Govt demands diamond dividends

Govt demands diamond dividends | The Herald 17 October 2014

The Reserve Bank of Zimbabwe has ordered banks to deduct 15 percent special dividends from gross diamond sales, backdated to April this year in line with provisions of the 2014 Finance Act, but diamond miners have raised alarm.
The Act signed into law in April had not been enforced since yet.
The diamond producers said they will effectively be grounded by the move since they already pay more taxes and royalties to the Government and other shareholders.

Officials in the sector said they will end up having more than 50 percent of gross sales going to taxes, inclusive of royalties, management and depletion fees, with corporate tax chewing at least 25 percent at the end of each year.

A crisis meeting was called on Wednesday where miners made their reservations about the dividend.
Finance and Economic Development Minister Patrick Chinamasa introduced the 15 percent special dividend in the 2014 Finance Act that was passed in April.
RBZ Governor Dr John Mangudya, confirmed the directive and the Wednesday meeting, but referred questions to Mr Morris Mpofu, the head of Exchange Control, who attended the meeting.

“Yes, there was a meeting yesterday (Wednesday), but I was not there because I only came back yesterday evening,” said Dr Mangudya. “But you can speak to Head of Exchange Control Mr Mpofu, he is the one who attended the meeting.”

Efforts to get a comment from Mr Mpofu were fruitless.
Representatives of diamond mining companies said if the directive was implemented, all the firms would eventually collapse.

“That was a killer, its like adding a huge load on top of an ailing horse,” said Marange Resources acting chief executive officer Mr Mark Mabhudhu.
“Already we have royalties at 15 percent as well before looking at other costs which leaves me with nothing as Marange Resources. The instruction is already at the banks, which means whatever money gets into our account almost all of it will go to Government.

“What complicates the whole issue is the fact that our money is being held in Belgium (where a South African platinum company wants to seize the proceeds over a failed deal) and from the local sales, payment hasn’t come through, but when it comes it means Treasury will take almost all of it because of this directive.

“Our proposal is that let Government spare us from all the Government-related obligations until we cross the bridge because the Belgium issue has affected us seriously. And now Government is bringing this issue on.”

Diamond Mining Company general manager Mr Ramsey Malik said diamond companies would collapse if the directive to pay the 15 percent dividend was implemented.

“We had a meeting at the Ministry of Mines to discuss the impact of the reinstatement of the 15 percent special dividends in retrospect of April 4, 2014,” he said. “All the mining companies present confirmed that operations will stop if the directive is enforced. The Ministry of Mines, RBZ and Ministry of Finance are to discuss the issue and hopefully come up with a solution that will save the industry, while at the same time ensuring that Treasury receives all statutory obligations.”

An official at Mbada Diamonds, who spoke on condition of anonymity, said diamond companies would not survive if the 15 percent special dividend was effected.
“What it means is that if Government takes 15 percent special dividend, the other shareholder will also take 15 percent because you cannot declare dividend on one shareholder and leave the other. That will take our total tax costs to almost 60 percent,” said the official. Anjin board member Mr Munyaradzi Machacha yesterday referred The Herald to Ms Martha Legenda, who said she could not respond.