Gemstone structured market rolls out with challenges

By Wahard BETHA

The Reserve Bank of Malawi has through its subsidiary, Export Development Fund (EDF), rolled out the long awaited structured market for gemstones which is meant to curb smuggling of precious minerals by providing the local Artisanal and Small-scale Miners (ASMs) with a ready market.

In an interview with Mining & Trade Review, EDF Manager for Precious Metals and Minerals Elvin Nkhonjera said since it commenced buying gemstones in February 2023, EDF has managed to purchase “a considerable amount of gemstones including sapphire, rhodolite garnet and aquamarine.”

Nkhonjera, however, said there are a few challenges the structured gemstone market is facing, the major one being lack of knowledge on quality and value of gemstones by both miners and traders as some are bringing to them stones of low or no value.

Nkhonjera said: “I think gemstone knowledge in the country is still a challenge. People are bringing stones thinking they are valuable just because they heard EDF is buying gemstones.”

“Some are just starting gem trading upon hearing that we established a structured market. But as EDF we are trying to tell them how some of the valuables look like but still more, we and Ministry of Mining need to conduct special training for these miners.”

She said some traders are losing a lot of money by buying stones of no value thinking they will sell to EDF at a good profit but EDF send them back because they cannot buy stones of little or no value.”

Nkhonjera stressed that the aim of establishing the market is to generate forex for the country and also provide local miners with a stable and dynamic market hence EDF is only buying stones which are easy to handle but expensive on the market.

She said miners with stones of low value have to wait as EDF is planning to roll out an initiative which will provide a foreign market for miners with low value gemstones.

Nkhonjera explained that EDF buys the gemstones while at the same time marketing them to eligible foreign buyers to ensure that they generate foreign exchange as soon as possible.

She said EDF is currently marketing raw gems but was quick to explain that once they get settled in the business they will start adding value to the stones, which will help in creating employment opportunities for Malawians along the value chain.

Nkhonjera said:  “We will recruit experts to help on how to add value to low value gemstones and also train ASMs on how they can add value on their own.”

“Currently, some gemstones are being marketed without added value because we may cut them but some buyers may not like it only to say your cuts are different with ours. So it is better we sell in large sizes and they do the cutting themselves.”

“If we start cutting today we may have limited market at the same time lose a lot of money as compared to selling them in large sizes.”

Nkhonjera also lamented that currently supply of the gemstone has gone down as many small scale miners have abandoned the mines to their gardens as it is farming season, but sounded hopeful that once the growing season comes to an end, supply will pick up.

EDF has so far purchased the gemstones in the districts of Dowa, Lilongwe, Ntcheu and Mulanje with some miners and traders coming with their gemstones directly to its Lilongwe offices.

In a related development, EDF has bemoaned stiff competition with unlicensed foreign gold buyers in its gold buying initiative.

Nkhonjera said market competition has drastically resulted in an increase in the prices of gold on the local market from MK18000 to MK75000 per gram in a period of two years.

She said: “Before we started buying the gold, the foreign traders were buying every gram at MK18, 000 and some at MK20,000, but we came into the market with MK35, 000 per gram which forced them to raise their price to MK40,000 per gram.

“We later raised it to MK45,000 and they raised theirs to K55,000. We got to Mk65,000 and they responded by raising too to MK75,000. So what does it tell, we have lost a lot as country before EDF launched the structured market for gold.”

“Our participation benefits the Malawi economy both directly and indirectly. We are improving the welfare of local miners while on the other hand helping in boosting the national economy.”

EDF is currently buying gold at MK70,000 per gram and Nkhonjera said in order to avoid making losses it cannot raise the price further than that to outdo the foreign buyers.

Commenting on the development in an interview, mining expert Grain Malunga said there is need for the Ministry of Mining to work in collaboration with security agencies to arrest the illegal buyers and monitor the markets.

Malunga said: “What is happening is like selling tomatoes. You need to negotiate and if there are others who do not negotiate, you lose.”

“What is important is to identify those buyers if they are licensed by the Department of Mines. They may offer higher prices because their dealings are informal.”

Coordinator for Natural Resources Justice Network (NRJN) Kennedy Rashid in a separate interview called for an increase in funding the gold structured market to allow that EDF is present in all gold mining hospots.

“Government should look at how we can ensure that EDF is present in the areas to reduce costs of roving across the country. We need their presence daily in hotspots,” said Rashid.

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