Secrecy, obscure mining laws hurt gemstone trade

Dorothy Odindo is eyeing the lucrative gemstone business. But for lack of information, her dream remains just that—a dream. The lucrative industry is shrouded in lack of transparency.

“I want to get into the gemstones industry, but very little information is available,’’ she says.

At a ‘‘Romancing the Stone’’ event held in Nairobi in Nairobi late last year, Ms Odindo was among several prospectus who listened keenly in the hope of learning the ropes.

‘‘Interacting with the likes of Joel-Noel Soni, a world-renowned gem cutter is the only way I can learn this trade.”

Errol King, a gems dealer with Cradde Ventures says Kenyan traders do not share gemstones techniques and practices and the seminar organised by Porini Gems, a dealer in loose, rough and cut stones brought together dealers, miners, cutters, designers and jewelers to shed light on the trade.

‘‘There is a lot of secrecy in the Kenyan market and traders are never on the same page about the value of gemstones. Nigeria on the other hand is an open market with a set value for the gems,” said Mr Soni.

Diana Atieno of Porini Gems likens the gemstone business to a drug cartel, noting that with changing times most Kenyan traders now want to be recognised.

“There is little regulation and we need to talk about the current state of affairs to ensure that change is effected,” she said, adding that she wants to see more recognition for Africa’s contribution to the jewelry world, and more rewards for the efforts of miners.

Guarded market

For Ms Atieno, the Internet and attending trade shows globally helped her to penetrate the guarded market. Porini Gems that deals with diamonds and coloured gems sources its precious stones from miners in Kenya, Tanzania, South Africa and Zambia.

“Any country that is at peace and has good business practices and ethics is a source. My conscience cannot support countries that are in conflict over gems,” she said.

Cutting of the gemstones is done in the source country as she aims to promote the African cutters .

“African cuts are shunned worldwide, mostly considered poor or not well done and are given funny names like native cuts or jungle cuts. But as a continent we are slowly progressing and learning from the master cutters,” she said.

Ms Atieno mainly sells her precious stones in North America, Middle East, Europe and Asia.

Kenya has substantial deposits of ruby, spinel, zoisite, garnets, sapphire, tsavorites and aquamarine, gemstones that would the earn the economy more if the sector is well regulated. The coastal region sits on the neoprotezoic Mozambique belt which has high-value gemstones.

Taita Taveta, Kwale, Baringo, Kitui and West Pokot have long supplied the local and global markets with ruby, sapphire, tourmaline and tsavorites.

Tsavorites are mined in Kwale and Taita Taveta while aquamarine is found in Meru and Tharaka Nithi. Western Kenya also has gold deposits.

Despite the availability of these minerals, there are no valuation procedures to measure the worth of gemstones before they are exported. Kenya also lacks gem laboratories that grade the stones and gemmologists to do the grading.

Less tax

A dealer who did not want to be named said lack of valuation procedures has made it possible for traders to export gems without paying the required tax.

He cites an occasion when he was charged $50 (Sh5,000) for a rough stone (pre-processed gemstone) that was valued at Sh2 million.

“Such things happen when the market is not regulated. How else would the customs officials know the value of the gem if there are no guidelines?”

“The government, miners and gem hunters are the greatest losers because they do not know the value of the stones that they holding in their hands.”

The scarcity of information on trends, growth and the state of the gemstone industry and valuation structures in Kenya tells of a sector that is not well policed and one whose existence is poorly documented.

Gem hunters and traders set their own prices and with no set valuation standards, they pay less tax.

Traders argue that a handful of powerful people in the government have ensured that little information is available on the sector so as to seek total control of the industry.

Unlike diamonds, gemstones do not conform to a universally grading standards. To determine the value of a gem, one needs to know its colour, clarity, cut, carat weight and origin.

Sapphires from Kashmir, for instance, can command as much as Sh2.5 million ($25,000) per carat, while look-alike stones from Madagascar may fetch only a third of the price. However much of the price disparities come down to aesthetics.

In Tanzania, the gemstone market is well regulated and the country has since transformed its tanzanite market with clearly laid down procedures of exporting and importing minerals.

It prohibits unlicensed dealers and brokers. Minerals obtained illegally are confiscated and culprits face prosecution.

In Kenya, however, there are no trade restrictions as long as miners and dealers have licences. The lax rules have lured unscrupulous brokers and traders into the business.

The industry only contributes less than one per cent annually to the country’s Gross Domestic Product (GDP).

Kenya mined gemstones worth Sh263 million in 2014, according to the 2015 Economic Survey. In 2012, the country earned only Sh157 million and Sh411 million in 2013 from gemstones.

The decline in production of gemstones and gold was attributed to low prices in the export markets, the Economic Survey shows.

However, traders, miners, jewellers and cutters said the government has not been keen on streamlining the sector, leading to illegal mining and domination by cartels that do not pay taxes.

Jennifer Halwenge, a director at the Mining ministry says little recognition has been given to the gemstone industry and a lot needs to be done.

“An old Mining Act is what is being used but the ministry is putting a legal framework soon to ensure that everything is captured including the artisan miners,” says Ms Halwenge.

The Mining Bill 2013 is yet to be passed into law. The Act is the first major review of the 1940 mining laws and seeks to safeguard the interests of citizens and Kenya.

Under the proposed law, miners will be required to apply to the Cabinet Secretary to shut down a plant. The minister can agree to the request with conditions or decline.

The Act also specifies the timeline for mining, royalties, valuation of minerals and dispute resolution. It also restricts mineral dealership permits to Kenyans or companies with 60 per cent local holding.

But even as the government awaits a new law to mine the gains of the growing global gemstones industry, trade is slowing down. Gemstone traders say since 2013 business has dropped sharply.

Emily Mututua of Milestone Gemstone said the business environment in Kenya is increasingly becoming difficult amid the tourism sector slump.
The domestic market takes in only 10 per cent of the jewellery produced while the rest is bought by tourists or exported.

Gem traders sell the stones mainly to tourists and the decreasing numbers following terror attacks has dented sales. Visitor numbers fell 25.4 per cent to 284,313 between January and May last year.

Some gemstone dealers are looking at other markets such as Tanzania. Ronald Mutisya, a gem cutter says before 2013, he would make Sh40,000 a day from cutting stones brought in by dealers, jewellers, but business is no longer as good.

“Most gem dealers have moved to Tanzania, and this is really affecting my business,” he said.

Those still doing business in Kenya, Mr Mutisya adds, have scaled down their production. The lack of schools offering courses in gemmology has left the industry with shortage of professionals like prospectors, miners and cutters.

Professionals currently serving the industry use outdated techniques, resulting in poor prospects and low-quality products.

Cutters like Mr Mutisya learn new techniques through apprentices such as Mr Noel-Soni who are invited to the country rarely.

Universities would have played a key role in ensuring that there are enough professionals in the country to guide the mining industry.

The University of Nairobi, which offers a degree in geology, and the Jomo Kenyatta University of Agriculture and Technology offering a course on mining and mineral engineering courses, remain the only institutions of higher education in Kenya that are training professionals.

The Technical University of Nairobi once offered gemmology courses and had a laboratory for gemstone studies, but the course has long been dropped.

The Taita Taveta University College is among the few planning to introduce gemmology courses.

“There are no schools to teach jewel design yet Kenya produces a lot of gemstones. It is important to have such schools so that the country can start exporting finished products,” said Jackie Collins, a gemmologist and jeweler, who was a gemmology lecturer at the Technical University of Nairobi, the former Kenya Polytechnic.

To get the full benefits of the gem industry, Ms Collins, who learnt jewellery design in UK, says that there is need for the industry to establish schools that will train people to ensure that the country produces decent finished products and reaps the gains of value addition.