The Zambian government has taken decisive action to stimulate its mining sector by suspending the previously reinstated 15 percent export duty on gemstones and metals. This announcement came from Minister of Finance and National Planning Situmbeko Musokotwane on February 21, 2023. The government stated the measure aims to re-energize the sector's competitiveness on the global stage and promote foreign and local investments.
According to the official statement, the suspension seeks to support producers competing internationally and attract investment beyond traditional mineral exports. Musokotwane emphasized, "The measure will also encourage increased investment in the exploration and extraction of precious stones and metals, moving beyond the reliance on traditional mineral exports for foreign exchange earnings." He added this would significantly boost overall mineral production and increase foreign exchange through diversified imports.
This policy shift occurs less than two months after the Zambian government reinstated the 15 percent export duty, initially introduced back in 2019. The swift reversal reflects growing pressure from the mining sector, as key industry voices raised concerns about the detrimental effects of the tax. During a town hall meeting held on January 21 at the Mulungushi International Conference Center, Victor Kalesha, the president of the country’s Emerald & Semi-Precious Stones Association, voiced strong objections, stating, "This 15 percent tax will suffocate gemstone miners, leading to reduced exports, job losses, and decreased income going to the national coffers." Kalesha emphasized the detrimental economic impacts of such taxes, advocating instead for more favorable tax regimes to retain and attract investors.
Gemfields, the London-based emerald mining company operating extensively within Zambia, echoed Kalesha's sentiments. Despite not confirming its presence at the January meeting, Gemfields spokesperson communicated their engagement through dialogue with the Zambian government. Following the recent suspension of the export tax, Gemfields’s CEO, Sean Gilbertson, expressed gratitude, stating, "The Zambian emerald sector has delivered phenomenal growth... The government’s collaborative approach and decisive action are clear demonstrations of its intent to deliver growth and jobs for Zambia and this step puts our industry back on track to continue its growth."
The mining company, which oversees the Kagem emerald mine—considered the world’s largest—had previously announced plans to suspend operations at Kagem for six months to manage costs. Nevertheless, they assured affected employees would be compensated as per Zambian law throughout the suspension.
Meanwhile, on February 22, 2023, President Hakainde Hichilema made headlines again by executing a large-scale government reshuffle. The newly appointed cabinet involved both replacing and terminating multiple permanent secretaries and the minister of Muchinga province. This significant move indicates Hichilema's commitment to restructuring the government for enhanced efficiency. The changes included replacing Henry Sikazwe as minister of Muchinga province with Njavwa Simutowe and ending the roles of several permanent secretaries across various provinces.
Despite the lack of detail surrounding the motivations behind this reshuffle, it marks a determined drive by President Hichilema to streamline and stabilize the administration, which plays a key role in implementing policies and overseeing the nation’s economic directives. The reshuffle also follows the government's efforts to overhaul its image and policies to facilitate economic growth and improve governance.
An integral aspect of Hichilema’s policies has been ensuring the government's responsiveness to citizen concerns—especially from the business community—regarding taxation and regulatory practices. This adaptability may very well signal to both local and international investors the government’s willingness to listen and act on legitimate concerns raised by the industry.
Looking forward, the suspension of the export duty combined with the significant reshuffle could prove pivotal for Zambia's mining sector and broader economy. Adequate support and clear communication from the government could help assuage concerns among eager investors. By focusing on engagement and addressing the overarching issues facing the mining industry, Zambia might be on the verge of enhanced growth trajectories, whilst simultaneously aligning its economic strategies with global expectations.
These recent developments, highlighting the government's efforts to adapt rapidly, could set the tone for the nation’s economic strategy as they navigate the challenges of exporting precious stones and metals. The interplay between tax policy and administrative tactics are central to ensuring Zambia capitalizes on its rich mineral endowments.