Rough Cut Ban U-Turn in Bid to Boost Mining Revenue




The Ministry of Mines (MoM) is backtracking on its plan to ban rough gem exports during the 2013/14 fiscal year. It is also lifting the May 2012 export ban on raw tantalum, in order to increase the export volume of mineral resources.

The Ministry’s decision came after the export desk at Prime Minister Hailemariam Desalegn’s office ordered all federal institutions dealing with exports to come up with more ambitious targets for the current fiscal year, Fortune confirmed from a senior official close to the issue and a mid-level expert of gemstones at the MoM. This is to offset the lag created in the country’s exports over the past three years.

In order to comply with the request, the MoM has raised its revenue projections to a billion dollars, for 2013/14. This  is a drastic jump up from its initial conservative target of 777 million dollars.

Part of the reason for the low projections, aside from the fall in gold prices, was the MoM’s assumption that no revenue would be recorded from rough opal and raw tantalum exports. These collectively brought in 13.8 million dollars during the last fiscal year.

In January 2013, the Ministry announced its intention to ban rough gem exports at the start of the new fiscal year. This was because of the considerably higher price a value-added stone would fetch when compared with the rough cut. Although the ban of raw tantalum for similar reasons came at an earlier time, it was not fully implemented in 2012/13, because the tantalum already in stock was exported.

Either way, the benefits of value addition are unlikely to be seen this year, since it takes time for exporters and miners to get the refining machine and develop the capacity to operate it, according to the senior official from the MoM. But, once capacity is developed, a kilogram of value-added gemstone, namely opal, which makes up to 98pc of all gemstone exports in Ethiopia, can fetch 40,000 dollars, as opposed to the 1,500 dollars for rough gemstones.

There are 50,000 artisan gemstone miners and over 200 exporters in Ethiopia, according to data from the MoM. Very few of them, however, have bought the machine that cuts and softens the rough gems, according to the senior official from the Ministry.

This fact led the Ministry to set a very low revenue projection for rough gems. This was based on the plan to export 250kg of value-added gemstones for 10 million dollars, while not making any projections at all for tantalum exports.

The sudden 223 million dollar leap in export targets, however, is forcing the MoM to devise ways to fill the gap. Its new plan targets an increased volume of production and export. Hence, the Ministry has now revised its export targets to include the sale of 15,000kg of gemstones, worth five million dollars, and the export of 180tns of tantalum, valued at 20 million dollars. Additionally, the MoM aims to considerably boost the production and export of gold.

The Ministry hopes that, aside from filling gaps in export volume and value, delaying the bans will give artisan miners and exporters adequate time to buy the gemstone refining machine, as well as developing capacity.

Out of the four exporters interviewed by Fortune, only one, Berhan Kassa, already owns the machine. According to Berhan, the government’s initial plan was better, since the refining machine is affordable and capacity can be built in a reasonably short period of time.

Value-adding machinery can be bought locally for prices ranging from 4,000 Br to 70,000 Br, with Chinese-built machines being the cheapest and brand machines from Europe and America the priciest.

“The industry needs to get used to change and update itself,” he told Fortune.

Molla Yehuala, an artisan miner and exporter who supplies Berhan, also owns an Ethiopian made modified machine, purchased for 35,300 Br. Selling refined opal on the local market alone has increased his revenue by as much as 1,100 Br a gram.

“If the ban starts now, they will be limited to selling to the local market, which will offer them a lower price because of the ban,” he told Fortune. More time should be given, is his opinion.

The Ministry plans to get such inputs from miners and exporters on August 6 and 7, 2013, at Ghion Hotel. It has called a meeting here to inform partners and stakeholders of its altered plans and to set regional targets.



By ELLENI ARAYA
FORTUNE STAFF WRITER

Published on August 04, 2013 [ Vol 14 ,No 692]


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