Finance Minister Patrick Chinamasa recently told a parliamentary portfolio committee that treasury has not received royalties from the diamond sector, mostly Marange firms. This has placed the treasury in a precarious position as funds to pay civil servants are likely to come short if the diamond sector continues to default on royalties.
This has seen the central government exerting pressure on Chidhakwa. In a bid to revitalise the diamond mining sector, he introduced a new tax payment system whereby government automatically deducts royalties once payment for diamond sales has been made.
He also proposed the amalgamation of the Marange diamond firms to improve on transparency, accountability and viability. But the initiative is proving arduous to implement. In an interview, the Mines Minister clarified that diamond firms were paying dividends – contrary to earlier opposing assertions – but at a low scale.
New system
“Treasury is receiving its dividends from the diamond sector though the amount is now low,” he said. The mines sector is now governed by a new system where financial deductions are made automatically via a company’s bank account once payment of diamond sales have been made. The firms are supposed to remit 15 percent royalties to government and 2,5 percent depletion fees to the Zimbabwe Mining Development Corporation (ZMDC).
“The amount that is now going to treasury as a result of reduction of production and reduced sales is low but the little funds are trickling into Treasury coffers. This means treasury is still getting its 15 percent, so if government used to get 15 percent of $10 it’s now getting 15 percent of $5 and there is a difference. But it doesn’t mean they are not getting anything,” said Chidhakwa.
The minister, who visited the Mbada Diamonds mining concession recently, is further pushing all mining firms to prioritise exploration as a means to get the full potential out of concessions. He has said exploration, consolidation and a robust tax should be prioritised if the sector is to thrive.
Miners blame govt
Meanwhile, Mbada chief executive officer Thomas Lusiyano recently blamed the diamond sector’s woes on inconsistent government policies.
He made the remarks when he appeared together with other mining executives during the second mining industry meeting hosted by Manicaland Provincial Affairs Minister Mandi Chimene.
Lusiyano said the diamond tender system heavily affected all operations as there were delays in having the money released to companies.
“Some of the policy inconsistency has affected our industry. The diamond tender system heavily affected all diamond mining operations as there were delays in having the money released to companies,” he said, adding that some of the diamonds were confiscated after they had been sold through Antwerp, Belgium.
Lusiyano went on to point out that following the Antwerp debacle, most buyers now had a negative perception of Zimbabwean diamonds, which has lowered the price on the international market. “Most buyers had a negative perception of our operations in Zimbabwe after the Antwerp debacle and this affected the prices of our diamonds. Because of the policy issues we had to close our mine for the first time in December. We were under severe pressure from almost every angle and government should not kill the goose that lays the golden egg through its heavy taxes as well as policies,” he said.
Post published in: Mining