Cabo Delgado is a warzone, but profiteers strike it rich

Apology to Gemfields and Montepuez Ruby Mining

Last September, The Mail & Guardian ran an article about mining and conflict in Mozambique headlined, “Cabo Delgado is a warzone, but profiteers strike it rich.”
One mine in particular was mentioned, Montepuez Ruby Mining Limitada, along with its partner, Mwiriti Limitada. Our editorial team didn’t send detailed and relevant enough questions to either party and for this we apologise. Giving people a right of reply is a core part of our work.

Gemfields, on behalf of the two, complained to the Press Council of South Africa. This is a body we are part of which allows for an independent oversight of our journalism. Its ruling on this is available on their website.

The complaint showed other failures in the article, which we also apologise for. These include: Wrongly implying impropriety in the amount Gemfields paid to Mwiriti for mining rights; Inaccurately stating that Mwriti earned $17.9-million from an auction in 2019 (it was $3.1-million); Suggesting that youths that were allegedly tortured in 2012 around Montepuez might have been recruited by insurgents; Wrongly suggesting that MRM “shifted” its ownership offshore, that the company’s structure is opaque and that it is not conducting open business; and using a misleading headline and sub-heading.

The Continent has worked out what went wrong and taken steps to make sure there are no repeats. We will continue to report on resource extraction and its role in driving inequality in Mozambique.

Last month, the Maputo-based NGO the Public Integrity Centre (CIP) published a study showing that requests for mining concessions in Cabo Delgado have increased in tandem with the raging armed conflict.

The study also showed that the biggest single holder of concessions in the province is Mwiriti Mining, owned by retired general Raimundo Domingos Pachinuapa and his Iranian business partner Asghar Fakhraleali.

Their company owns 7% of all the concessions in the province, but that figure could rise to around 10% if other mining projects where it is a shareholder are included.

Lucrative mines, with some torture

Raimundo Pachinuapa is a veteran of Mozambique’s struggle for independence from Portugal, and a senior figure in the ruling Frelimo party, being a member of Frelimo’s 19-strong political commission, which guides party policy on a weekly basis.

A member of the Makonde ethnic group to which President Filipe Nyusi belongs, Pachinuapa was governor of Cabo Delgado between 1980 and 1983.

His company, Mwiriti, rose to prominence after a person discovered a rich vein of rubies in 2009, in the locality of Namanhumbir, in the district of Montepuez. The find has since been described as “the most important ruby discovery of this new century” by the Gemological Institute Of America.

Soon after the discovery, Mwiriti took control of the area, and in 2011 formed Montepuez Ruby Mining (MRM), a joint venture between Mwiriti, with 25%, and Gemfields, which owns 75% of the company. The mining operation occupies 33.6 hectares of land.

Despite formally having capital of just 30 000 meticais (around $1 000 at the time), and without any prior capabilities for exploitation of mineral resources or experience of the international market for precious stones, Gemfields paid Mwiriti $2.5-million for 75% in the joint venture, MRM.

Year after year MRM has been selling gems in international markets and making a huge profit. However, the mining operations have not been without controversy. Videos surfaced in 2012 following the torture of illegal miners who were digging for rubies in Nahamamumbir by Mozambique’s security forces to ensure that they cleared the area.

People in Cabo Delgado believe some of those youths who were treated so brutally in Montepuez might have been recruited by the insurgents to join their ranks. In 2019, Gemfields agreed to pay $7.6-million in compensation to people living around its ruby mine in Montepuez, who allege they were the victims of human rights abuses by the police and security guards employed by Gemfields.

The company agreed to make the payment without admitting any liability, though it said it had been “proactive and constructive in addressing the wider issues raised by local communities through this case.”

Later that same year, Gemfields and Mwiriti announced a new joint venture to develop gold mines in Cabo Delgado.

MRM told The Continent it has “investigated carefully” suggestions that its project might have fed feelings of inequality and alienation that have fuelled the insurgency – and concluded that such a suggestion is “absurd and misleading”.

“Save for the recent arrival of internally displaced persons in the ruby mining areas, the area affected by the insurgency lies in the gas project areas, not in the ruby mining areas,” the company pointed out.

Meanwhile, artisanal mining continues on MRM’s concession, despite the best efforts of police and private security to crack down on the activity. MRM said that it knew of 21 people who died while mining illegally on its concession in 2020, and a further eight by the start of August this year. Most of the deaths were due to the collapse of the mines they had dug.

Owners in hiding

In 2019, Mwiriti earned $17.9-million from auctioning rubies in Singapore, while Gemfields took the largest share, with $71.5-million. In June 2014, MRM sold rubies for a total of $33.5-million at an auction in Singapore.

Mwiriti has come a long way from the company registered to offer services in the areas of building, sale of foodstuffs, office equipment, general trading and lobbying. It was only in 2009 that it included in its business portfolio the “prospection, research, exploitation of mineral resources, including import and export”. 

But the CIP report raises another concern: the company has apparently shifted ownership of its mining concessions offshore, to a mysterious company called Nairoto Resources Holding, domiciled in Mauritius – known as Africa’s tax haven.

That means, CIP pointed out, that “it becomes difficult [to] identify the beneficiaries of the concessions, which can be Mozambicans in conflict of interest,” or even “with power and political capacity to influence the dynamics of the sector for their own benefit”.

Where owners of Cabo Delgado’s mining concessions can be identified, however, the names of powerful families such as Chipande, Chissano, Talapa, and Waty crop up – “easily identifiable with the country’s political elite”, as CIP says, showing that “a good portion of the concessions is owned by politically exposed people or directly linked to influential individuals from the Frelimo party, in power since Mozambique’s independence.”

Mwiriti issued a statement following CIP’s report, saying that the use of offshore structures was perfectly legal, and mining activities are still carried out in-country. CIP’s researchers suggested, meanwhile, that the lack of transparency over who really owns mining concessions “may be behind land conflicts” in Cabo Delgado – and that publishing the names of beneficial owners “may minimise the occurrence of the reported and future conflicts.”

But if greater transparency only reveals the true extent to which Mozambique’s riches are concentrated in the hands of a privileged few, then deeper changes will be needed to overcome the resentment that is contributing to unrest in Cabo Delgado. 

This is an edited version of an article first published by The Continent

Right of reply: Gemfields Limited and Mwiriti Limitada

The article “Cabo Delgado is a warzone, but profiteers strike it rich” made misleading statements in relation to Montepuez Ruby Mining Limitada (MRM) (a joint venture owned by Gemfields Limited and Mwiriti Limitada), (“the companies”).
 
Several allegations are particularly concerning: First, the suggestion that MRM was responsible for the torture of illegal miners, which drove them into the insurgents’ ranks, is false and irresponsible.
 
The companies’ commitment to Mozambique and its citizens is clear from its actions. For example, MRM provides stable employment for 1 400 people (95% of whom are Mozambican nationals), who receive salaries above the living wage. MRM has also established much-needed community support and education projects, including a vocational training centre, schools and agricultural cooperatives. Its mobile health clinics have delivered over 150 000 consultations.
 
Gemfields’ industry-leading operations therefore continue to drive stable employment, community development and economic growth in Mozambique.
 
In addition, Gemfields’ Operational Grievance Mechanism ensures that any individual with a bona fide grievance in relation to MRM’s operations is able to obtain appropriate remedies. Gemfields is also an “engaged member” of the VPSHR Initiative and has, among other things, conducted comprehensive human rights risk assessments and training with security providers.
 
Second, the suggestion that MRM evades compliance with Mozambique’s tax regime, shifted its assets offshore, and hides the ownership structure, is patently false.
 
MRM has been recognised as the largest taxpayer in the Cabo Delgado province for six consecutive years up to 2020 (with no awards made since).
 
Since operations commenced, 22% of MRM’s revenue has been paid to the Mozambican government in the form of corporation tax and mineral royalties. As the Bank of Mozambique publishes its balance-of-payments data, it can be seen that MRM alone accounts for 94% of Mozambique’s monetary inflows from emeralds, rubies and sapphires from 2011 to 2021.