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Thursday, 3 October 2013

Will Mining Companies Get Lower Taxes?

Mining companies are currently in negotiations with Government to reduce the mining tax burden. According to a "government official" at the mining ministry quoted by a recent Wall Street Journal report, the talks over incentives and tax waivers are progressing well but warned that "miners shouldn’t expect a lot of concessions".

What is clear is that there are concessions being made by Government. And the focus seems to be getting either deferring mineral royalties or getting rid of the 10% export levy introduced last year on unprocessed mineral exports. KCM recently upped the pressure by claiming that copper production at Zambia’s largest copper producing mine is facing a looming threat as stockpiles of unprocessed concentrates rise due to inadequate treatment facilities in the country. It values the stockpiles at around US$130m.

The levy on the export of unprocessed concentrates is intended to encourage value addition. It is in fact in line with a trend of restricting unprocessed minerals across the continent as resource-rich countries seek to benefit more from natural resources. Our neighbour the DRC is due to ban exports of unprocessed minerals from January 2014. It appears Mines Minister Christopher Yaluma is more keen to do the opposite by getting rid of the export levy.

All more baffling because Chamber of Mines president Emmanuel Mutati has already noted that "the current price won't lead to a reduction of copper production per se this year..it might just lead to a non-profitable situation and it's a question of how each mine assesses how long they can get into a non-profitability situation. How long can they sustain that situation". He went as far as to say there's no need to panic.

So where is the pressure to drop these mining taxes coming from? We can only await the Budget 2014 with trepidation!

ABOUT THE AUTHOR
Chola Mukanga | Economist
Copyright © Zambian Economist 2013

2 comments:

  1. How is this ever going to change?

    Have all the defenders of neoliberal ideology from the MMD years ever said they were wrong, even though they helped the mining companies steal tens of billions of dollars of Zambian resources?

    Why would the Zambian government get one dime,

    Do you know who founded the world's biggest diamond miner, De Beers? That was NM Rothschild & Sons Limited, in 1887. In 1888, Cecil John Rhodes named De Beers' Founding Chairman.

    Did you know that the MDC in Zimbabwe even wrote ownership of their diamond mines by De Beers into their manifesto?

    De Beers has similar PPP's in Namibia (NamDeb), and Botswana (Debswana). Zimdeb? Debzim? I quote from "MDC-T plan for the mining sector": "We will nationalise diamonds and ensure that government goes into partnership with genuine investors."

    The party that wants to privatise everything that isn't nailed down, wants to nationalize the diamond fields for the benefit of De Beers.

    The problem is that we need international recognition and enforcement of the ownership of natural resources by the people who live in the country. Minerals should only be sold to the state at cost, and sold by the state at the highest international prices.

    The question has never been whether there would be 'development', but who benefits.

    ReplyDelete
    Replies
    1. Mrk,

      Good to see you back sir!

      "The problem is that we need international recognition and enforcement of the ownership of natural resources by the people who live in the country. Minerals should only be sold to the state at cost, and sold by the state at the highest international prices"

      Well stated!

      Delete

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