Zimbabwe’s diamond producers have resorted to reworking dumps to extract ore in a bid to make up for declining production, attributed to depleted resources and a continuing liquidity crisis.

The country has five main diamond mining companies – Anjin Investment, Mbada Diamonds, Marange Resources, Diamond Mining Company and Jinan – all of which are extracting alluvial diamonds from the Marange concession, in the east of the country.

However, the deposits in Marange are depleting, while the companies are unable to finance exploration projects to find new deposits.

The state of affairs in the diamonds sector emerged as Zimbabwe Geological Survey (ZGS) director Temba Hawadi addressed the Parliamentary portfolio committee on Youth, Indigenisation and Economic Empowerment.

The country’s production slipped from 8.9-million carats in 2013 to 5.9-million carats in 2014, which resulted in export earnings falling from $466-million in 2013 to $350- million last year.

Hawadi said the steep decline in production meant that none of the mining houses would be able to raise the $50-million required to fund community share ownership trusts, as demanded by the country’s highly contentious indigenisation law.

“With the current level of operations, which is far [lower] than when the scheme was launched, there is no way in which the companies can raise
$10-million each. In fact, production has been going down since the time of the launch and most of the companies are now reworking
dumps to increase production,” he said.

He added that government and mining companies had no choice but to renegotiate the amounts they would need to pay to the Marange-Zimunya Community Share Ownership Trust.

“We, as the Ministry [of Mines and Mining Development], recommend that the Marange-Zimunya community pledges be renegotiated and that they be payable over a certain period, given the current production and financial challenges that the diamond mines are facing.”

He said only Marange Resources and Mbada Diamonds had made part payments on their initial obligations.

The financial difficulties facing diamond producers have forced the Ministry of Finance and Economic Development to temporarily suspend a 15% tax on diamond sales, introduced in October last year and backdated to April of
the same year.

Finance and Economic Development Minister Patrick Chinamasa has been reported as saying that the decision to suspend the tax was part of efforts to improve the viability of the mining industry: “We have temporarily suspended the collection of the special dividend on diamond sales on the back of the drop in production and adverse global price developments.

“Economic growth continues to slow down, reflecting low business and investment confidence, scarce liquidity and the substantial decline in
international prices for our major exports. Risks are tilted to the downside,” Chinamasa said in a letter to International Monetary Fund
(IMF) chief Christine Largade.