GOVERNMENT plans to reduce or remove royalties for diamonds that are being cut and polished locally among a raft of measures to improve the doing business environment in Zimbabwe.
Mines and Mining Development minister Walter Chidhakwa said the plans would also see the removal of 15% value added tax on diamonds.
Speaking at the Zimbabwe Diamond Conference in Harare yesterday, Chidhakwa said government was in discussions to put in place new incentive packages that would enable the country to create an industry that allows growth in diamond production in Zimbabwe.
“We are also looking as we go towards the budgeting process at the possibility of reducing or eliminating royalties for those diamonds that are destined for local cutting and polishing including the removal of the 15% VAT as part of efforts to improve the environment,” he said.
“In our discussions in government we recognise that the process of value addition and beneficiation is the process of industrialisation and
industrialisation has its own cost. We recognise that in order to create that new industry that we never had before we might have to give up certain revenue inflow through government in order to create an industry, employment for our people for higher skills than the current employment that exists in the primary sectors.”
Despite the country being one of the world’s leading diamond producers, Zimbabwe has nothing to show for it attributed to leakages and the export of raw, unpolished diamonds.
In recent auctions in Dubai and at the Antwerp World Diamond Centre, diamond producers sent cleaned diamonds thereby enhancing the prices.
Chidhakwa indicated that diamond production and export sales had generally been on an upward trend since 2009.
According to the official statistics, production in 2010 rose significantly from about 1,4 million carats in 2009 to about 8,5 million carats. The average price per carat rose from about $24 per carat to about $40 between 2009 and 2010 while exports sales increased dramatically from about $33,3 million in 2009 to about $341,5 million in 2010.
However, the average price increased significantly by about 47% in 2011 resulting in export sales rising by 24% though production plummeted by about 15%.
Production in 2012 increased by about 105% and export sales rose by 75%, the increase in production was explained by the rise in the number of diamond mining companies.
In 2013, export sales fell by about 39% owing to about 40% decline in production.
Chidhakwa said the mining industry had been the most dynamic sector of the Zimbabwean economy over the last five years, leading the 2009 to 2011 rebound with average annualised growth of 35%.
The sector was projected to grow by an average 6% in 2014 and its contribution to the country’s Gross Domestic Product (GDP) has seen a phenomenal rise from about 4% in the 1990s to 16% in 2013 and a projected 17% in 2014 with the sector currently employing more than 45 000 people excluding all informal mining.