Wednesday, December 29, 2010

Smuggled-Diamond Revenue Flows to Mugabe’s Zimbabwe Before Vote

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By Brian Latham and Fred Katerere

Dec. 29 (Bloomberg) -- Enos Chikwere spills nine uncut diamonds from a bag at Restaurante Piscina in Mozambique near the Zimbabwe border and says they’re worth $75,000.

“I can supply all the diamonds you need,” said Chikwere, explaining that he sneaked them into Mozambique after buying them from Zimbabwean soldiers.

Chikwere and hundreds of other border smugglers are part of a chain whose money flows back into Zimbabwe, whose president for three decades, Robert Mugabe, has ruled over four violent and disputed elections since 2000. Mugabe’s policies of land seizure helped cause the economy, once the second-biggest in southern Africa, to shrink by 50 percent in eight years.

The gems from Zimbabwe’s biggest diamond field in the Marange region are helping enrich the 86-year-old president’s party ahead of next year’s vote, according to Human Rights Watch, Partnership Africa Canada and the Zimbabwean opposition party, Movement for Democratic Change, which governs in a forced coalition with Mugabe’s party.

Annual income from the gems may reach $2 billion, assuming the country is able to export them freely, the state-owned Herald newspaper cited Mines Minister Obert Mpofu as saying in October. Mugabe is trying to amass funds for the election campaign, said Tom Porteous, the U.K. director of New York-based Human Rights Watch, which has lobbied against abuses for the past 30 years.

“Revenue from the mines is serving to prop up Mugabe and his cronies,” Porteous said in a Dec. 8 response to e-mailed questions. “There are real concerns that diamond revenue will be used to fund political violence and intimidation of Mugabe’s opponents.”

Soldiers and Diggers

Human Rights Watch cited interviews with unidentified soldiers, diggers, community leaders and members of government and the parliamentary portfolio committee on mines and energy to support its allegations.

Partnership Africa Canada, an Ottawa-based nonprofit organization, said in a June report that Marange is controlled by the military and proceeds from the gems aren’t benefiting the country. The group cited testimony in Zimbabwe’s parliament, company statements, and interviews with unidentified diplomats and illegal miners for its conclusions.

Illegal smuggling benefits Mugabe because it is mostly carried out via the military, according to the two nonprofits and interviews with six smugglers and two dealers in and around Vila de Manica, where Chikwere, clad in Diesel jeans and wearing two gold chains, was displaying his wares.

Finance Ministry

The army reports to the president. The Finance Ministry, by contrast, is controlled by Morgan Tsvangirai’s Movement for Democratic Change, or MDC, and receives revenue from legal diamond mining in the form of taxes.

Mugabe’s party, the Zimbabwe African National Union- Patriotic Front, or Zanu-PF, denies the smuggling allegations.

“These are just inventions of the western imperialists who are trying to discredit Zanu-PF,” party spokesman Rugare Gumbo said in a Dec. 6 interview from Harare, the country’s capital. “There is no corruption at Marange and Zanu-PF is not using the proceeds.”

Diamonds from Marange can’t be exported legally from Zimbabwe because the field hasn’t yet met an international certification standard showing that proceeds from sales aren’t used to finance conflict.

Mining at Marange has been subject to allegations of military abuses of unauthorized miners and disputes over ownership of the deposit. Human Rights Watch said in June that 200 miners were killed in 2008 at the site by the military, and also reported that the army controls most of the deposits and is forcing local community members to mine the gems on its behalf.

Kimberley Process

Soldiers are smuggling gems across the border, according to Human Rights Watch, which cited information it has obtained and interviews with unidentified people.

Mozambique isn’t a member of the so-called Kimberley Process, an organization that includes governments and diamond industry companies and is designed to reduce the number of so- called conflict diamonds in the world. The Jerusalem-based group said it couldn’t decide on whether to allow unfettered exports from Marange at a meeting that ended on Nov. 4.

The Kimberley Process says it has reduced the proportion of conflict diamonds in the world trade to 1 percent from 15 percent. Signatories, which include all major diamond-producing and buying countries, have pledged that they won’t deal in uncertified gems.

While the Kimberley Process has allowed two “limited” auctions of gems from Marange this year, the state-owned Chronicle newspaper said an August sale earned the government $30 million. By contrast, Central Bank GovernorGideon Gono said in 2007 that smuggling from the Marange site was costing the country as much as $40 million a week.

Paying Civil Servants

“We need the money to pay civil servants,” said Finance Minister Tendai Biti, a member of the MDC, in a Dec. 3 interview from Harare. “We must rein in the political elite who are prospering from the stones.”

In the past decade, Mugabe has seized land from white farmers and given it to blacks, including government officials, and made proposals that would force foreign companies to sell 51 percent of their assets to black Zimbabweans.

The result has been a 50 percent decline in the production of tobacco, the country’s biggest export in 2000, while corn production has fallen by more than half, causing national famines. Gross domestic product shrank by 50 percent between 2000 and 2008, and the country scrapped its currency, the Zimbabwe dollar, in 2009 as inflation rose.

Attempts to attract aid to help the economy haven’t been successful: The country received $3 million from foreign donors in the first quarter of 2010, 0.4 percent of its annual target, according to Biti.

Contested Election

The MDC said in a Dec. 17 statement that it holds the leadership of the Zanu-PF party responsible “for years of plunder and human rights abuses at the mine fields.”

Mugabe’s party narrowly won an election in 2000 against the MDC amid complaints of attacks and murders of opposition supporters. Tsvangirai came back in 2008 and beat Mugabe in a first-round presidential vote, though he failed to get the 51 percent needed to avoid a runoff. He then boycotted the runoff, citing violence. Mugabe’s party was forced by neighboring states into a coalition with the MDC in February 2009.

Tsvangirai has twice been unsuccessfully charged with treason and underwent a brain scan in 2007 for a suspected skull fracture after he was beaten by police.

Mugabe said Dec. 17 at an annual conference of his party in Mutare that the coalition government needs to come to an end. The MDC is “dragging their feet on elections,” he said, adding that general and presidential polls should be held next year.

Constitutional Wrangle

Mugabe’s party has frustrated attempts to implement a new constitution, according to the MDC, which is demanding such steps as a condition for elections.

Diamond fields in eastern Zimbabwe were seized in December 2006 from Maidstone, England-based African Consolidated Resources Plc by the Zimbabwean government.

Since then, thousands of illegal miners have periodically been evicted from the deposits, according to Human Rights Watch. Mbada Investments (Pvt) Ltd., in which Johannesburg-based scrap metal company New Reclamation Group Ltd. has a stake, runs a mining concession at part of the site with the state-owned Zimbabwe Mineral Development Corp.

Members of Zimbabwe’s political elite ranging from Mugabe’s wife, Grace, to military leaders allegedly profited from illegal trading of diamonds, according to a November 2008 U.S. diplomatic cable published by WikiLeaks. In the cable, former American ambassador to Zimbabwe James D. McGee cited an industry official and a senior member of Mugabe’s party as his sources.

‘Where is the Evidence?’

“The allegations made against the First Lady and others regarding illegal diamonds from Marange are scandalous and untrue,” George Charamba, Mugabe’s spokesman, said in a Dec. 22 interview from Harare. “Where is the evidence? There is no wrongdoing in Marange.”

The soldiers are very open, said a Nigerian gem dealer in Chimoio, capital of Mozambique’s Manica province, who repeatedly said his name was Colonel Rambo. They give their cut to their superior officers, who in turn surrender a percentage to politicians in Zimbabwe, he said.

He displayed a suitcase full of $100 bills that he said amounted to more than $1 million. Ministers are involved in this business on the other side of the border, he said.

David Kassel, New Reclamation’s chairman, declined to comment when called on Dec. 15. London-based Old Mutual Plc, which owns “less than 6 percent” of New Reclamation, said in an e-mailed response to questions that its actions are guided by the Kimberley Process and Zimbabwean laws. No allegations of illegal action have been made against Old Mutual or New Reclamation. New Reclamation didn’t respond to a Dec. 17 e-mail.

No Arrests

“We have not arrested anyone for dealing in diamonds because no one has reported to us violations of any law,” Belmar Mutadiwa, a police spokesman for Mozambique’s Manica province, said in a Dec. 6 interview. “Most of the dealers operating in the province have been licensed by the government to buy precious and semi-precious stones.”

A police station in Vila de Manica is situated on a street where dealers from Guinea, Lebanon, Sierra Leone and Nigeria -- who all disclosed their nationalities in interviews -- trade on the porches of their houses. Security guards sit outside.

Mercedes, Humvee and Range Rover vehicles drive down the town’s streets, lined by freshly painted houses sprouting satellite television dishes. By contrast, the 750-mile drive to the region from Mozambique’s capital, Maputo, runs through small towns where ramshackle buildings are side-by-side with grass shacks known as baraccas.

Purchase Point

Vila de Manica has “become one of the premier purchase and departure points for Marange’s illegal diamonds,” Partnership Africa Canada said in a Junereport on its website.

“Diamonds are being sold in this district, after they’ve been smuggled from Zimbabwe”, said Jose Tefula, district administrator for Manica District, in a Dec. 20 phone interview. “Locally we don’t have any diamonds, so the stones can only come from Zimbabwe.”

Three messages left at the Manica branch of the Department of Mineral Resources weren’t returned.

A group of about 40 diamond dealers surrounded the vehicle in which two Bloomberg reporters were travelling in Vila de Manica on Nov. 26. They banged the side of the car with their fists, blocked the escape route with motor vehicles, seized and damaged a camera and shouted “you’re dying today.”

Two policemen arrived and detained the reporters for almost an hour, saying they should have sought permission to enter the area. No action was taken against the dealers.

No Details

New Reclamation rebuffed a petition made by Johannesburg’s Southern African Litigation Centre in October through the Access to Information Act for details of its involvement in Zimbabwe’s diamond industry, Nicole Fritz, the group’s director, said on Dec. 15 from her mobile phone. New Reclamation’s Kassel declined to comment and put the phone down when asked about Marange.

Marange’s deposits may contain 1,000 carats of gems per hundred tons of ore, the official said in the cable posted on WikiLeaks, citing a geologist’s report prepared for De Beers, the world’s biggest diamond company. That compares with a grade of 120 carats at Rio Tinto Plc’s Murowa mine in Zimbabwe, the official said.

Tom Tweedy, a spokesman for Johannesburg-based De Beers, declined to comment on Dec. 9.

More Than Botswana

Zimbabwe may mine 40 million carats of diamonds annually within three years, the state-controlled Herald reported Oct. 18, citing Mpofu. Botswana, the world’s biggest diamond producer by value, expects gem production of 24 million carats this year.

Murowa produced 97,000 carats of diamonds in 2009 while production at the country’s other diamond mine, River Ranch, isn’t disclosed. Total national official production in 2007 was 695,000 carats, worth $31 million, according to the Herald.

“We believe the new intransigence of Zanu-PF is down to its finding of an infinite source of wealth,” Fritz said. “There is this race to elections.”

In Vila de Manica, smuggler Chikwere boasted that there was no limit to the amount of stones he could bring into Mozambique.

“Don’t worry about me and the border,” he said. “I have my systems.”

To contact the reporters on this story: Brian Latham in Durban, South Africa atblatham@bloomberg.net; Fred Katerere in Maputo, Mozambique via Johannesburg at asguazzin@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

Last Updated: December 28, 2010 17:01 EST

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African Huts Far From The Grid Glow With Renewable Power

BEYOND FOSSIL FUELS

African Huts Far From the Grid Glow With Renewable Power

Ed Ou/The New York Times

Thanks to this solar panel, Sara Ruto no longer takes a three-hour taxi ride to a town with electricity to recharge her cellphone. More Photos »

By ELISABETH ROSENTHAL

Published: December 24, 2010

REPRINTS

KIPTUSURI, Kenya — For Sara Ruto, the desperate yearning for electricity began last year with the purchase of her first cellphone, a lifeline for receiving small money transfers, contacting relatives in the city or checking chicken prices at the nearest market.

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Ed Ou/The New York Times

Solar power for Ms. Ruto’s hut in Kiptusuri, Kenya, means her toddlers no longer risk burns from a smoky kerosene lamp. More Photos »

Charging the phone was no simple matter in this farming village far fromKenya’s electric grid.

Every week, Ms. Ruto walked two miles to hire a motorcycle taxi for the three-hour ride to Mogotio, the nearest town with electricity. There, she dropped off her cellphone at a store that recharges phones for 30 cents. Yet the service was in such demand that she had to leave it behind for three full days before returning.

That wearying routine ended in February when the family sold some animals to buy a small Chinese-made solar power system for about $80. Now balanced precariously atop their tin roof, a lone solar panel provides enough electricity to charge the phone and run four bright overhead lights with switches.

“My main motivation was the phone, but this has changed so many other things,” Ms. Ruto said on a recent evening as she relaxed on a bench in the mud-walled shack she shares with her husband and six children.

As small-scale renewable energy becomes cheaper, more reliable and more efficient, it is providing the first drops of modern power to people who live far from slow-growing electricity grids and fuel pipelines in developing countries. Although dwarfed by the big renewable energy projects that many industrialized countries are embracing to rein in greenhouse gas emissions, these tiny systems are playing an epic, transformative role.

Since Ms. Ruto hooked up the system, her teenagers’ grades have improved because they have light for studying. The toddlers no longer risk burns from the smoky kerosene lamp. And each month, she saves $15 in kerosene and battery costs — and the $20 she used to spend on travel.

In fact, neighbors now pay her 20 cents to charge their phones, although that business may soon evaporate: 63 families in Kiptusuri have recently installed their own solar power systems.

“You leapfrog over the need for fixed lines,” said Adam Kendall, head of the sub-Saharan Africa power practice for McKinsey & Company, the global consulting firm. “Renewable energy becomes more and more important in less and less developed markets.”

The United Nations estimates that 1.5 billion people across the globe still live without electricity, including 85 percent of Kenyans, and that three billion still cook and heat with primitive fuels like wood or charcoal.

There is no reliable data on the spread of off-grid renewable energy on a small scale, in part because the projects are often installed by individuals or tiny nongovernmental organizations.

But Dana Younger, senior renewable energy adviser at the International Finance Corporation, the World Bank Group’s private lending arm, said there was no question that the trend was accelerating. “It’s a phenomenon that’s sweeping the world; a huge number of these systems are being installed,” Mr. Younger said.

With the advent of cheap solar panels and high-efficiency LED lights, which can light a room with just 4 watts of power instead of 60, these small solar systems now deliver useful electricity at a price that even the poor can afford, he noted. “You’re seeing herders in Inner Mongolia with solar cells on top of their yurts,” Mr. Younger said.

In Africa, nascent markets for the systems have sprung up in Ethiopia, Uganda, Malawi and Ghana as well as in Kenya, said Francis Hillman, an energy entrepreneur who recently shifted his Eritrea-based business, Phaesun Asmara, from large solar projects financed by nongovernmental organizations to a greater emphasis on tiny rooftop systems.

In addition to these small solar projects, renewable energy technologies designed for the poor include simple subterranean biogas chambers that make fuel and electricity from the manure of a few cows, and “mini” hydroelectric dams that can harness the power of a local river for an entire village.

Yet while these off-grid systems have proved their worth, the lack of an effective distribution network or a reliable way of financing the start-up costs has prevented them from becoming more widespread.

“The big problem for us now is there is no business model yet,” said John Maina, executive coordinator of Sustainable Community Development Services, or Scode, a nongovernmental organization based in Nakuru, Kenya, that is devoted to bringing power to rural areas.

Just a few years ago, Mr. Maina said, “solar lights” were merely basic lanterns, dim and unreliable.

“Finally, these products exist, people are asking for them and are willing to pay,” he said. “But we can’t get supply.” He said small African organizations like his do not have the purchasing power or connections to place bulk orders themselves from distant manufacturers, forcing them to scramble for items each time a shipment happens to come into the country.

Part of the problem is that the new systems buck the traditional mold, in which power is generated by a very small number of huge government-owned companies that gradually extend the grid into rural areas. Investors are reluctant to pour money into products that serve a dispersed market of poor rural consumers because they see the risk as too high.

“There are many small islands of success, but they need to go to scale,” said Minoru Takada, chief of the United Nations Development Program’s sustainable energy program. “Off-grid is the answer for the poor. But people who control funding need to see this as a viable option.”

Even United Nations programs and United States government funds that promote climate-friendly energy in developing countries hew to large projects like giant wind farmsor industrial-scale solar plants that feed into the grid. A $300 million solar project is much easier to finance and monitor than 10 million home-scale solar systems in mud huts spread across a continent.

As a result, money does not flow to the poorest areas. Of the $162 billion invested in renewable energy last year, according to the United Nations, experts estimate that $44 billion was spent in China, India and Brazil collectively, and $7.5 billion in the many poorer countries.

Only 6 to 7 percent of solar panels are manufactured to produce electricity that does not feed into the grid; that includes systems like Ms. Ruto’s and solar panels that light American parking lots and football stadiums.

Still, some new models are emerging. Husk Power Systems, a young company supported by a mix of private investment and nonprofit funds, has built 60 village power plants in rural India that make electricity from rice husks for 250 hamlets since 2007.

In Nepal and Indonesia, the United Nations Development Program has helped finance the construction of very small hydroelectric plants that have brought electricity to remote mountain communities. Morocco provides subsidized solar home systems at a cost of $100 each to remote rural areas where expanding the national grid is not cost-effective.

What has most surprised some experts in the field is the recent emergence of a true market in Africa for home-scale renewable energy and for appliances that consume less energy. As the cost of reliable equipment decreases, families have proved ever more willing to buy it by selling a goat or borrowing money from a relative overseas, for example.

The explosion of cellphone use in rural Africa has been an enormous motivating factor. Because rural regions of many African countries lack banks, the cellphone has been embraced as a tool for commercial transactions as well as personal communications, adding an incentive to electrify for the sake of recharging.

M-Pesa, Kenya’s largest mobile phone money transfer service, handles an annual cash flow equivalent to more than 10 percent of the country’s gross domestic product, most in tiny transactions that rarely exceed $20.

The cheap renewable energy systems also allow the rural poor to save money on candles, charcoal, batteries, wood and kerosene. “So there is an ability to pay and a willingness to pay,” said Mr. Younger of the International Finance Corporation.

In another Kenyan village, Lochorai, Alice Wangui, 45, and Agnes Mwaforo, 35, formerly subsistence farmers, now operate a booming business selling and installing energy-efficient wood-burning cooking stoves made of clay and metal for a cost of $5. Wearing matching bright orange tops and skirts, they walk down rutted dirt paths with cellphones ever at their ears, edging past goats and dogs to visit customers and to calm those on the waiting list.

Hunched over her new stove as she stirred a stew of potatoes and beans, Naomi Muriuki, 58, volunteered that the appliance had more than halved her use of firewood. Wood has become harder to find and expensive to buy as the government tries to limit deforestation, she added.

In Tumsifu, a slightly more prosperous village of dairy farmers, Virginia Wairimu, 35, is benefiting from an underground tank in which the manure from her three cows is converted to biogas, which is then pumped through a rubber tube to a gas burner.

“I can just get up and make breakfast," Ms. Wairimu said. The system was financed with a $400 loan from a demonstration project that has since expired.

In Kiptusuri, the Firefly LED system purchased by Ms. Ruto is this year’s must-have item. The smallest one, which costs $12, consists of a solar panel that can be placed in a window or on a roof and is connected to a desk lamp and a phone charger. Slightly larger units can run radios and black-and-white television sets.

Of course, such systems cannot compare with a grid connection in the industrialized world. A week of rain can mean no lights. And items like refrigerators need more, and more consistent, power than a panel provides.

Still, in Kenya, even grid-based electricity is intermittent and expensive: families must pay more than $350 just to have their homes hooked up.

“With this system, you get a real light for what you spend on kerosene in a few months,” said Mr. Maina, of Sustainable Community Development Services. “When you can light your home and charge your phone, that is very valuable.”