Now Reading
Weaknesses in gemstones policy results in illicit trade practices

Weaknesses in gemstones policy results in illicit trade practices

Fadzai Midzi

The weaknesses in laws, policies and institutional frameworks governing the gemstone sector in Zimbabwe, have resulted in illicit trade practices, Zimbabwe Environmental Law Society (ZELA) Programs Assistant Fadzai Midzi said.

Rudairo Mapuranga

According to Midzi Speaking at ZELA’s Champion Member of Parliament (MPs) capacity-building program with the Parliamentary caucus on Illicit Financial Flows (IFFs), the gemstone sector in Zimbabwe has no adequate legal instruments regulating it thereby contributing to massive illicit financial flows.

“While the Mines and Minerals Act mention precious stones, it is conspicuously silent on semi-precious stones.

“The Precious Stones Trade Act only regulates two precious stones, namely diamonds and emeralds and when read together with the Mines and Minerals Act, it implies that the latter Act’s definition of precious stones includes only diamonds and emeralds.

“However, the Precious Stones Trade Act leaves room for the Minister to include via a statutory instrument to expand the category of precious stones and perhaps semi-precious stones. The greatest worry in all this is that both Acts leave two precious stones and thirty-three plus semi-precious stones unregulated throughout their value chains.

“Weaknesses in policy, legislative and institutional frameworks governing the gemstone sector in Zimbabwe, have resulted in illicit trade practices.

“For all gemstones, the formal footprint on the value chain is very narrow (several stages are missing) resulting in offshoring of value – loss of foreign currency earnings, tax revenue, jobs and industrial linkages due to lack of local beneficiation and value addition,” Midzi said

Midzi said Artisanal and Small-scale Miners are being exploited by illegal gemstone traders who are not paying the real value of gemstones. She said pricing and valuation of the country’s gems is a very big challenge. Semi-precious and gemstones do not have a defined value as it’s based on a willing buyer willing seller.

“The sector is characterised by the existence of syndicates which include foreign buyers based in towns, local dealers who do the running for the foreign dealers, compromised security details (including the police and the military) at extraction sites, grossly exploited artisanal miners and transporters of gemstones who use informal and formal routes including airports and borders.

“In July 2020, the Ministry of Mines and Mining Development produced a draft policy on gemstones in Zimbabwe whose scope supposedly covers the whole value chain and all the other gemstones besides diamonds, which are covered by the Diamond Policy (Ministry of Mines and Mining Development, 2020).

“Most of these other gemstones have been exploited since the 1960s by small-scale miners except the Sandawana Mine which produces emeralds. Occurrences of gemstones are dotted all over the country.

“The fact that there are no large mines or MNEs mining gemstones in Zimbabwe apart from the diamonds eliminates the massive risk of abusive transfer pricing.

“The price we see on the internet do not represent the present transaction as they are just indicative of the previous sale. The pricing of our stones is also based on supply, demand and quality as compared to other countries.

“The only organization doing price valuation is MMCZ located in Harare while producers are all over the country, also they do not issue valuation certificates making it difficult to conclude a trading agreement,” she said.

Midzi said the government and other stakeholders have been neglecting the trade of semi-precious stones. She said formalization and regularization together with the recognition of gemstones mining and trading might not be enough to prevent illicit financial flows.

“The gemstone industries apart from diamonds and emeralds, generally, have been neglected by the government and other stakeholders like civil society.

“A draft legal framework to guide the mining and trade of semi-precious stones was formulated in 2019. In addition, the gemstone policy is in the pipeline.

“Generally, the four objectives mentioned by the Draft Gemstone Policy are all around formalization of the ASSM sector, which is expected to increase accountability in the sector.

“Questions arise around this. Is formalization of the ASSM sector alone enough a safeguard against illicit financial flows in the sector? Does that cover the whole value chain and plug loopholes and vulnerabilities in the whole chain? Should the policy not specifically speak to trade and trading systems, and the movement of people in and outside the country?

See Also

“On the trading side, the Precious Stones Trading Act (PSTA) defines precious stones as “… rough or uncut diamonds, or rough or uncut emeralds or any other substance which is, in terms of subsection (2), declared to be precious stones for the purposes of this Act.

“While it is a glaring gap that only diamonds and emeralds are mentioned by the PSTA, there is room for the Minister of Mines “…by notice in a statutory instrument, declare any substance to be precious stones for the purposes of this Act.”

“Unfortunately, the Minister of mines has never issued a Statutory Instrument (SI) to declare semi-precious stones as part of the standard definition of precious stones as required by the PSTA,” Midzi said.

What should be done?

Zimbabwe’s stones are finding their way into the international market outside formal channels. “The informal nature of the coloured-gemstone trade, combined with the inherent difficulty in valuing rough stones at the site of extraction, provides ample opportunity for criminal and corrupt actors to exploit and profit from it. This includes large-scale smuggling of stones, resulting in significant under-reporting of export and trade figures.”

According to Midzi, it is of importance to expedite the formulation and implementation of the gemstone policy. She said, the process must be inclusive and particularly involve local communities where gemstones are extracted and critical stakeholders like artisanal and small-scale mining associations, local government, civil society, buyers, jewellers, and vocational training colleges.

“Expedite the reforms of the Mines and Minerals Act and the Precious Stones Trade Act to foster a conducive environment for formal extraction and trade of gemstone to close legal and institutional gaps that facilitate illicit gemstone trade.

“Local governments must have clear strategies for harnessing the gemstones in their jurisdictions to transform local economic and social development outcomes.

“Political will is needed at local, national, regional, continental, and global levels to tackle the scourge of illicit trade of gemstones that are undermining efforts to achieve sustainable development in Zimbabwe.

“Incentives are needed to promote the fusion of skills for stone sculpturing that Zimbabwe is globally renowned for and jewellery making that is offshored along with value creation.

“Awareness raising of illicit gemstone trade is vital, and communities must be mobilised through the alternative mining indabas to engage with key stakeholders on leveraging gemstones for the promotion of local economic and social development,”

Scroll To Top
error: Content is protected !!