Gemfields faces 21% tax as Zambia reinstates export duty

Shares in Gemfields (LON: GEM) (JSE: GML) fell on Wednesday after the coloured gemstones miner said it faces a high tax bill in Zambia following the government’s decision to re-introduce a 15% export duty on emeralds.

The export tax, reinstated on January 1, was suspended in 2019 following months of negotiations between the government and emerald producers. Its return, Gemfields said, has added to an already substantial tax load. The company’s 75%-owned local subsidiary, Kagem Mining, will now shoulder an effective revenue tax of 21%, which includes the existing 6% mineral royalty tax.

Gemfields criticized the move, stating there was no prior consultation or notice regarding the tax’s reintroduction.

“The company will engage with the Zambian government to seek the re-introduction of the suspension of this export duty or to remove it from the legislation given the impact on sector sustainability and investment attractiveness,” Gemfields said in a statement.

The company’s shares were last trading 4.30% lower in London at 6.7p each. They lost 12% of their value in Johannesburg, leaving the miner and marketer with a market capitalization of 2 billion South African rand, or about $106 million.

Zambia, the world’s second largest emerald producer after Colombia, first implemented the 15% export duty in early 2019 and it ceased to apply on January 1, 2020.

In 2023, when no export duty was in place, Kagem Mining paid approximately 31% of its revenues to the Zambian government through mineral royalties, corporate taxes, and dividends, according to Gemfields.

“Gemfields understands that several additional measures have also been introduced in other areas of the Zambian economy to enhance Zambian government revenues in 2025,” the group said.

Zambia’s government is targeting a gross domestic product (GDP) growth rate of 6.6%, an inflation rate between 6% and 8%, and a budget deficit of 3.1% of GDP, according to data from PwC. Revenue projections include a 26% increase in domestic revenues and grants, with tax revenues anticipated to grow by 20%.

Beyond Zambia, Gemfields owns the luxury jewellery brand Fabergé and holds a 75% stake in the Montepuez ruby mine in Mozambique.