Zimbabwe was to cut royalties for diamonds destined for beneficiation and value addition inside the country, Mines Minister Walter Chidhakwa said last week, as the mineral rich nation engaged investors and executives in the lucrative global gem mining industry.
Global resource companies such as Rio Tinto – which partly owns the Murowa diamond mine in Zimbabwe’s Midlands region – are eyeing further reductions in mining fees in Zimbabwe. Mining operations in the country, which cut across coal, platinum, gold and nickel among other minerals, are battling power outtages that continue to worsen.
Chidhakwa said the government was willing to forgo revenues from diamond mining in some cases to promote growth of the local diamond cutting and polishing industry.
“We are looking at the possibility of reducing or eliminating royalties for those diamonds that are destined for local diamond cutting and polishing, including the removal of 15 percent VAT as part of efforts to improve the environment,” he said.
Chidhakwa said the government had addressed concerns around “licencing, tenure and access to rough diamonds”, with “10 percent of production” of diamonds from Zimbabwe now reserved for “local cutters and polishers”. This would ensure that the local cutting and polishing industry would get access to between 1.5 million and 2 million carats of gems or near gems a year.
Mining has become a crucial sector, accounting for almost half of the country’s exports. However, it has been hit by softer commodity prices on global mineral markets, while investors have also been cautious in investing in Zimbabwean projects because of an operating and legislative framework widely viewed as unfriendly for business.
Chidhakwa said the mining sector’s contribution to the country’s gross domestic product of around $10 billion (R111.6bn) had risen to 16 percent last year and was projected to rise to 17 percent this year. He said the industry was poised “to grow by an average of 6 percent in 2014”, in stark contrast to Finance Minister Patrick Chinamasa’s revised 1.9 percent negative growth for the industry.
Despite the problems miners are facing in Zimbabwe, President Robert Mugabe insisted on Thursday that they invest in further exploration, beneficiation and production ramp-up to boost diamond output and secure expanded life of mine for the gem mines. The diamond mining industry in Zimbabwe has incessantly been hit by concerns over non-transparency in the accounting for diamond revenue.
Eli Izhakoff, the president of the World Diamond Council, said Zimbabwe’s diamond output rose to a peak of about 12 million carats in 2012, with the country’s “share of African production at 15.2 percent by volume in 2013”.