GOVT MULLS INCREASING MINING ROYALTIES | Govt says it will engage mining companies with a view to gain their buy-in on its intention to increase the threshold of mining royalties for most minerals to between 10 and 15 percent.
The move is meant to enhance revenue mobilisation to improve the infrastructure needed for business operations. Government currently has little to spare for capital formation, as constrained revenue space has resulted in most resources going to meet recurrent expenditure.
Mining royalties are charged in terms of the Mines and Minerals Act and according to the Zimbabwe Revenue Authority’s schedule diamond miners pay the most at 15 percent and the rest 10 percent and below.
Platinum miners are levied 10 percent, large scale gold miners pay 5 percent on gross proceeds while small-scale gold miners are levied 3 percent of all proceeds. Base metals, industrial metals and coal bed methane extractors pay royalty of 2 percent and coal miners are charged at 1 percent.
However, Government said it would engage the mining houses on its proposal to expand the royalty thresholds for most of companies that exploit depleting resources to a minimum 10 percent.
But the proposals have already elicited stern resistance from some sections of the mining industry who argued that they were already hard pressed with many other obligations to agencies such as local authorities, Environmental Management Agency and Radiation Authority of Zimbabwe.
Speaking at the MINEX Conference at the ongoing Harare Agriculture Show being held under the theme, “Local Content, Value Chain and Coalitions for Economic Development,” Mines and Mining Development Minister Walter Chidhakwa implored the mining companies to appreciate the value they could add to the business environment through increased contribution State revenue.
“The mining sector continues to play a significant role in the economic development of the country . . . the minister of finance has always criticised us (mining sector) on our contribution to fiscal revenue.
“When you look at the importance of that aspect, (national revenue) is what enables the State to develop infrastructure; to build roads, facilitate the development of railways, telecommunications (infrastructure), dams and irrigation facilities: all (such infrastructure) come from that contribution.
“Now the things that I have mentioned are in fact the framework within which we all operate, it does not matter what business you do.
“So yes, there is the fine line between the discussions on investment promotion, which say lower taxation in order to be internationally competitive in terms of attracting investment, but when it is too low it also then affects the infrastructure needed by the same players when they then begin to operate.
“Therefore, this discussion needs to take place a bit more, we need to make more contribution as a mining sector and perhaps move from seven to 10 percent to somewhere between 10 and 15 percent.
“In fact that will be significant because your (production) volumes are very significant and therefore just one or two percent increase will make a significant difference to national economic development.
Minister Chidhakwa said while his proposals might sound as if Government was trying to push the miners against the wall, in reality, the proposal would make it easier for them because at the end of the day the miners needed such the infrastructure, all of which should be provided by the Government.
Zimbabwe Miners’ Federation (ZMF), the country biggest small scale miners’ representative group, however contends the move was ill-advised and had the potential to push miners out of business.
“We understand the need for us to contribute more as a sector,” said ZMF spokesperson Dosman Mangisi, “but we feel the sector is already depressed and any move to further levy it could have serious negative impact.”
Mining revenue for the first half of this year totalled $34,27 million, reflecting a 22,84 percent growth in revenue for the same comparative period the previous year when the sector grossed $27,9 million.
In its revenue performance report for the first half, Zimra attributed the increase in mining royalties to firming of metal prices on the global market and increased production of gold and platinum.