranswick estimated there are 
currently around three or four thousand diggers swarming over 
the 70 hectare Chiadzwa site. The police have unsuccessfully 
tried to prevent the site from becoming overrun, and 
routinely use live fire to chase away diggers. Anyone trying 
to enter the area has to present a Zimbabwean national 
identification card with a registration number that ends in 
"75", signifying the person is a resident of the Mutare 
region of Manicaland. 

¶11. (C) During the first weekend of November, police killed 
at least five panners in Chiadzwa, according to the on-line 
newspaper Zimbabwe Times. While usually operating on foot 
with attack dogs, this time the police used a helicopter to 
shoot at panners. Passmore Nyakureba, a lawyer with the 
Zimbabwe Lawyers for Human Rights said, "This has become an 
everyday scenario. Up to five people die every week as a 
result of being shot at by police or after being bitten by 
dogs." Cranswick said that at the peak of the frenzy in 
2007, up to a hundred panners were shot in a week. 

¶12. (C) In response to aggressive police action, diggers 
began arming themselves with handguns and in some cases 
automatic weapons. They also formed loose gangs in an 
attempt to protect themselves as well as "claimed" areas. 
Cranswick said that some members of the police and army have 
deserted in order to join the digging, and they typically 
brought their firearms with them. Some former police even 
still wear their uniforms as they search for diamonds. 

------------------------------------- 
Police Corrupted; Community Destroyed 
------------------------------------- 

¶13. (C) Cranswick said that the police were rotated into the 
area on two-week shifts to control the mining and keep 
unauthorized diggers out, but they were immediately 
corrupted. Police officers routinely charged 100 rand or 
US$10 a person for a day's digging in Chiadzwa. The military 
has largely avoided the area out of fear that commanding 
officers would lose control of their troops, according to 
Cranswick. 

¶14. (C) Cranswick maintained that local chiefs were on ACR's 
side in its pending court battle to win back its claim. They 
realized that the "curse" of diamonds had wreaked havoc in 
the community. Children were no longer attending school, the 
environmental degradation was severe, lawlessness and 
violence reigned, and the community was not benefiting from 
the resource. According to an independent weekly newspaper, 
three quarters of the schools in Marange, Buhera, and 
Chimanimani districts failed to open this term because 
teachers and students alike were digging for diamonds. 

---------------- 
What's At Stake? 
---------------- 

¶15. (C) Chiadzwa has the potential of being a major source 
of industrial and gem quality diamonds. What makes it so 
commercially valuable is that it possesses a diverse mix of 
different size and color stones, all within just a few meters 
of the surface. It also has a high carat per hundred tons 
(CPHT) ratio, a measure the industry uses to characterize the 
diamond concentration. Cranswick told us he was 
confidentially shown a report prepared for the De Beers 
Corporation by noted geologist John Ward. The report 
estimated that Chiadzwa had a CPHT of over 1,000. By 
comparison, the Rio Tinto/Rio Zimbabwe-owned Murowa diamond 
mine near Zvishavane in Midlands province has a CPHT of 120. 


HARARE 00001016 004 OF 005 


¶16. (C) Eye witnesses and panners told us that they were 
extracting both industrial and gem quality stones, but 
predominantly the former. Cranswick believed that the site 
had 30 to 40 percent industrial diamonds and the rest gem 
quality, including very good quality five to 30 carat colored 
diamonds. In his view, the area could be commercially 
exploited for five to 25 years, including excavation of 
diamond yielding hard rock that ran deeper than the one meter 
depth currently being worked. Econ specialist also was told 
that another diamond field was discovered this year within 
five km of Chiadzwa at the village of Chirasika. Panners had 
begun working the site and it had not yet become a 
police-restricted area. We have no estimates for the 
potential of this new diamond discovery. 

¶17. (C) On October 27, Gono publicly declared that the 
Zimbabwean economy could be turned around by stemming losses 
caused by illegal mining at Chiadzwa. According to Gono, "A 
reliable estimate shows that US$1.2 billion per month would 
be realized from diamond sales in the country, enough to 
solve the economic challenges the country is currently 
facing." Cranswick said that while the estimate is probably 
exaggerated, Gono may be looking for a large one time 
dividend by selling a share of the mine or the mining rights 
to an outside investor. This would dwarf the relatively 
small profits he is now accruing from the mine. 

¶18. (C) ACR has offered the government a deal in which ACR 
would take a 49 percent share of all diamond proceeds and 
give the rest to the GOZ, but Cranswick did not seem 
optimistic that the government would accept the deal. 

----------------------------- 
Two Other Major Diamond Mines 
----------------------------- 

¶19. (U) Murowa is a well-regulated mine operated by the 
British multinational mining giant Rio Tinto, which since 
2004 has held a 78 percent share in the open-pit Murowa 
diamond mine in Zvishavane district, in southern Masvingo 
province. Murowa is a deep kimberlitic deposit that requires 
heavy machinery to extract the soil and rock. 

¶20. (U) River Ranch is partially owned by retired General 
Solomon Mujuru (husband of Vice President Joyce Mujuru) and 
is located in Beitbridge in Matabeleland South. Mujuru 
gained a 20 percent stake in the mine at the expense of a 
local company, Bubye Minerals, which was pushed out to 
Mujuru's benefit. Bubye Minerals contested the ownership 
change, but was thwarted by the Zimbabwean courts. It is 
unclear if Mujuru purchased his stake. 

------- 
COMMENT 
------- 

¶21. (C) In a country filled with corrupt schemes, the 
diamond business in Zimbabwe is one of the dirtiest. Mining 
in general remains the largest single source of foreign 
exchange, but the potential of Chiadzwa is being lost to 
Zimbabwean corruption. While Gono talks about using diamonds 
to stabilize the Zimbabwean economy, he would only do so if 
he thought he could personally make more in the process. At 
present, police trying to bring order to Chiadzwa are 
benefiting Zimbabwean officials who see the diamond field as 
a new source of illegitimate income; the people of Zimbabwe 
are seeing little return. 

¶22. (C) It is also clear that Cranswick is a businessman 
trying to find any pressure point he can through which to 
leverage his own claim. At the same time, he sheds light on 

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an industry that is enriching many of the same old corrupt 
Zimbabwean elite--and causing violence and deaths that so far 
have received little attention. END COMMENT. 

MCGEE