Kagem Mining recently hosted a successful auction of emeralds from Lufwanyama Mine, this week.
The 34th auction since UK-based Gemfields acquired 75 percent of Kagem in July 2008 was held under the watchful eye of Ministries of Finance and Mines and Minerals Development.
While the sale of high quality gemstones in Singapore successfully raised US$27.2 million of foreign exchange earnings for the nation – all of which will be repatriated to Zambia – the company has cautioned that the Zambian export duty on gemstones is hampering both production and sector growth.
“The recovery being experienced by our auction customers appears to have solid foundations, as is further evidenced by the 48 companies placing bids, a record for any Kagem emerald auction. While the auction’s overall price‐per‐carat was also a record, each auction has a slightly different composition and should not be directly compared. In addition to our stalwart clients from India, we also congratulate Caibaocheng of China and Gemstar of Israel, each of whom won three lots of fine quality Zambian emeralds,” said the company.
The 15 percent export duty came into effect on 1 January 2019 and is levied in addition to the long-standing six percent mineral royalty tax.
This means that law-abiding Zambian gemstone exporters face a 21 percent turnover tax, compared with just 2.5 percent and 2.0 percent in Colombia and Brazil, the world’s second and third largest emerald exporters respectively.
In addition to the 21 percent turnover tax, Kagem’s profits are then taxed at the prevailing 30 percent corporate tax rate, imposing an aggregate tax rate that has closed the door on foreign investment in the Zambian gemstone sector. Small-scale emerald miners have widely bemoaned their inability to attract investors.
Zambia’s 15 percent export duty has handed the competitive edge in the emerald business to Brazil and Colombia by making them more attractive gemstone investment destinations and more competitive emerald exporters.
Kagem has sought to keep Zambian emeralds competitive on the international market by shouldering the export duty itself rather than by passing it on to customers, who would simply reduce their offers by 15 percent if they were asked to pay the export duty.
Kagem has significantly reduced funding for the mine, which provides more than 1,150 direct jobs, up from just 421 in 2009.