Steep licence fees hit diamond polishers

HARARE - While Zimbabwe has intensified efforts to have its minerals, particularly diamonds, further processed locally before export, licensed gem-polishing and cutting firms have dwindled from 29 to one this year due to exorbitant licence fees.

Richard Mvududu, Diamonds Beneficiation Association of Zimbabwe (DBAZ) chairperson, told businessdaily that licence fees have increased five-fold to $100 000 from $20 000 per annum in 2007.

“The diamond cutting and polishing industry in Zimbabwe is still in its infancy, and in fact it is facing a still birth,” he said.

“In 2011, there were at least 29 companies licensed to cut and polish diamonds. In 2012, licence fees were increased. This increase saw a sharp drop in licensed operators,” Mvududu said.

He said while the development was incoherent with government’s beneficiation policy, the fees are way too high as compared to SA and Botswana.

“This is particularly striking given that Zimbabwe could be holding 25 percent of the world’s production by volume,” said Mvududu.

This comes as government imposed that at least 10 percent of Zimbabwe’s rough diamond output — approximately 8,5 million carats per year — should be processed, but the country only managed to cut and polish a mere 0,1 percent.

Mvududu said “that the state of affairs is not acceptable, especially the fact that we are producers, we should be in a position to take advantage of as much beneficiation of our diamonds as opposed to exporting them in raw form.”

“DBAZ has engaged government to review the licence fees to match South Africa and Botswana,” Mvududu said, adding that government had backed down to $50 000 per annum, but it “mistakenly” gazetted a $100 000 licence fee.

Botswana’s diamond cutting licence fees go for BWP1000 per decade while in SA, Mvududu said, it does not exceed R5 000 for a five-year period.

“The mistake has not been corrected. The $100 000 still stands,” he said.

The delay in rectifying the error, Mvududu said, resulted in the country having only one polishing firm licensed for the full year of 2013 while two other firms’ licences are expiring before year end.

“We have made a presentation to Parliament and the Minerals Marketing Corporation of Zimbabwe on the issue,” he said.

“The delay is making the country lose employment opportunities. A diamond carat Zimbabwe export is equal to two hours of employment,” Mvududu said, adding that India’s diamond cutting and polishing industry employs nearly a million people.

“We are paying a $100 000 to polish rough diamonds yet we are selling to buyers who are not paying anything.”

Mvududu said apart from the exorbitant licence fees, government also had to extend the tenure as one year is too short.

“The tenure is also a problem here… in the sense that you are not in a position to attract meaningful investment, whether it’s local, regional or international. All these are disincentives against implementation of the beneficiation policy,” he said.

Mvududu said diamonds beneficiation is a process which included cleaning, sorting, cutting and polishing, grading and dealing or marketing.

“There is a +/- 10 percent increase in the diamond’s price at every stage,” he said. - Eric Chiriga, Business Editor

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