Zimbabwe eliminates tax on diamond sales, for now

Zimbabwe eliminates tax on diamond sales, for now

Zimbabwe's illegal diamonds miners. (Image: screenshot from VOAvideo)

The government of Zimbabwe has eliminated a 15% tax on diamond sales to stimulate production and attract investment in the sector, amid low international prices for the coveted gems.

The country’s finance minister and central bank governor informed their decision to the International Monetary Fund (IMF) in a letter dated April 17.

"We have temporarily suspended the collection of the special dividend on diamond sales on the back of the drop in production and adverse price developments," said the document signed by Finance Minister Patrick Chinamasa and Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya.

The African nation, one of the world's main producers of diamonds, is believed to hold a quarter of the world's reserves of alluvial gems — those easily extractable through open cast mining.

But miners operating at the country’s Marange and Chiadzwa fields have been warning for months that diamond mining has become economically unviable for them, as they can’t dig any deeper with their current resources and expertise.

Local boost

Hit by smuggling, illegal mining (pictured) and under-invoicing, which has caused a massive leakage in diamond revenues, Zimbabwe has been looking for ways to ensure that the bulk of its diamonds are processed locally. This, as opposed to being exported in raw form, as it happens now.

“In spite of mining being an important contributor to the country’s economy, the mining sector has been limited to extraction and exportation of minerals in their raw or semi-processed form, without due care taken to beneficiation and value addition. The finite resources should be made to remain competitive, in both regional and global markets,” President Robert Mugabe was quoted as saying.

He also revealed his government was considering setting aside up to two million carat of diamonds or 10% of its annual production for local industry to encourage local value addition and beneficiation.