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Stewart Leiwakabessy

Petra Diamonds, the largest diamond-mining group listed on the UK's Alternative Investment Market (AIM), may deal in the glittering rocks that bring lovers together in holy matrimony. But the company’s activities behind the scenes may just be tearing people – and societies – apart, writes Khadija Sharife.

The Africa-focused company, with a resource base of 261 million carats, recently landed a US$40 million loan agreement with the World Bank's opaque International Finance Corporation (IFC) to support the expansion of the company's Williamson Diamond Mine.

But whether the loan benefits Tanzania remains to be seen. All revenue from production is to be shifted through Willcroft Company Limited, a 100 per cent owned intermediate company based in Bermuda, a tax haven, before being remitted back to Williamson Diamonds Limited (Tanzania). Bermuda is just one of over 30 tax havens belonging to the UK, 'managed' through the City of London, head office to the empire's hidden vaults.


Each year developing countries lose over US$385 billion to mispricing while more than 60 per cent of Africa's illicit flight is caused by corporate tax avoidance and evasion. This occurs primarily through the use of jurisdictions intentionally structured to provide criminogenic environments facilitating such activities.

An estimated 26 per cent of Bermuda's GDP is generated from a host of 'secrecy' services specifically designed to cater the needs of foreign clients eager to escape the rule of law in both developed and developing countries, despite fully exploiting infrastructure, labour and resources on the cheap. Besides the obvious near zero tax holidays, Bermuda provides company redomiciliation (easy corporate inversion), protected cell companies (locking up assets etc), and lack of disclosure concerning company ownership, beneficial or ultimate ownership, company accounts, trusts amongst other legal and financial tools. Of course, Petra is only one of over 480 multinationals to maintain subsidiaries in Bermuda.

The secrecy factor cultivates corruption. The opacity concerning beneficial owners (those ultimately benefitting from resource revenue) opens the door to potential political corruption at the lower or higher state level acting in direct collaboration with the corporation. The Tanzanian government, for instance, holds 25% and Petra, 75% of the Tanzanian entity (Williamson Diamonds Limited).

Tanzania is not the only country to have resources funnelled through a tax haven: Petra's mines in South Africa, its primary stronghold also launders revenues through Cullinan Investment Holdings Limited based in the British Virgin Islands, while the company's exploration in Sierra Leone in similarly passed through an entity based in the Seychelles called Basama Diamonds Limited (51 per cent).

To get an idea of what Petra's operating boundaries (or lack thereof) we could delve back into the company's involvement in US$1- $2 billion 800 sq km DRC diamond concession about a decade ago.

In 1996, Zimbabwe's authoritarian strongman Robert Mugabe gave then-DRC head Kabila US$5 million to fund the war against Mobutu. In addition, Mugabe facilitated a US$53 million deal negotiated by the Zimbabwean Defense Industries (ZDI), itself owned by Mugabe's government, to provide Kabila's army with arms, bombs, food, transport and other requirements. The ZDI served as the economic vehicle penetrating the DRC's resources via the barter exchange. Directors of ZDI, a highly secretive company, were disclosed in 1993 as Army General Vitalis Zvinavashe, Mugabe's close aid Perence Shiri, amongst others.

ZDI's Zvinavashe was also, for instance, a director in Osleg, Operation Sovereign Legitimacy, used as a means of financing the Zimbabwean forces. One of the deals included the Sengamines diamond concession south of Mbuji Mayi, through a joint venture (COSLEG) with Kabila's armed forces Comiex.

Caymen Islands-incorporated Oryx Natural Resources came to acquire the concession. According to Diamond Intelligence, (Oryx's head), ‘Al-Shanfari, an Omani national,’ had, ‘close ties to Robert Mugabe and his top officials who has also been designated, ...uses Oryx to enable Mugabe and his senior officials to maintain access to, and derive personal benefit from, various mining ventures in the Democratic Republic of the Congo (DRC).’

Spokesman for Oryx and CEO for the South Africa-based African Mining Management Company (AMMCO) Geoffrey White disclosed to the Financial Gazette, ‘There was no payment by Oryx to Osleg or individuals related to Osleg when the new Sengamines was formed and Osleg departed.’ AMMCO's Rob Scott revealed to the same paper that the lack of payment was a political decision between the governments of DRC and Zimbabwe. Oryx allegedly owned 49 per cent of Sengamines, Comiex, 35 per cent and MIBA, the DRC's state-owned diamond company, 16 per cent. The company planned a listing on the London Stock Exchange in June 2000. However, a UN Panel report (2000) revealed that Mugabe's Osleg owned the 49 per cent of Sengamines concession, situated in an area allegedly controlled by Zimbabwean forces, claimed by Oryx.

This was because Osleg, the beneficial shareholders, nominated Oryx to hold its share. The panel stated that this was done in order to, ‘disguise the close association between Sengamines and ZDF, and to deceive international investors.’ Oryx's response was that the report, ‘is highly inflammatory and riddled with unsubstantiated and undocumented allegations.’

Plans to list Oryx were foiled when the independent regulator Grant Thornton objected just days before the proposed floating. Petra Diamonds had intended to merge with Oryx, allegedly managed by close Omani associates of Mugabe. Arthur Levy, author of ‘Diamonds and Conflict’, wrote that Petra and Cosleg were to split profits equally.

By 2003, by presidential decree, 'Oryx' owned 80 per cent of Sengamines, and MIBA, 20 per cent. According to Petra's chairman Adonis Pouroulis (concerning the foiled 2000 listing), ‘I understand the position that they have adopted was put to them by 'certain regulators' very late on Friday afternoon.’

Foiled it may have been, but had the regulator not pulled out after substantial and unambigious evidence, it is unlikely that Petra, headquartered in another UK tax haven of Jersey, would not have eagerly gone ahead.


* Khadija Sharife is southern Africa correspondent at The Africa Report magazine and a contributor to the Tax Justice Network.
* Please send comments to [email protected] or comment online at Pambazuka News.