Zambia has made a bold move that could shake up the global emerald market. The country has reinstated a 15% export duty on all precious gemstones, effective January 1, 2024, without prior warning. This sudden shift is hitting hard, particularly for Gemfields, the major operator of Zambia's Kagem emerald mine, which now faces an additional tax burden.
With the new 15% export duty layered on top of a 6% mineral royalty tax, the total effective tax rate on revenues from Kagem has skyrocketed to 21%, excluding the 30% corporation tax. This move puts Zambia at a sharp disadvantage compared to competitors like Brazil and Colombia, which charge far lower export taxes of just 2% and 2.5%, respectively, despite similar corporation taxes of 34% and 33%.
In 2023, when no export duty was in place, Kagem paid an effective 31% of its revenues to the Zambian government in the form of royalties, taxes, and dividends. The unexpected reintroduction of this duty raises serious concerns about the sustainability of Zambia's emerald industry and its competitiveness on the world stage.
Gemfields, which has already paused operations at Kagem due to a downturn in the market, has expressed its intention to engage with the Zambian government to seek either a return to the suspension of the export duty or its complete removal. As the company grapples with these financial challenges, the rest of the emerald industry is left wondering what this decision means for the future of Zambia’s gem market and its ability to attract investment.