Herald Reporter
The local diamond industry is lobbying for a review of mining royalties, saying the current tax regime is worsening operational pressures and threatening the viability of producers amid a prolonged downturn in global diamond markets.
The Chamber of Mines of Zimbabwe (CoMZ) says the Government should consider reducing royalties in the diamond sub-sector, proposing a 2 percent rate or a price-linked structure to help struggling producers remain operational until market conditions improve.
The appeal comes as the industry battles depressed international prices, competition from lab-grown diamonds and geopolitical developments affecting global trade, while some local producers have suspended operations.
Zimbabwe charges a flat 5 percent royalty on diamond revenues, compared with a regional average of slightly below 5 percent.
Only one diamond producer, the Zimbabwe Consolidated Diamond Company (ZCDC), remains operational after Chinese-owned Anjin and RioZim’s Murowa suspended operations amid operational challenges.
Speaking at the Ministry of Mines and Mining Development Strategic Planning Workshop in Kadoma recently, CoMZ chief executive officer Mr Isaac Kwesu said the existing royalty burden had become unsustainable under prevailing market conditions.
He said producers were seeking fiscal relief to help them withstand the downturn until the international market recovers.
“They (diamond producers) have said that this (royalties) is a major cost that they are facing, they will be able to survive some way, somehow until the tide turns,” Mr Kwesu said.
“They are requesting support, specifically saying a 2 percent royalty may be better for them. Otherwise, they would prefer, maybe not to pay a lot at this juncture.”
The appeal comes ahead of Finance Minister Professor Mthuli Ncube’s expected presentation of the 2027 National Budget on November 19, with the diamond industry hoping for fiscal measures that can restore competitiveness and stimulate production.
The sector’s difficulties are largely linked to weakening demand and prices for natural diamonds, partly driven by the growing penetration of laboratory-grown alternatives into the global market.
Geopolitical developments, including tensions involving major diamond-producing and trading markets, have further complicated the operating environment.
The chamber argues that the existing royalty framework does not adequately reflect the challenges confronting diamond producers, particularly during periods of depressed prices.
The proposed review comes as the gold sector provides an example of how adjustments to the fiscal regime can support mining output.
Gold producers have benefited from changes to the royalty structure, including the introduction this year of a three-tier, price-sensitive system for bullion, linking payments to prevailing international prices.
The diamond industry is seeking similar consideration, arguing that a more responsive royalty regime would help producers remain viable during market downturns while allowing the Government to benefit when prices recover.
Challenges facing the industry have already taken a toll on local production, with some of the companies scaling down operations and others suspending activities.
Last year, ZCDC undertook a staff rationalisation exercise that resulted in nearly 500 jobs being declared redundant.
The company also introduced cost-containment measures and pursued value addition as part of efforts to sustain operations. However, the industry believes such interventions will have limited impact without corresponding fiscal support.
A review of the royalty structure could therefore become a key consideration in the 2027 Budget as the Government seeks to balance revenue mobilisation with the need to protect investment, production and employment in the mining sector.
