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Diamond beneficiation: Zimbabwe's road to prosperity

21 Jan 2014 at 16:53hrs | Views
The global value chain of the diamond industry includes exploration, mining, sorting, polishing, dealing, jewellery manufacturing and ultimately, retail.

Zimbabwe is able to conduct the first three stages but must now focus on mastering the other four. In a nutshell, this mastery is beneficiation.

The best way for Zimbabwe to benefit from its diamonds is for government to form a State Diamond Trading Company (SDTC).

The state-owned company's primary objective should be to buy rough diamonds from miners and sell to local cutters and polishers in order to boost the downstream sector.

This would create jobs, add value to diamonds and boost revenues for government coffers when they are exported at higher prices.

The state should therefore, make it exceedingly difficult for Zimbabwe's uncut stones to be shipped elsewhere by levying a significant export duty on the exports of unfinished diamonds.

The SDTC is to operate on a cost-recovery basis, passing profit margins onto its local clients.

Craftspeople and local firms are then able to purchase, cut and polish the rough stones, and then sell them at market prices.

The SDTC must also provide funding to assist with start-up capital for these indigenous small-scale players in the mineral beneficiation industry.

In fact, according to the South African government, in the four years that the South African State Diamond Trader has been in operation, it has been a boon for the local downstream diamond sector.

It has reportedly created thousands of jobs, added millions of dollars to the value of diamonds and thereby boosted government revenues.

Admittedly, there is not as yet a sufficiently large number of people with the requisite skills in Zimbabwe to realise such beneficiation plans.

Therefore, the SDTC should provide for an indigenous diamond beneficiation fund designed to provide young Zimbabweans with access to intensive training in diamond polishing and cutting abroad.

Given the current lack of local cutting schools and traditions, this initiative would bring service and design knowledge back to Zimbabwe so that the quality of cut diamonds is up to international industry standards.

Locally however, for beneficiation to truly empower the majority, thousands of skilled Zimbabweans would be needed to process the gems.

Therefore, government must make a firm commitment to creating local schools and institutions to provide a workforce with the necessary skills.

One such encouraging commitment made by government is the multi-million dollar diamond technology centre that would have the positive effect of centralising control over diamonds.

The centre would serve the important fiscal control functions of enhancing accountability, minimising leakages and enabling government to value and tax mined diamonds more accurately.

President Robert Mugabe has shown leadership and foresight on the issue and recently stated that, “Local beneficiation of diamonds in Zimbabwe shall be encouraged through mechanisms that will require producers to set aside some 10% of their diamond production for local cutting and polishing, as well as jewellery manufacturing."

However, government must ensure that this percentage is flexible and, as Zimbabwe's diamond processing capabilities improve, the percentage should be raised until all rough diamonds are processed within the nation's borders.

Beneficiation would eventually serve as a catalyst for other industries directly or indirectly related to diamonds like banking, jewellery making, security, information technology, and even tourism.

For Zimbabweans to fully benefit from the mining, beneficiation and trading of their gems, they must know the value, extent and location of their stones.

This can be ensured by the formation of the recently proposed State Diamond Exploration Company (SDEC).

The SDEC's mandate would be to provide sound mineral resource information to attract and incentivise, both local and foreign investors.

There are four stages of independence for African nations: political, territorial, economic and prosperity.

Zimbabwe has attained the first three and diamond beneficiation will go a long way to attaining the final stage.

By forming a democracy and gaining independence from white minority rule in 1980, Zimbabwe has clearly attained political independence.

The land democratisation programme has allowed the majority to regain control of the nation's land and territorial independence.

The ongoing indigenisation programme is seeing to it that the economy is put back in the hands of the majority.

Finally, mineral beneficiation would form the much-needed bridge for Zimbabwe to eventually become a first world power.

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Garikai Chengu can be contacted at chengu@fas.harvard.edu


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