Zimbabwe to Use Gems to Secure Loan, Letter to Miners Shows

May 23, 2014 5:16 am ET

(Adds government official comment in sixth paragraph.)

May 23 (Bloomberg) -- Diamond miners in Zimbabwe have been told to sell their gems through the central bank, which will use the stones to secure a government loan, according to a letter written to them by the country’s mines secretary.

In the letter to miners, the secretary Francis Gudyanga, instructs that producers “prepare parcels of all your currently produced diamonds which must be sorted and evaluated with the involvement of the Minerals Marketing Corp. of Zimbabwe,” a state company, and payment will be made soon after.

The stones will be kept by the central bank and used to “securitize a government loan,” Gudyanga said in the letter. The letter, obtained by Bloomberg, was sent to miners April 28 and came into effect April 30.

Zimbabwe’s economic growth is slowing as consumer spending slumps and the government struggles to secure adequate funds to meet costs such as paying state workers. The World Bank in April forecast growth at 3 percent this year compared with an initial government estimate of 6.1 percent.

The southern African nation’s deputy mines minister Fred Moyo said May 7 that Zimbabwe may use mineral exports, including gold and diamonds, to underwrite loans from China.

Zimbabwe’s diamond mining companies include Rio Tinto Group, which operates the Murowa mine, Econendra, a Russian miner, digs the gems in the eastern Chimanimani district while Mbada Diamonds (Pvt) Ltd., Anjin Investments Ltd., the Diamond Mining Co. and Jinan Mining (Pvt) Ltd. work the eastern Marange diamond fields in ventures with the MMCZ.

“They are in the process of complying,” Guydanga said today, confirming the veracity of the letter.

Unpaid Debt

Zimbabwe is expected to mine 16.9 million carats of diamonds this year, according to mines ministry estimates. Last year the country produced 8 million carats worth $685 million.

Munyaradzi Machacha, a director at Anjin, declined to comment and said his company is still to be paid the $5 million it’s owed after a gem sale in Dubai run by the Zimbabwean government.

Zebra Kasete, managing director at Rio’s Murowa and George Manyaya, a spokesman for Mbada, were said to be in a meeting when Bloomberg sought comment.

--With assistance from Brian Latham in Harare.