Mugabe man cashes in on diamond fields

Mhlanga, a retired air vice-marshall, is widely regarded as a close associate of President Robert Mugabe and a business representative of the Mugabe family, although both parties have denied this.

The Mail & Guardian recently reported that Mhlanga has been on a R200-million property buying spree in South Africa.

The company he chairs, Mbada Diamonds, and other concerns operating in Marange have been accused of remitting inadequate revenue to the Zimbabwean treasury despite making "a killing".

The United States and the European Union recently introduced new measures that require processors of rough diamonds to disclose the origin of the gems, putting a squeeze on companies operating in Marange.

Central to Mbada's operation is a South African scrap-metal company, New Reclamation. Despite its lack of mining expertise, Reclamation was chosen to partner Marange Resources, wholly owned by the state's Zimbabwe Mining Development Corporation (ZMDC), in a joint venture called Mbada Diamonds. Mbada, favoured ahead of several other established diamond-mining companies, immediately received a 1000-hectare concession in the Marange fields.

In October 2009 Zimbabwe's minister of mines and mining development, Obert Mpofu, appointed Mhlanga chairperson of the joint venture, which Reclamation entered through its Mauritian-registered subsidiary, Grandwell Holdings. Grandwell was given the mandate to oversee day-to-day operations and the right to market all diamonds produced.

Although Mhlanga was ostensibly appointed to its board to represent the government's interests, the M&G has established that he has a stake in other companies linked to Mbada.

Joint venture deal
These include the mysterious Hong Kong-registered Transfrontier Mining, which acquired 49.99% of Grandwell last year. The owners of Transfrontier who would benefit could not be established. However, Mbada's Marange concession was increased sevenfold after Transfrontier bought into Grandwell.

Mhlanga's lawyer of more than 10 years, Paul Casasola, a director of Grandwell and Mbada, is seen to represent Mhlanga's interests in both companies. The M&G was told that Casasola was involved in crafting the joint venture – although he insisted that the negotiations "occurred prior to my appointment as director at Mbada and Grandwell". He said he was a director of both companies but "had no financial interests in either".

He did not respond to a question asking him whether Mhlanga had employed him to work in the companies.

At the time the joint venture deal was clinched, Grandwell was wholly owned by New Reclamation.  Casasola said he had "absolutely no relationship" with the latter.

The M&G has also established that when a ZMDC team visited Johannesburg to conduct due diligence on Reclamation in August 2009, Mhlanga was among the representatives who met the group. Mhlanga attended the meeting in his capacity as the chairperson of a South African-registered commodities company, the Liparm Corporation, which trades in diamonds. He is its sole shareholder and director.

Share registry documents indicate that Liparm does not have a stake in the Reclamation group. Reclamation's lawyer, David Hertz, said the scrap metal company "has a commercial arm's length relationship with Liparm".

Until early this year, Liparm listed Transfrontier and Mbada Diamonds as sister companies on its website. However, the relevant section has been removed from the site.

In questions put to him through  Casasola, the M&G asked Mhlanga to explain his role in Mbada, but he did not respond. Mhlanga also did not answer a question about the nature of his relationship with the Reclamation Group and its chairperson, David Kassel, a director of both Grandwell and Mbada.

Vision and growth strategy
Casasola said he would meet Mhlanga on August 20 to put the M&G's questions to him, but later said the meeting did not take place.

Mhlanga is believed to have played a role in ensuring Reclamation's acceptance as the ZMDC's partner, ahead of specialist mining companies such as Alrosa, Namakwa, Gem Diamonds, SAIIC and Community Energy. It is thought the scrap metal company's relationship with Mpofu dates to when he was Zimbabwe's industry and trade minister.

In 2008 Reclamation approached Mpofu to acquire a stake in Zimbabwe's ailing state steel manufacturer, Ziscosteel. However, Mpofu was reassigned to the mines portfolio in February 2009 before the deal was concluded and Reclamation's Marange coup followed soon after.

Ironically, the ZMDC team that came to South Africa to conduct due diligence "on approved" companies noted that Reclamation had no experience in diamond mining. Despite this, it gave the company the thumbs-up. Allegations are that Mhlanga and Mpofu's influence may have been crucial.

"Reclam is not a mining house and is currently not involved in mining … They have no diamond mining as part of their vision and growth strategy," the due diligence report states.

Complicated mining techniques
Hertz said there was nothing amiss with Reclamation landing the deal, because the company "drew on the experience of certain key executives and employees who have extensive experience in the mining sector".

"These individuals were involved in the reopening of the Roberts Victor Diamond Mine in Kimberley and the Monarch Gold Mine in Botswana, which … required the utilisation of complicated mining techniques and methods," he said. This is an apparent reference to Kassel, whose role in the two mines is mentioned on the company's website.

Hertz said none of the Reclamation executives have a personal relationship with Mpofu. It had bid for Ziscosteel but the minister had not influenced the outcome.

"The first time a meeting was held between any members of the Reclamation Group's executive team and minister Mpofu was in 2009 when the ministry met with the Reclamation Group to discuss the then prospective Marange transaction," Hertz said. "Subsequent to that meeting, the Reclamation Group interacted with the ZMDC and its wholly owned subsidiary, Marange Resources (Pvt) Limited."

Allegations of diamond revenue being diverted into private pockets and concerns that elements of the Zimbabwean security forces have control of diamond companies have resulted in the US, Australia, New Zealand and European Union imposing restrictions on diamonds from Marange.  

Repeated efforts to contact Mpofu for comment were unsuccessful.

* Got a tip-off for us about this story? Email [email protected]

The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See for our stories, activities and funding sources.

PW Botha wagged his finger and banned us in 1988 but we stood firm. We built a reputation for fearless journalism, then, and now. Through these last 35 years, the Mail & Guardian has always been on the right side of history.

These days, we are on the trail of the merry band of corporates and politicians robbing South Africa of its own potential.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.


The rule of law in times of crisis: Covid-19 and...

Under a state of national disaster, some rights may be suspended. But it is critical to remember that the Constitution itself is not suspended

Test backlog skews SA’s corona stats

With thousands of samples still waiting to be processed, labs are racing to ramp up testing to help the government gain a better idea of how prevalent Covid-19 really is

Press Releases

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders

Dimension Data launches Saturday School in PE

The Gauteng Saturday School has produced a number of success stories