By Lisa Vives, Global Information Network
NEW YORK (IDN) – Foreign mining companies extract more than a quarter of the world’s production of rare emeralds in Zambia yet, in some quarters, are alleged to declare losses to make themselves tax exempt.
So far, charges of tax evasion filed against Kagem mine, a subsidiary of the London-listed gemstone miner Gemfields, have been unsuccessful on investigation and dismissed by the Zambian Revenue Authority.
Gemfields owns 75 percent of the world’s largest emerald mine in Kagem, northern Zambia, with the remaining 25 percent owned by Zambian government. Auctions of 30 Zambian emeralds and 11 Mozambican rubies have brought the company over $1 billion of combined auction revenue, according to the Creamer Media Mining Weekly.
The UK Company stated this was a remarkable benchmark for the coloured gemstone sector.
Reports in several media outlets suggest that members of the Chamber of Mines, of which Kagem is a member, are fighting tooth and nail against Zambian tax increases which would cut into profits.
Should the proposed tax increase of 1.5 percent to reduce Zambia’s mounting public debt be enacted, mining companies warned of a cut by $500 million in capital spending and the retrenchment of 21,000 workers, according to the Bloomberg news wire.
Each year, the Zambian government is believed to lose billions in illicit financial flows mainly related to its mineral resources sector. Recent audits of foreign mining operations are part of a government effort to capture more benefits from the sector.
Zambia is also Africa’s second-biggest copper producer with ownership concentrated in a few foreign hands. In 2018 the revenue authority carried out an audit of all major mining companies and, according to Reuters, slapped the India-based Konkola Copper Mines with an $18 million bill.
Suspicions about Konkola were raised when founder Anil Agarwal told a business forum that its Zambian mines made $500 million a year yet declared a loss at the end of the financial year.
In a separate development, Gemfields faced serious allegations of human rights abuses at the Montepuez ruby mine in Mozambique, which were later settled on a no-admission-of-liability basis. Charges levelled at Gemfields cited abuses allegedly carried out since 2012
*This is a revised version of the story titled Emeralds, Rubies Score Big Profits For Foreign Firms As African Countries Go Broke that appeared on 25 December 2018. [IDN-InDepthNews – 06 February 2019]
Photo: An exceptionally rare high quality 5,655 carat (1.13kg) emerald crystal discovered at Kagema mine in Lufwanyama. Source: Zambia Reports.
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