The Zimbabwe Consolidated Diamond Company (ZCDC) has called on the Government to reduce the foreign currency surrender ratio and royalties, following a sharp decline in global diamond prices that has strained its operations.
Currently, diamond mining companies are required to surrender 30 percent of their foreign currency revenue to the Reserve Bank of Zimbabwe (RBZ) in exchange for ZiG equivalent and pay a further 10 percent in royalties.
Presenting before Parliament’s Public Accounts Committee on Saturday, ZCDC chief executive officer, Mr Douglas Zimbango, said the taxes were weighing heavily on their operations.
“What we are requesting is a review of the forex retention regime. We currently surrender 30 percent of our revenues to the RBZ for ZiG, whereas almost 100 percent of our payables are forex-denominated,” he said.
“We know we have to contribute to the forex reserves of the country, but we would propose that this be reduced slightly to between 15 and 20 percent, so that we are also able to survive.”
The price of Zimbabwe’s diamonds has fallen from around US$74 per carat to US$22 per carat.
Mr Zimbango similarly called for a downward review of royalties from 10 percent to five percent.
“And then I’ve spoken of royalties. You will see that our royalties are 10 percent. During the time of alluvial diamond mining, the prices were good and the costs were very low, so 10 percent was justified,” he said.
“But the problem is that we have not moved with the times. Following the current price fall, our royalties remained the same, but the situation is no longer the same.
“And this royalty is on gross revenue — whatever we sell, without even taking out expenses, 10 percent is taken out. We are proposing that this be reduced to 5 percent, or that it be linked to price performance, as is happening with the big gold producers.”
The ZCDC CEO also noted that there is a 2.5 percent depletion fee that was supposedly replaced by royalties, but no formal statutory instrument was promulgated to remove it from their books — meaning they still account for it.
Diamond prices have plunged because lab-grown stones have flooded the market, destroying natural scarcity and adversely affecting countries like Zimbabwe with natural endowments.-herald
