Zimbabwe government to eliminate royalties for diamonds

For a country whose diamond mining industry contributes 17% to its GDP, it becomes vital to harness the sector. Zimbabwe is taking steps to develop diamond processing sector locally in order to move up the diamond value chain. Zimbabwean government has been asking companies to process the diamonds found in the country before shipping them out. Zimbabwe’s Mines and Mining Development minister Walter Chidhakwa in the Zimbabwe Diamond Conference held in Harare announced a new step in this direction.

Zimbabwe will reduce or remove royalties for diamonds that are being cut and polished in the country. There are also plans to remove the 15% VAT (Value Added Tax) on diamonds. Though companies that plan to start processing in the country will need to invest in facilities and create a new industry from scratch, Zimbabwe is planning to assist this industrialization by giving up some sources of revenues in the short term. This would create employment for people in the skilled domain and not just to existing primary sectors only.

A basic reason for the limited development of diamond industry in the country is lack of any value additions to the roughs mined and exported. Cutting and polishing processes add up a significant value to the diamonds, at least to the smaller roughs. Processing centres including China and India have hugely benefited from this.

However, if Zimbabwe wants to develop this sector, in addition to the reduction in tariffs and taxes, the government must also look into the capability development aspect of diamond processing. Diamond processing is a skilled job and countries like India have a rich pool of trained people in the area. Zimbabwe needs to set up up training facilities for diamond cutting, polishing and valuation that could match the skill level of people in other countries and in turn help the industry and its economy grow.

 

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