21 January 2013

Zambia: Calls for Gemstone Auction

THE 'mysterious' deep green emerald is one of the most prized coloured gemstones on Earth.

The most valuable of the Beryl group, emeralds are not easily categorised by conventional standards due to their unique characteristics and rare qualities.

The growth potential of the gemstone industry in Zambia is vast and the social-economic benefits to the country and its people have been heralded repeatedly time and again.

Although, Zambia is endowed with a rich and diverse gemstone mineral resources base, this has added little or no meaningful value to the economy due to lack of formalised and effective gemstone mining, value-adding and trading processes.

A well-developed gemstone industry in the country has far-reaching capabilities of contributing significantly to the industrial development, employment creation, social and economic infra-structural development, particularly for the rural areas, income generation, foreign exchange earnings and government revenue.

However, Zambia's gemstone industry is characterised by small-scale miners and villagers, who mine or pick up the precious stones and sell them to gemstone-traders who are mainly foreigners, at what can be described as uneconomical prices.

Over 97 per cent of Zambia's gemstones are exported as raw, uncut stones and off-loaded at very low prices.

Less than 20 per cent of Zambia's gemstone exports are transacted through formalised export and trading channels.

The country realises zero value out of the gemstones that are processed into some of the highest quality gems that fetch millions of dollars on the international market.

Sub-Sahara Gemstone Exchange (SGE) chairperson, Phesto Musonda, said the low earnings Zambia was realising from gemstones was due to locally established and competitive market-driven trading structures.

Mr Musonda said this deficiency has seen an influx of informal and unscrupulous middlemen undercutting the export price of gemstones, much to the dismay of indigenous miners, who have remained relatively poor.

He said SGE has long been seen as the panacea for ensuring that local Zambian gemstone miners maximise their returns on the precious stones.

However, he said the operations and commissioning of SGE in Ndola can bring about a realisation of a long-felt need to improve competitiveness in the Zambian gemstone market.

Mr Musonda said SGE, a Zambian owned company, is preparing to establish what can be described as the country's first major gemstone trading centre on the Copperbelt.

He said one option of turning the sector into a viable one would be for the Government, through Zambia Consolidated Copper Mine Investment Holdings to negotiate and buy back its shares or get other partners to exploit the vast mining license areas of Kagem.

An Australian-based lapidary expert, Michael Andresse said the lack of a reliable gemstone auction floor had forced local producers to sell the precious stones on the foreign market.

Mr Andresse said there was an urgent need by the Government and all stakeholders to invest in the establishment of an auction floor which will showcase Zambia's potential in gemstone production.

"The auction floor once operational, will help to prevent capital flight as there is no guarantee that those firms selling gemstones, especially emeralds on foreign auction floors, will bring back into the country the money realised from such transactions," he explained.

He said if an auction floor was established locally, Zambia would attract the highest foreign bidders who would bring in foreign exchange as opposed to a situation where Zambia has been losing millions of Kwacha annually, because the money realised from the gemstone sales abroad does not come into the country's coffers.

Mr Andresse was recently in the country offering expertise to local small-scale miners in Lufwanyama District to help them understand how to add value to the gemstones.

Emeralds and Semi-precious Stones Mining Association of Zambia president, Dale Litana said there was need for the Government to seek stakeholders' input in addressing the problem on why the already existing gemstone auction houses were white elephants.

Mr Litana said the Lapidary Centre and the Sub-Sahara Gemstone Centre in Ndola was supposed to act as an auction house but was now a white elephant due to a combination of factors.

"The authorities should make sure that they create a one-stop centre which will provide the facilities needed for the efficient and transparent sale of emeralds and other gemstones," he said.

Mr Litana said there was need for the Zambia Revenue Authority, the Ministry of Mines, commercial banks and the customs authorities among others, to be stationed at the auction house which should be a one-stop shop if Zambia was to have an internationally-recognised gemstone auction floor.

Mr Litana, however, observed that currently, there was no law compelling gemstones mined in Zambia to be auctioned locally.

Zambia Association of Manufacturers (ZAM) chief executive officer, Rosetta Mwape said one of the options which could be considered was the introduction of quota system to enable local jewellery manufactures to access the high grade gemstones which they were being forced to buy from foreign auction houses.

Ms Mwape said opening auction houses in Zambia would greatly benefit the country because the money earned from trading at auction houses would remain within the country.

Mines, Energy and Water Development Deputy Minister Richard Musukwa said the Government would ensure that all auctions for emeralds are done within the country.

Mr Musukwa said all players in the industry must ensure that auctions were done successfully within Zambia.

He said the Government would closely monitor all procedures and ensure that the auction of emeralds succeeds.

Mr Musukwa said the Government is determined to break all cartels that may be formed to block the successful auction of gemstones within the country.

He challenged foreigners to buy emeralds in Zambia as opposed to taking them to their countries for auction.

"They should follow us and get the stones from Zambia because we know that we have the best. Zambians should now do the auctioning in their back-yard. If the auction is done cheaply in foreign countries, we will also do it cheaply," Mr Musukwa said.

The onus is now on the Government and the private sector to partner to release the much desired benefits from gemstone mining, which undoubtedly, is an avenue for job creation, and foreign exchange earnings.

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