Global Policy Forum

Diamonds Are a Tyrant's Best Friend

Business Report
December 8, 2002

As Zimbabwe vies with the Democratic Republic of Congo for the title of most wretched nation in Africa, a small clique of opportunists is making a fortune out of both countries and it is doing business with a little-known diamond mining company wrongly linked with Al-Qaeda by the BBC.

It was, said the media pundits, probably the worst journalistic mistake ever. A BBC documentary broadcast in October 2001 accused a little-known Cayman Islands-registered mining company, Oryx Natural Resources, of being part-owned by a key supporter and financier of Al-Qaeda.

In fact, neither Oryx nor the shareholder in question had any connection with Al-Qaeda: the BBC's allegation was a case of mistaken identity. But the effect on Oryx's reputation was catastrophic: business began to dry up overnight, claimed the company.

So it sued the BBC, seeking spectacular damages to reflect its losses. Some spoke of a P15 million payout; most reports settled for the scarcely less mind-boggling P12 million. The BBC, realising that it hadn't a leg to stand on, ran a full apology three weeks after the initial libel, but Oryx insisted on compensation. But instead of settling promptly, the BBC baffled many observers by spending nearly nine months preparing to defend the case.

Only on the eve of the court case, two months ago, did it finally admit liability. A hearing to determine the size of the damages was due shortly and the media pundits were licking their lips in anticipation of what was expected to be by far the biggest libel payout in British legal history. Then last week, a small unexpected news item appeared in a few newspapers: Oryx had settled out of court for a reported P500 000. This dramatic twist in events was not, however, much remarked on: not by Oryx, not by the BBC, and certainly not by the media pundits.

The good names of Oryx and its maligned shareholders had, after all, been vindicated, and the BBC had made a big mistake and paid for it. Yet for those who have been following the case, and who have been following the fortunes of Oryx over the past few years, the news was interesting as much for what it left unsaid as for what it said.

For, even without the BBC's gaffe, this has been a bruising year for Oryx's reputation - last month another slightly unnoticed news report appeared in a few British papers. The UN had published a report on the illegal exploitation of natural resources and other forms of wealth in the Democratic Republic of Congo. The report described, in shocking and exhaustive details, the trade in blood diamonds - diamonds whose extraction and sale finance armed conflicts - in that war-ravaged country.

Perhaps mindful of the BBC's difficulties, most of the papers that ran the story discreetly omitted to mention the fact that Oryx Natural Resources featured prominently in the report. For anyone who takes an interest in African affairs, and particularly in the tragedies currently playing out not just in the Congo but in the once-prosperous land of Zimbabwe, the report makes compelling reading.

But it was particularly compelling for anyone who has attempted to investigate the elite clique of Zimbabweans and foreign business people who have been making big money out of the mayhem of war, and for anyone who has considered testimony on this subject from a host of other sources.

The combined effect of this evidence and the UN report is to reinforce, in astonishing detail, the widespread perception that President Robert Mugabe is the leader, not so much of a national government but of a small gang that has spent the past four years getting rich from war that has cost more than 2 million lives in the Congo, and that deems its own survival to be of more pressing urgency than the impending death by famine, as the UN has warned, of 6 million Zimbabweans.

It also does little for the reputation of Oryx Natural Resources. The story revealed by these sources (and supported by the UN report) has two chief protagonists - Emmerson Mnangagwa and Thamer Said Ahmed Al Shanfari. Mnangagwa is Mugabe's crony-in-chief: his closest confidant, the key man in Zimbabwe's Central Intelligence Organisation since independence, and the man with whose blessing almost any crime may be committed in Zimbabwe with impunity. Al Shanfari is an Omani entrepreneur and friend of Mnangagwa and is described in one secret intelligence document as "Zimbabwe's most important foreign business partner".

He is also the president and chief executive of Oryx Natural Resources, which owns a diamond concession in Mbuji-Mayi, in the Congo, jointly with companies owned by the governments of Zimbabwe and the Democratic Republic of Congo. The Oryx Group first became involved with the Mugabe regime four years ago.

It began with a proposal that President Laurent Kabila of the Congo made to Mugabe in 1998. Facing heavy military pressure from rebel armies backed by Uganda and Rwanda, Kabila proposed to Mugabe that he would give him access to a diamond concession in the Congo valued at $1 billion - the concession in Mbuji-Mayi - in exchange for the loan of his army.

Mugabe readily agreed to the diamonds-for-soldiers deal, but what he did not have was the technical or commercial expertise to extract the diamonds. Enter Kamal Khalfan, a weapons dealer, Oryx shareholder and old Harare resident who rejoiced in the title of honorary consul of Oman in Zimbabwe. Khalfan suggested to Mugabe that Shanfari might be just the partner he needed.

Shanfari, a 34-year-old graduate of the Colorado School of Mines, and who comes from a lavishly wealthy and influential Omani family, flew to Harare and met Mugabe. According to the UN report, a company called Sengamines was created, a joint venture between Shanfari's Oryx, a company called Osleg (the business wing of the Zimbabwean armed forces) and a third co-signatory to the agreement - dated July 16 1999 - "the government of the Republic of Zimbabwe". (This last entity may be taken as synonymous with the clique that runs the ruling Zanu-PF Party.)

Osleg already had a partnership agreement with Congo's Comiex, a private company linked to the presidency in Kinshasa. It is difficult to imagine a rasher choice of business partners for a company that cares about its reputation. Talk to Zimbabwe experts in Washington and London - in congress or the state department, or the pentagon, or the foreign office, or the House of Lords - and the words that keep recurring in connection with Zimbabwe's ruling elite are "mafia", "pillage" and "criminal".

The consensus, summed up by one congressional staffer in Washington, is that the Zimbabwean government is "a criminal organisation run for the benefit of Mugabe and his cronies". "Mugabe always was power-hungry, but not, I thought, corrupt. I never imagined he would end up presiding over the most corrupt regime in Africa," said Robin Renwick, one of the chief architects of the Lancaster House agreement, which gave independence to Zimbabwe and, as it turned out, uninterrupted power to Mugabe and his Zanu-PF party for the past 22 years.

Renwick, later the British ambassador in South Africa and Washington, was one of the more vocal proponents of the European Union (EU) visa ban and assets freeze that were imposed this year on Mugabe and 71 of his associates. Russ Feingold, the Democrat who chairs the US senate's subcommittee on Africa, has pushed for similar sanctions in Washington.

Senator Feingold, who has met with members of Mugabe's inner circle, says Zimbabwe's "elite" had "strong incentives to retain power, regardless of the cost to the country", and it was difficult to avoid the conclusion "that public office is being used almost solely for private gain". Or, as Renwick more bluntly puts it: "The Zimbabwean army has been rented out in the Congo for the benefit of Mugabe and the mafia around him."

Ed Royce, the Republican who heads the house of representatives' Africa subcommittee, is outraged by what he calls Mugabe's use of "food as a weapon", deliberately "starving" his political opponents. The judiciary is neutered, the press is gagged and meanwhile, Royce says: "Mugabe's cronies live high by pillaging the Democratic Republic of Congo."

It is in such a climate, in such a country, with such people, that Oryx's Shanfari has judged the circumstances propitious during the past four years to do business. It is believed that, under the terms of the agreement with Osleg, Oryx would run the diamond mining concession in Mbuji-Mayi and take 40 percent of the profits.

But UN sources claim that, owing to the war and the logistical problems presented by Congo's poverty and vastness, the enterprise is not producing diamonds on a scale remotely proportionate to its $1 billion valuation. Oryx disputes this. According to the UN report, however, there was ample opportunity for the company to make money in other ways, for example, by "laundering diamonds smuggled from Angola and Sierra Leone". Such diamonds are "blood" or "conflict" diamonds.

According to the UN, the EU and the US, trade in such diamonds has particularly enriched a group of about a dozen Zimbabwean individuals, notable among whom have been Mugabe and Mnangagwa.

Mnangagwa was minister of state security and head of the secret police at the time of the notorious Matabeleland massacres of 1983, in which the Zimbabwean army's North Korean-trained Fifth Brigade killed more than 10 000 inhabitants of a region of Zimbabwe considered to be opposed to Mugabe. Identified by human rights groups as a key figure in the massacres, Mnangagwa was rewarded by Mugabe with the job of justice minister, a position he kept for 12 years.

Diplomats in southern Africa believe Mnangagwa to have rigged the presidential elections held in March this year, and he was described in a UN report put out at the end of last year as "the architect of the commercial activities of Zanu-PF" and the prime mover behind illicit diamond trading in Congo.

Mnangagwa has been a regular guest of honour at large dinners that Shanfari has hosted at his Harare home. Another guest, allegedly, used to be Chenjerai Hunzvi, better known by his chosen nickname Hitler. Hitler, who died last year of natural causes, rose to prominence four years ago as the man who led the invasions of Zimbabwe's white-owned farms.

Under the protection of, among others, Mnangagwa when he was justice minister, Hitler would encourage his storm troopers to rob and commit murder, safe in the knowledge that there would be no legal consequences. It was perhaps inevitable that, with associates and business partners like these, Oryx and Shanfari would come in for a certain amount of criticism.

But the UN report does not just accuse Oryx of trading with the wrong kind of people, or in the wrong kind of diamonds. It also accuses its employees of smuggling both diamonds and currency. One paragraph in the report alleges that "on March 18 2000, Oryx officials in Kinshasa loaded an aircraft with eight crates of Congolese francs for shipment to Harare".

Mnangagwa, known in Zimbabwe as "the son of God" because of the general supposition that he is Mugabe's anointed successor, is the man who, among other things, guarantees the safe passage of illegal cash and diamonds through Harare Airport.

And the allegation made by the UN report, though fiercely denied by Oryx, is that "an Oryx employee regularly transported parcels of $500 000 at a time that were withdrawn from the Oryx account at Hambros Bank, London to Kinshasa without declaring them to the Congolese authorities".

This is interesting because other anonymous sources claim to have been involved in precisely such activities, adding the intriguing detail that to transport $500 000 in unlaundered cash safely from one country to another, you must possess a business-class airline ticket because the weight of $500 000 exceeds the hand luggage limit in economy class. These sources claim personal knowledge of 10 such trips, involving about $5 million, and allege that a large cut went to Mnangagwa after every trip, often stuffed into cardboard boxes and deposited in the boot of his car.

Interviewed about these allegations last month in Zimbabwe's Daily News, Mnangagwa denied having had such boxes loaded into his car, but is reported to have added: "Could they have put money in my boot without me seeing it? Mind you, this was three years ago."

Another ultimate beneficiary of this largesse is alleged to have been Mugabe's young wife, Grace, a woman who has acquired a reputation as something of an African Imelda Marcos on account of her profligate spending down the years in the shops of London, New York and Madrid. A further beneficiary was alleged to have been Sydney Sekeramayi, Mnangagwa's most serious rival to take over as president eventually from Mugabe.

Sekeramayi, who is today minister of mines and energy, wrote a letter to Shanfari dated July 7 2000 when he was minister of state security in the president's office - meaning head of intelligence - thanking him for money received. Elections had just taken place in Zimbabwe and Sekeramayi had retained his parliamentary seat.

The letter carries an official Zimbabwean government letterhead and contains Sekeramayi's signature at the bottom. It reads: "Dear Mr Thamer Al-Shanfari. I am writing this letter to express my sincere appreciation for the generous moral, material and financial assistance you rendered to boost my election campaign.

"My re-election as the member of parliament for Marondera East was facilitated by your support. Thank you very much, Dr. ST Sekeramayi." The cogs in the state apparatus having been duly oiled, the remaining money was allegedly taken to Kinshasa, where it was exchanged for uncut stones that were then smuggled back (allegedly concealed in the couriers' underpants) to Harare and then to Johannesburg to be cut.

Mnangagwa, who did business deals with his Congo counterparts, saw to it that there would be no awkward questions asked by the customs men at Kinshasa Airport. On other occasions, according to the UN report, Congolese francs were taken into rebel territory around Kisangani and exchanged very profitably for US dollars, which could then be exchanged for Congolese francs, equally profitably, back in Harare.

Oryx denies being involved in the illegal traffic or trading of currency or diamonds, or in the trading of conflict diamonds, and has denied giving money to Mnangagwa or his political party. Indeed, Oryx and its lawyers have reacted vigorously to the handful of news reports in Europe and Africa that have touched on these matters, casting doubt on the UN's sources and blaming the report on (in the words of its managing director Geoffrey White) "a continual disinformation campaign driven by commercial competitors".

Meanwhile, pressure is increasing almost by the day from every corner of the world for "regime change" in Zimbabwe, for the termination of a Mugabe autocracy perceived to be so criminal to rise up and overthrow it by force of arms. Only last month, as former president Nelson Mandela's good friend former US president Bill Clinton was speaking out in Nigeria against the election rigging and intimidation of political opponents in Zimbabwe, a senior UN human rights investigator from Malaysia, Param Cumaraswamy, denounced Mugabe's "systematic attack on the rule of law".

Three days later, Australian Prime Minister John Howard announced that his government would examine imposing "targeted sanctions" against Zimbabwe, in the manner of the US, which since February has prohibited entry to top Zimbabwean officials, and the EU, which earlier this week abandoned an international summit on poverty rather than allow two Zimbabwean ministers to travel to Brussels to attend. In both the US and Europe, meanwhile, moves are afoot to shut off a possible leak in the sanctions system by extending it to include people who do business with Zimbabwe. As Renwick puts it: "In order to put more pressure on Mugabe you must obviously tie up his associates, among other things, by freezing their assets."

Oryx Natural Resources is not yet on any sanctions list, but it is listed in the UN report as a company "on which the panel recommends the placing of financial restrictions" (defined as barring selected companies and individuals from accessing banking facilities and other financial institutions and from receiving funding or establishing a partnership of other commercial relations with international financial institutions); while Shanfari is listed as an individual "for whom the panel recommends a travel ban and financial restrictions" (which could include freezing of personal assets).

It is also worth remembering that the company's attempt to list itself on the London Stock Exchange in 2000 was abandoned in the face of a barrage of criticism from government officials and human rights activists. As the London Sunday Times wrote at the time: "The bid to float Oryx sits uncomfortably with a campaign by the British government to organise an international ban on sales of "blood diamonds" from conflict areas."

But the current allegations against Oryx go further than this, suggesting in essence that the company made cash payments to senior members of the Zimbabwean government or individuals otherwise close to Mugabe and that its Sengamines joint venture bought "blood" or "conflict" diamonds in war zones and in some cases smuggled them abroad. "I refute all the allegations," said Geoffrey White, who, together with a company lawyer, has responded to these allegations in a series of faxes and telephone calls since September.

"This is rubbish," White said, adding that he believed that the allegations were the product of an elaborate hoax. He said that two ex-employees of Oryx - "frauds", who were "driven by revenge" against the company, which they believed owed them money - had been spreading malicious lies.

In a letter that was faxed later, Oryx's London lawyer, Mischon de Reya, said the allegations against his client were "grossly defamatory". The lawyer wrote that, according to White, the two people whom he believed to be the sources for this investigation were "motivated by extreme malice towards Oryx Natural Resources" and were "trying to defraud the company's owner - Shanfari".

These two individuals are not named in the letter, but according to De Reya, they have "made threats to kill both Shanfari and White. By contrast, White declared in the first of his faxed responses: "The Oryx Group prides itself on conducting itself with honesty and integrity."

There was no answer at White's Oman number when the Independent rang him for his latest comments on these matters. But Oryx has made its position on the UN report crystal clear. All the allegations are "completely baseless". Any currency taken from London to Congo was taken legitimately. If any Oryx employee smuggled diamonds, he or she did so without the company's knowledge or approval. Shanfari's donation to Sekeramayi amounted to just $500.

White has also expressed bitterness that, because of the UN's legal immunity, the organisation can make such hugely damaging allegations against the company, while the company has no legal redress. "We are seeking a legal jurisdiction and process where this matter can be resolved and our name cleared."

Yet while one may sympathise with White on this point, the fact remains that, as a top foreign business associate of what Mandela has called the Mugabe tyranny, his company is an accomplice of a small power clique that uses food as a weapon to starve its political opponents; that murders and tortures political rivals with impunity; that steals elections; that has profited from a savage war in Congo; that sets the perpetuation of its own power and wealth above the welfare of 6 million Zimbabweans who today are facing famine; and that has destroyed its own country and has blood all over its hands.

And with friends like that, your reputation will always be in danger of getting a bit bruised. - Independent Foreign Service

More Information on Conflict Diamonds

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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.