Zimbabwe has emerged as one of the leading diamond producers by volume following the discovery of the Marange fields.
The country produced 12 million carats of rough diamonds valued at over $640 million in 2012, according to the Centre for Natural Resource Governance.
Zimbabwe was projected to produce 17 million carats in 2013.
Sadly, President Robert Mugabe revealed during Zimbabwe's Inaugural Diamond Conference in November 2012 that the country only beneficiated 0.1 percent of diamonds produced in 2011.
Rough & Polished reported recently that the Zimbabwe Mining Development Corporation (ZMDC) was planning to set up a cutting and polishing factory in Harare to realise maximum value from its diamonds.
The state-owned firm said in an investment guide that it was targeting to cut 3000 carats per month once it opens shop.
It said this would be increased to 4500 carats after a year of operation.
ZMDC said a total $6.1 million was required for the 3000 carat factory capacity with $2.3 million covering equipment and installations whilst $3.8 million would be for working capital needs.
“Cutting and polishing is the most crucial aspect of the diamond chain, as this is where substantial part of the mark up occurs,” it said.
“The preferred business model is the management contract model for the following reasons: tenure of partnership is limited, profits will all be for the corporation thereby increasing revenue to the fiscus and loan repayments will be for a short term period because of the enhanced financial base.”
ZMDC said $12.5 million would be needed for market procurement of rough diamonds.
The Centre for Natural Resource Governance said Zimbabwe had the potential to cut and polish diamonds worth $5.8 billion, or go on to produce wholesale diamond jewellery that can rake in revenues of $11.6 billion annually and create 210,000 jobs.
Although, there was a realisation that Zimbabwe can benefit a lot by avoiding rough diamond exports, a report released by Centre for Natural Resource Governance showed that there are several factors that had been stalling progress in this respect.
Here are the points raised by the lobby group:
Prohibitive fees for local cutters and polishers
Zimbabwe's cutting and polishing license fees are too exorbitant for the local players. There is need to slash the fees to bring them in line with regional standards. Apart from reducing the fees government should also assist aspiring diamantaires with access to loans. Without empowering indigenous Zimbabweans to enter the cutting and polishing industry, the indigenization policy remains a pie in the sky.
Legal and policy frameworks
According to Zimbabwe's diamond policy 'a quota of all locally produced rough diamonds as set by the Minister of Mines and Mining Development shall be reserved for local beneficiation'. This policy announcement has not yet been translated into action as revealed by President Mugabe during Zimbabwe's inaugural diamond conference in 2012. Whilst there are laws on prospecting, exploration, mining and marketing of rough diamonds, Zimbabwe has no law on cutting and polishing of diamonds. Lack of legislation makes it difficult to enforce the quota system.
It is essential that a new minerals legislation that promotes value addition is crafted. This should be done in consultation with local business and civil society.
Skills shortage
Cutting and polishing of diamonds are skills that take a lot of training and years to master. 95% of rough diamonds produced globally are cut and polished in Surat, India where over 800 000 people are employed in the sector. The few Zimbabweans who are trained to cut and polish diamonds will not be adequate if the quota system proposed in the diamond policy is to be effected.
Having established factors inhibiting diamond beneficiation in Zimbabwe, the lobby group made the following recommendations:
Quota System
The Centre for Natural Resource Governance calls on the Minister of Mines and Minerals Development to declare that a quota of 25 percent of rough diamonds produced in Zimbabwe be cut and polished locally. This quota system should be reviewed from time to time in response to local supply and demand for rough diamonds.
Invite international diamantaires
Zimbabwe should emulate Botswana which now boasts of the biggest cutting and polishing sector in Africa. In 2012, Botswana cut 18-20 percent of its own rough diamond production domestically. Botswana signed a new marketing agreement with De Beers, its partner whereby all its diamonds will be sold through the Diamond Trading Corporation Botswana (DTCB) by December 2012.
Skills training
Diamond cutting schools should receive Government assistance. The Government should also encourage Indian firms to set up diamond cutting centres in Zimbabwe under the Indigenization model which will result in the transfer of knowledge and skills to locals. By taking these steps, there will be an increase in revenues generated from the diamond industry and creation of thousands of jobs for Zimbabweans.
Export duty
Diamond mining companies that fail to sell the declared quota to Zimbabwean cutting and polishing companies should be exposed to an export duty. However this should not be applied on miners who decide to beneficiate their own diamonds.
Beneficiation should be prioritised
It is imperative that diamonds be beneficiated locally, beginning with cutting and polishing before moving to manufacturing of jewellery. There is no law, both domestic and international, that prohibits Zimbabwe from manufacturing and exporting jewellery directly to the major diamond jewellery markets such as the USA, Japan and Italy. Government needs to put in place the right policies and legal instruments that force diamond mines to avail a certain percentage of locally produced diamonds to the local players in the cutting and polishing industry.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
