via Diamond industry likely to release fiscal pressure by Victoria Mtomba for NewsDay
THE diamond industry has the potential to release a lot of fiscal pressure that the economy is experiencing which has seen capital expenditure being sacrificed to the detriment of economic growth, a local research firm has said.
In its weekly update, the firm, MMC Capital, said the recent move to lift sanctions on the Zimbabwe Mining Development Corporation (ZMDC) was likely to result in the acceptance of the country’s gems.
The European Union last week announced that it was lifting sanctions on ZMDC.
“The move to lift the sanctions is likely to kickstart a wave of acceptance for Zimbabwe in places where it had been barred and this may further increase investor interest in the mineral-rich economy,” said MMC.
“There is a huge capital deficit in the country and no doubt sanctions were playing a big role in the restriction of capital flows over and above the absence of clear policies in the economy.”
Belgium, the global diamond trade centre, has been pushing for the lifting of the sanctions on Zimbabwe while other EU countries were opposed to the move.
According to Kitco Metals Inc, Zimbabwe’s Marange diamond fields are expected to produce 16,9 million carats in 2013, 13% of the world’s 130 million carats production.
In 2012 eight million carats were produced from Marange diamond fields from a total output of 12 million carats nationally.
ZMDC operates five joint ventures mines in Marange diamond fields.
According to statistics from Partnership Africa Canada, a non-profit organisation, production from the Marange fields could be as high as 30 to 40 million carats annually if Kimberly Process restrictions did not exist.
MMC Capital, however, said certainty was yet to be established as the dust that was raised by the delay in the appointment of Cabinet is yet to settle and investors were still trying to understand the new government through the policy pronouncements.
“There is a growing suspicion that there is going to be funding constraints for the economy and the new government is yet to allay these fears by disclosing how government projects will be funded,” read the report.