A tax can fill a treasury and starve the mine that feeds it in the same stroke. That tension sits at the centre of Zambia’s emerald ambition, and it turned concrete in early 2025 when Gemfields publicly asked the government to reverse an export duty on emeralds, warning that the levy threatened the competitiveness of the very operations the state relies on for revenue. The episode is a map of everything that could derail the sector.
The trade-off is real, not merely corporate lobbying. An export duty raises money per stone today; it can also push rough toward cheaper jurisdictions or the informal channel tomorrow, shrinking the taxable base it was meant to grow. Emeralds are mobile, gradable and easy to move quietly — which makes the sector unusually sensitive to how it is taxed.
Taxation: The Fastest Way to Lose the Rough
Coloured gemstones compete globally on price, quality and the friction of doing business. When Zambia layers an export duty on top of royalties and corporate tax, it changes the arithmetic for a miner deciding whether to expand, hold or sell into another market. Gemfields’ warning was blunt: the duty risked making Zambian emeralds less viable at exactly the moment the country wants more processing, not less.
The deeper danger is behavioural. A high enough tax on formal exports is an implicit subsidy to smuggling, because the informal stone pays no duty at all. Revenue policy that ignores this can raise the rate and lower the take.
Tax the rough too hard and it simply stops leaving through the front gate.
Illegal Mining: The Leak Beneath the Formal Sector
Zambia’s emerald belt around Lufwanyama has long contended with unlicensed digging and leakage of high-value stones outside official auctions. Every carat that exits informally is revenue the state never sees and provenance the market cannot verify. Illegal mining is therefore not a side issue; it is the direct competitor to the formal, taxable, traceable sector the country is trying to build.
The two risks compound. Heavy taxation widens the incentive to go informal; a large informal sector then undercuts the case for taxing formal miners fairly. Breaking that loop requires enforcement paired with a formal channel worth staying in.
The rival to the licensed mine is not another country — it is the unlicensed pit next door.
Luxury Demand: A Cyclical, Distant Master
Emeralds ultimately depend on discretionary spending in Milan, New York, the Gulf and East Asia, and that demand moves with luxury cycles Zambia cannot control. A downturn in high-end jewellery softens auction prices regardless of how well Kagem is run. Building processing and jobs on top of a volatile revenue line means designing for the troughs, not just the peaks.
Diversifying the buyer base and the product — from loose rough toward finished, branded goods — is one hedge, because finished luxury holds value differently from raw commodity. But the exposure never fully disappears.
The sector’s price is set in showrooms Zambia does not own.
What Reform Would Have to Do
The reforms that follow are specific. Tax the sector at a rate that keeps rough in the formal system rather than maximising the headline levy. Fund enforcement and a fair, accessible route for artisanal and small-scale miners to sell legally, so formality beats the informal channel. And treat processing incentives as revenue policy, not charity, since a cut stone taxed onshore is worth more to Zambia than a rough one taxed at the border.
The winners, done right, are the treasury, formal miners and a future cutting workforce; the excluded, done wrong, are small-scale diggers pushed further underground and a state taxing a shrinking base. Zambia’s emerald story will be decided less by geology than by whether policy keeps the stones — and their value — inside the formal economy.
