Gemfields Faces High Tax Burden in Zambia as Export Duty Returns
Shares of Gemfields (LON: GEM) (JSE: GML) dropped on Wednesday after the colored gemstone miner revealed it faces a steep tax hike in Zambia due to the reintroduction of a 15% export duty on emeralds.
The export tax, reinstated on January 1, had been suspended since 2019 following months of negotiations between the Zambian government and emerald producers. Gemfields noted that the tax adds to an already significant burden, with its 75%-owned subsidiary, Kagem Mining, now subject to an effective revenue tax of 21%, which includes a 6% mineral royalty tax.
No Warning, No Consultation
Gemfields expressed disappointment over the lack of communication regarding the tax’s return. “There was no prior consultation or notice about the reintroduction of this export duty,” the company stated.
The miner plans to engage with the Zambian government to push for the duty’s suspension or removal, citing concerns over the sustainability of the sector and its attractiveness to investors.
Impact on Share Prices
The announcement rattled investors, with Gemfields’ shares falling 4.3% in London to 6.7p each. The company’s stock also plunged 12% in Johannesburg, reducing its market capitalization to 2 billion South African rand (about $106 million).
History of the Export Duty
Zambia, the world’s second-largest emerald producer after Colombia, first implemented the 15% export duty in 2019, but it was lifted in 2020. During 2023, when no export duty was applied, Kagem Mining contributed about 31% of its revenues to the Zambian government through mineral royalties, corporate taxes, and dividends.
Gemfields noted that the government has introduced additional measures across other sectors of the economy to boost revenues in 2025.
Broader Economic Goals
Zambia has set ambitious targets for 2025, including a GDP growth rate of 6.6%, inflation between 6% and 8%, and a budget deficit of 3.1% of GDP, according to PwC. Revenue projections include a 26% rise in domestic revenues and grants, with tax revenues expected to grow by 20%.
Beyond Zambia
While navigating these challenges in Zambia, Gemfields continues to expand its portfolio. The company owns the luxury jewelry brand Fabergé and holds a 75% stake in the Montepuez ruby mine in Mozambique.
Gemfields remains committed to addressing the tax challenges while maintaining its global leadership in the colored gemstones market.
