Chinese in diamond challenge to Harare

China's interest in Zimbabwe's alluvial diamond mining is posing a challenge to Harare.

Zimbabwe last year said it would take over all alluvial diamond activities in the country. Savior Kasukuwere, the Minister of Youth Development, Indigenisation and Empowerment, said alluvial diamonds were the preserve of the state and "must benefit the people of Zimbabwe".

Cabinet resolved that the government would take over all alluvial mining in the Marange fields, where it is involved in two joint ventures with two South African firms. But Chinese investors are also present in the area.

Alluvial mining is the cheapest form of diamond mining, but Zimbabwe this week secured deals worth more than $700-million with Chinese investors interested in the industry.

Prince Mupazviriho, the permanent secretary of mines and mining development, met the potential investors last week on a trip to China.

"We signed transactions estimated at between $700-million and $750-million with investors eager to do mineral extraction and beneficiation," he told journalists. The Chinese were quick to point out that they were interested in alluvial diamond mining, as a result of the decision by the Kimberley Process and Certification Scheme to allow Zimbabwe to sell its diamonds, Mupazviriho said.

Their interest in alluvial diamonds will be a test for Harare to choose between diplomatic relations and government principles.

President Mugabe had talks this week with China's deputy president, Xi Jinping Xi, in Beijing. After the talks, Xi said: "His Excellency the president is a famed leader of the national liberation movement in Africa, and also an old friend whom the Chinese people know well. "

Since the start of the indigenisation drive Chinese investors have been trying to get around it.

In March, China signed nearly $700-million in loan deals with Zimbabwe, and urged the government to protect Chinese companies from nationalisation plans.

Analysts say this has sent a signal to other foreign firms that if they do not follow Zimbabwean laws they stand to lose much to Chinese investors, whose companies have so far not been earmarked for indigenisation.