• Diamonds contributed only 1.71% of MMCZ mineral export value in H1 2026
• Production rose 19% from 2022 to 2024 as production value fell 61%
• A tied royalty could preserve fiscal upside and support investment during weaker markets

Harare- Zimbabwe has sufficient economic evidence to introduce a tied diamond royalty, with the existing 10% rate retained during stronger market conditions and lower rates activated through transparent price, investment and beneficiation thresholds. The case rests increasingly on the size of the taxable base. Diamonds generated only US$43.3 million during the first half of 2026, accounting for 1.71% of the US$2.532 billion in mineral exports facilitated by the Minerals Marketing Corporation of Zimbabwe.

The position of diamonds within that export basket has become difficult to ignore. PGM matte generated US$859.1 million, spodumene concentrates US$672.8 million and PGM concentrates US$347.6 million. High carbon ferrochrome, steel, coke, lithium sulphate and chrome concentrates also generated more export revenue than diamonds. A mineral that once occupied a much larger place in Zimbabwe’s export ambitions ranked ninth among the ten commodity categories reported by MMCZ during the period.

Lithium sulphate provides a particularly useful comparison. The product generated US$73.2 million during the first half, about 69% more than diamonds, even though commercial lithium sulphate production represents a relatively recent addition to Zimbabwe’s mineral export portfolio. Its emergence demonstrates how processing investment can create additional export categories while the diamond sector continues to rely predominantly on the sale of rough stones.

Zimbabwe’s diamond problem therefore extends beyond weak global prices. The sector has lost relative weight inside a mineral economy whose other segments are adding processing capacity and generating new sources of export value.

The production history reinforces that conclusion. Kimberley Process data show Zimbabwe produced 4.46 million carats valued at US$423.6 million in 2022. Output increased to 4.91 million carats in 2023 and 5.29 million carats in 2024. Production value moved from US$423.6 million to US$303.2 million and then US$163.8 million across the same period.

Zimbabwe consequently produced almost 19% more diamonds in 2024 than in 2022 while the value assigned to production declined by 61%. Average production value fell from US$94.95 per carat to US$61.70 and then US$30.94. Additional volume could not compensate for deterioration in the value realised from each carat.

The international market remains under pressure in 2026. De Beers reported that its average realised rough diamond price declined by 32% to US$105 per carat during the first half, while its rough diamond price index declined by 16%. Consolidated rough diamond sales revenue fell 23% to US$1.31 billion. The company increased consolidated sales volumes by 13%, yet weaker realised pricing reduced revenue.

Zimbabwe applies a royalty of 10% of gross fair market value to diamonds. The percentage automatically generates fewer dollars as the value of output declines. Mine economics deteriorate faster because royalties are charged against gross mineral value while mining, security, plant maintenance, electricity, stripping and capital replacement continue to absorb operating cash.

The change in Zimbabwe’s average production value demonstrates the pressure. A 10% royalty applied to a carat valued at US$94.95 in 2022 leaves a materially different economic margin from the same percentage applied to a carat valued at US$30.94 two years later. Lower value does not reduce every cost required to recover, process, secure and market that carat by an equivalent amount.

A permanent reduction in the headline royalty would nevertheless be difficult to defend. The fiscal logic requires the lower rate to generate a substantial production or value response before Treasury recovers the revenue surrendered.

Using the US$43.3 million H1 2026 diamond export contribution as an illustrative base, a simple 10% calculation produces US$4.33 million before adjustments between export proceeds and the royalty assessment base. An 8% rate produces US$3.46 million, lowering the amount by approximately US$866,000. Taxable diamond value would have to increase by 25% at the lower rate for Treasury to return to the revenue generated by 10% on the original base.

At 6%, the equivalent amount falls to about US$2.60 million. Taxable value would need to increase by approximately 67% to recover the difference. That hurdle makes 6% too expensive as an unconditional industry wide concession. It becomes more defensible when the lower rate applies only to new output, qualifying capital expenditure or verified domestic processing.

Zimbabwe already has a legal precedent for linking diamond royalty relief to economic behaviour. The current framework provides royalty relief where diamonds are sold to qualifying local manufacturers at a discount equivalent to the royalty otherwise payable. The fiscal system therefore already accepts that government can forego immediate royalty revenue where the transaction advances domestic processing.

South Africa already applies a responsive mineral royalty to diamonds, with the rate on unrefined minerals moving from a minimum of 0.5% to a maximum of 7% according to the producer’s earnings relative to gross sales, allowing the fiscal burden to ease when mine profitability weakens and rise when economics strengthen. Canada’s Northwest Territories uses a graduated royalty on mine output, with marginal rates increasing from 5% to 14% as mine value rises and total liability capped at 13% of output value.

 Direct price indexed diamond royalties remain uncommon globally because diamonds lack a single benchmark price, yet both systems establish the principle Zimbabwe needs to consider, where government take responds to the economic capacity of the mine instead of remaining fixed through every stage of the market cycle.

The wider mineral export data provide a reason to deepen that principle. MMCZ’s US$2.532 billion H1 export basket is dominated by PGMs, lithium and increasingly processed mineral products. PGM matte alone contributed 33.93% of export value. Spodumene concentrates contributed 26.57% and PGM concentrates 13.73%. The three categories generated more than 74% of total export proceeds.

The relevant lesson for diamonds concerns the structure of value capture. Zimbabwe has invested policy effort in moving PGMs from concentrate towards matte and base metal refining, while lithium investment is progressing from concentrates towards sulphate and carbonate production. The diamond sector has yet to establish an equivalent processing trajectory at economically meaningful scale.

Cutting and polishing cannot simply be mandated on the assumption that every additional processing stage automatically generates a higher domestic return. Diamond manufacturing requires specialised skills, scale, reliable power, working capital and access to international buyers. Poorly designed beneficiation requirements can move value from the mine into an uncompetitive processing operation without increasing the total value retained in Zimbabwe.

Royalty policy can reduce that risk by making the incentive conditional on measurable value creation.

Government could retain 10% as the upper royalty band when verified diamond market values remain above a defined benchmark. An 8% rate could apply when a quality adjusted Zimbabwe diamond value index falls materially below its medium term reference level. An additional two percentage point credit, taking the effective rate to 6%, could be earned on incremental output or diamonds committed to approved domestic cutting and polishing operations that demonstrate export value addition.

The distinction between the 8% and 6% bands would protect Treasury. The middle band would provide cyclical relief during weak pricing. The lowest band would purchase a measurable economic response.

Diamond pricing requires a different architecture from the variable royalty already applied to gold because no single international benchmark captures the enormous difference between diamond qualities. Individual parcels vary according to size, colour, clarity, shape and other characteristics.

MMCZ already operates in the part of the value chain required to administer such a framework. The Corporation carries out mineral valuation, contract monitoring, price verification and inspection, and is investing further in digitalisation and laboratory capacity. Those systems can support a quality adjusted domestic reference index against which royalty bands are determined.

The index would need to be transparent enough for producers to incorporate royalty expectations into mine planning and investment decisions. Treasury and MMCZ would also need common valuation rules to prevent movement between bands from becoming dependent on producer declarations.

The beneficiation component should carry equally measurable conditions. A processor seeking royalty supported rough supply should disclose carats purchased, rough acquisition value, polished output, export proceeds, employment and domestic operating expenditure. The relief should continue only where the processing operation demonstrates that additional value is being retained locally.

Such a framework changes the purpose of the royalty concession. Government would be exchanging a portion of immediate fiscal revenue for a larger production base, additional capital investment or measurable domestic processing.

That exchange is increasingly affordable to test because diamonds now account for only 1.71% of MMCZ mineral export proceeds. An industry generating US$43.3 million from a US$2.532 billion mineral basket carries less immediate fiscal concentration risk than PGMs or lithium. Treasury has room to experiment with a tightly controlled incentive while limiting the amount of revenue placed at risk.

The opportunity cost of leaving the framework unchanged also deserves attention. MMCZ expects PGMs, lithium products, ferrochrome, steel and coke to remain the main drivers of export growth during the second half of 2026. Diamonds are absent from that growth group. Maintaining a high statutory percentage becomes progressively less valuable when the base on which that percentage is charged loses relevance within the national export portfolio.

The Ministry of Finance and Ministry of Mines should use the 2027 National Budget process to pilot a three band diamond royalty for 24 months. MMCZ and ZIMRA should publish the valuation methodology and market thresholds governing movement between 10% and 8%. Access to the 6% effective rate should require independently verified incremental output, qualifying capital expenditure or domestic beneficiation.

Performance should then be assessed against four variables. Diamond production must increase, export value must recover relative to comparable market prices, qualifying investment must be executed and local processing must deliver measurable value addition. Failure against those tests would remove access to the concession.

Zimbabwe’s mineral economy is already demonstrating where additional processing and capital investment can broaden export earnings. Diamonds currently sit outside that momentum. A tied royalty can help rebuild the sector provided every reduction in government take purchases an identifiable economic return. The objective should be to expand the value on which future royalties are collected and restore diamonds to a more meaningful position within Zimbabwe’s mineral export portfolio.

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