Gemfields Zambian subsidiary Kagem Mining has welcomed the states pronouncement to waive the 15% export tax on coloured stones gemstones as this move will increase the miners propensity to invest in the sector which will boost export earnings. Zambia will now level up with other coloured stone miners such as Brazil and Columbia which for a long time Kagem has lamented over. Kagem is confident that the suspension of the export duty is a positive step for the industry, which is still in its infancy and requires significant further investment to unlock its full production potential.
“This move will create a business environment which is conducive to further investment and growth in Zambia’s gemstone sector, levelling the playing field vis-a-vis competing countries such as Colombia and Brazil. Zambia, which saw its attractiveness as an investment destination for gemstone miners marred by the 15% export duty, will therefore now retain its position as the most formidable player in the world of emerald mining.
Kagem chairman Dr. Sixtus Mulenga, commending the Government’s proactive decision and its support for the gemstone industry said: “The decision to suspend export tax will have a significant impact on the growth of the sector, in turn contributing to employment and the economic multiplier effects that this brings, along with the overall enhanced tax revenue that will be derived for years to come.”
Dr Mulenga also thanked the management of Grizzly Mining for their collaborative effort during discussions with the Government.
“Thanks to this positive action by the Government, Zambia’s gemstone sector will regain its competitive edge in the international market, helping to stimulate investment and growth, thereby supporting exports and generating more foreign exchange earnings for the country” said CV Suresh, Managing Director for Zambia at Gemfields, which owns 75% of the Kagem emerald mine in Lufwanyama in partnership with the Zambian Government through the Industrial Development Corporation (IDC), which owns 25%.
“An increase in demand for emeralds, coupled with a well-established marketing programme and a reliable source of supply from Zambia, will result in increased revenue that will attract more foreign earnings and tax for the country,” he added. “Kagem, as the most successful and transparent emerald mining company in Zambia’s history, will now be sustainable and enabled to pay further dividends to its shareholders, which include IDC of Zambia, thereby contributing to the country’s growth and prosperity”.
Mr. Suresh further noted that the Government’s open and collaborative policy on dialogue relating to the challenges currently affecting the mining sector bodes well for the growth of the industry.
Kagem is 75% owned by Gemfields and 25% by the Industrial Development Corporation of Zambia. Proceeds from its regularly held auctions, which are held locally and abroad, are fully repatriated to Zambia, with all royalties due to the Government being paid on the full sales price achieved at an auction.
One concern Gemfields has bemoaned persistently in its 2019 auctions is that the export duty and plus other mining taxes increase the cost burden which then narrow its propensity to invest in expansion thereby rendering competition with other players globally an uphill battle. Emerald sales have earned Kagem $635 million in total revenues since 2009 with a contribution of $120 million to the state in corporation taxes, mineral royalties and dividends.
The Red Metal Analyst
