Tanzanite price falls by 80 percent, WHY?

2009-01-11 14:08:47
By Adam Ihucha, Arusha

First it was cotton, then followed coffee, Nile Perch, tourism and this week tanzanite joined the list of the latest casualties of global economic meltdown, when the price of the rare gemstone plummeted by 79 percent at the global market.

The situation has prompted thousands of tanzanite miners as well as brokers to suspend production, pending the stability of the global market for the uniquely Tanzanian gemstone which generates about $500million (Sh575 billion) annually.

The government`s share of the earnings is about $20million in taxes and royalties, the big chunk of which is paid by local miners, while foreign investors continue to enjoy the huge tax exemption granted to them under the controversial Mining Act of 1998.

In Mererani, the owners of the nearly 200 tanzanite mining pits reportedly opted to suspend their operations between October 2008 and January 2009 rather than operate at a loss.

Closure of the mines will leave 45,000 tanzanite diggers and brokers jobless, according to statistics provided by the Manyara Regional Miners Association (MAREMIA).

But, surprisingly, the tanzanite sub-sector employs about 250,000 people in Jaypur India; where the unprocessed gemstone is cut and polished for re-export.

By the end of this week, in a small town popularly known as `Zaire village` - that used to shelter about 60,000 people - the number has fallen dramatically to only 20,000 residents, during the past few months, following the plummeting of tanzanite prices at the global market.

The situation fuelled also by the recent Thailand political unrest has almost brought the price of the rare tanzanite to its knees, after a lull of nearly six years. Thailand is one of the leading markets for tanzanite gem.

The major price falls comes at the time when the sector was already recovering from a major setback of the September 11 terrorist attacks in US, whereby it was claimed that the revenues generated from tanzanite was used to finance Al-Qaeda activities around the globe.

During that period, tanzanite price fell drastically, after a celebrity lawyer Ed Hayes` multi-billion dollar litigation lawsuit against tanzanite traders, who were alleged to be trading with Al-Qaeda fugitives.

After the announcement of the lawsuit, panicky traders in Thailand and India dropped the price to as low as $120 a carat for high quality pieces from November 2001 until the Tucson Tanzanite conference in spring 2002.

Miners puzzled, left at the crossroads
Leonard Shayo and Lemali Bayani have been prominent tanzanite dealers for several years, operating in Arusha city, but with the latest major price cut for the rare gems, they don`t know what the future holds for them.

According to them, a top colour gramme of raw tanzanite is currently trading at between Sh170,000 from the previous Sh800,000.

Local dealers told The Guardian on Sunday, that a single polished carat of Tanzanite top colour, currently trades at Sh180,000 down from Sh400,000 recorded in mid last year.

``The global credit crisis plus the unrest in Thailand have contributed greatly to the drastic price cut for tanzanite…we are puzzled.” Shayo told The Guardian on Sunday.

Following the `collapse of tanzanite market`, hundreds of tanzanite brokers, who used to flock to the famous Pangani Street at the heart of Arusha city, have vanished, casting a bleak future to the city whose major source of revenue tourism - is also said to be the latest victim of economic recession.

Back to Mererani, hundreds of small scale miners have downed their tools, pending the stability of the world`s market for tanzanite, according to MAREMIA Secretary Abubakari Mollel.

``It is a disaster as hundreds of our members suspend mining activities due to the collapse of the tanzanite market, `` Mollel told this reporter over the phone yesterday.

``Mining is the core business here, others such as hotels, lodges and retail shops are all dependent on it, now there is no more tanzanite and therefore people are leaving.`` chipped in Rajabu Abdallah, a resident of Zaire.

The once vibrant mining vicinity is slowly, but surely transforming into a ghost territory empty houses, deserted bus stations and relatively sad faces of the few remaining residents who have lost all hope of survival.

Discovered by one Ali Juwa Watu in 1967 at what is now known as Block `C` area in Mererani hills, about 70km South East of Arusha, tanzanite gems will clock 42 years next year.

Tanzanite gems were named by Tiffany as, ``the most important gemstone discovery in 2000 years``, and have lived up to expectations. It is now one of the most sought after gemstones in the world, especially in the US market.