The Zimbabwe Consolidated Diamond Company (ZCDC) has pleaded with Parliament to assist in advocating for a reduction in various statutory fees that are making its operations unsustainable.
The diamond mining company is required to pay 10% royalties on gross sales, as well as a 2.5% depletion fee, at a time when diamond prices remain depressed, having dropped by at least 72% post-COVID.
The 10% royalty is the highest among mineral royalties in Zimbabwe and is even higher than the 5% charged on gold. ZCDC is therefore seeking a downward review of the rate.
Speaking during a fact-finding visit by the Public Accounts Committee, ZCDC chief executive officer Douglas Zimbango said the 10% royalty rate is no longer justified given the challenges facing the diamond sector.
‘’Then what are the key initiatives that we would want to request from the legislators in the House? Honourable members, our key requirement that you can assist us is a review of the forex retention regime.
‘’We currently surrender 30% of our revenues to the Reserve Bank for ZIG, whereas all our payables are almost 100% forex denominated.
‘’We know we have to contribute to the forex reserves of the country, but we would propose that this be reduced slightly, 20-15%, so that we also are able to survive,’’ he said.
Zimbango added: ‘’And then I’ve spoken of royalties. You will see that our royalties are 10%. During the time of Alluvial at the mine, the prices were good, the costs were very low, so 10% was justified.
‘’But it’s a question of us not moving with the times. When we suffered the current price fall, our royalties remained at that level, but it’s no longer sustainable. And this is a royalty on gross revenue.
‘’Whatever we sell, without even taking out the expenses, 10% goes straight to government. We are proposing that this be put down to 5%. Or it be linked to price performance, like what is happening to the big gold producers,’’ said Zimbango.
The ZCDC chief executive officer also highlighted concerns over the continued payment of a 2.5% depletion fee, despite it having been scrapped.
‘’We also have a fee, what is called 2.5% depletion fee. This was replaced by the royalties, but no formal statutory instrument was promulgated to take it out of our books. So we still have to make that provision.
‘’So it is our plea to honourable members that we attend to these issues, and we will make our submissions through the chair,’’ he said.
