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Gemfields, the leading producer of responsibly sourced coloured gemstones, has been caught off guard by reintroducing a 15% export duty on precious gemstones in Zambia. This unexpected move, effective from 1 January 2025, significantly increases the tax burden on the company’s Kagem Mining operation, a 75%-owned subsidiary.
The re-imposed export duty, coupled with the existing 6% mineral royalty tax, translates to an effective tax rate of 21% on Kagem’s revenues, excluding corporation tax. This compares unfavourably with the tax burdens emerald producers face in Brazil (2% mineral royalty) and Colombia (2.5% combined mineral royalty and national emerald fund contribution), where aggregate tax on revenues is significantly lower.
Before the reintroduction of the export duty, Kagem contributed 31% of its revenues to the Zambian government through mineral royalties, corporation tax, and dividends. This substantial contribution underscores the company’s significant economic impact on the country.
The surprise reintroduction of the export duty has raised concerns within Gemfields. The company notes that there was no prior consultation with the industry regarding this significant policy change. Gemfields will now engage with the Zambian government to advocate for the re-suspension of the export duty or its complete removal, highlighting the potential negative impact on the sustainability of the emerald sector and the attractiveness of Zambia as an investment destination.
The company has assured investors that it will keep the market informed of further developments in this matter.
By: Nkosilathi Mudiyi
