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Zvamaida Murwira recently in Zvishavane
Government should consider reviewing royalties levied on diamond mining companies so that they can compete effectively and viably with other regional firms, legislators have been told.

Chairperson of Rio Zim (owners of Murowa Diamonds), Mr Lovemore Chihota, said the 15 percent royalty that was charged to local mining firms impeded their ability to compete against other miners in the region.

Mr Chihota said this last week while making a presentation to the Parliamentary Portfolio Committee on Mines and Energy chaired by Norton MP Mr Temba Mliswa (Independent), which was touring the Midlands-based diamond mining firm.

“Currently, we face some serious challenges, which are affecting the future viability of Murowa,” he said.

“The issues include extremely high rate of royalty on diamonds in Zimbabwe. The average rate of royalty on diamonds in the region is 5,57 percent while the royalty in Zimbabwe is three times more.

“By definition, diamond mining across the world is very capital intensive and this high rate of royalty has made the industry almost unviable in Zimbabwe.”

Mr Chihota proposed a royalty of between 5 and 8 percent.

He said the firm remained hopeful that representations they were making with the Government would bear fruit considering the new dispensation’s thrust that Zimbabwe was open for business.

Mr Chihota implored the Zimbabwe Revenue Authority to deduct income tax from gross revenue and not after the 15 percent royalty had been deducted.

“Royalty is a revenue share between Government and the miners,” he said.

“When we checked more than 20 major mining countries around the world, they allow royalty as a tax deductible expense.

“However, Zimra insists that royalty is not deductible. In other words, suppose we sell our diamonds for $100, we give $15 from that to the Government for royalty.

“We are left with an income of $85 and should pay income tax on this $85, but Zimra insist that we pay income tax even on the $15 we would have paid to Government.”

Mr Chihota bemoaned the 15 percent discount for diamonds sold to local cutting and polishing shops.

“This is highly disruptive to the diamond producers,” he said.

“The reasons for that is RTGS is already at a huge 40 percent discount to the United States dollar and hence we lose a lot of value when we sell locally.

“To top this already big hit, we are now being mandated to sell our goods to local polishing shops at a further 15 percent discount.

“This effectively means there is a massive 55 percent loss in value for diamond producers on local sales. This is untenable for obvious reasons.”