Chronicle Editor
Leonard Ncube and Prosper Ndlovu in Victoria Falls
FINANCE AND Economic Development Minister Professor Mthuli Ncube has encouraged players in the mining sector to take advantage of the Victoria Falls Stock Exchange (VFEX) to secure critical capitalisation for the expansion of their operations.
With the mining sector coming under intense focus as the country seeks to bolster the economy towards an upper middle-income status by 2030, more financing is required to unlock the vast mineral deposits through comprehensive exploration and capitalisation of existing projects.
President Mnangagwa, who officially opened the 2021 Chamber of Mines of Zimbabwe Annual Conference on Friday, also stressed the need to scale up mining output with a bias towards enhanced exploration and robust value addition and beneficiation.
Such a path requires adequate finding, which could be successfully unlocked if local mining operations ride on the newly established VFEX, said Prof Ncube while addressing the conference delegates on Friday. He said in addition to fiscal support measures and short-term interventions to assist importers in mitigating against risks associated with the spread of Covid-19 pandemic, digitalisation of export documentation and listing on the foreign currency denominated VFEX, would be a game-changer for the sector.
Just because the mining sector is capital intensive, this means the sector requires a huge amount of foreign currency hence the establishment of the VFEX to help in attracting foreign investments into the country, said Prof Ncube.
“We are determined as a Government to support the achievements of the mining industry. In addition, in order to promote capitalisation of investment projects, the Government established the Victoria Falls Stock Exchange and I am confident that these measures will contribute towards the attainment of the US$12 billion mining sector,” he said.
VFEX parent company and main bourse, the Zimbabwe Stock Exchange, has said it was engaged in the process of crafting a framework that even allows small-scale miners to easily list on VFEX. Of late small-scale miners have become the backbone of mining operations but need more support to ramp up output.
This is expected to increase the new bourse’s product range through the establishment of a regulated platform to list and trade small-scale mining companies. Over and above the VFEX listing window, Prof Ncube told delegates that Government was increasing support for the mining industry particularly through incentives and rebates aimed at capacitating miners so that the economy can derive maximum benefit from the sector.
At the moment the mining sector is the biggest foreign currency earner for the economy, contributing 20 percent to the Gross Domestic Product in 2019 hence it is key to the achievement of the National Development Strategy 1 (NDS1) and Vision 2030.
Prof Ncube said there was a need to shift focus to higher-value addition and beneficiation to ensure that the economy derives maximum benefit from the sector. Already the Government envisages a US$12 billion mining industry by 2023 driven by a cocktail of minerals most of which are enjoying investment boost from the private sector riding on the policy of engagement and reengagement by the Second Republic.
Through the Reserve Bank of Zimbabwe, the minister said the Government has come up with a number of incentives with the aim of driving growth through an optimal mining regime.
“Research has shown that mineral extracting economies grow much slower than mineral value adding economies. To translate mineral resources into improved economic development and improved fiscal revenues, the NDS1 thrust is to promote mineral beneficiation and value addition. Government appreciates that the mining industry requires a stable mining fiscal regime to facilitate growth and investment. To further promote investment in the mining sector, the Government has over the past years reviewed the mining fiscal regime,” he said.
Among the measures being implemented to support the industry is the downward review of corporate income tax from 25 percent to 24 percent to uphold the equity principle of taxation, deductibility of royalties on assessment of Corporate Income Tax where royalty payments were disallowed as a deductible expense in the assessment of Corporate Tax in prior years. These are now allowable as a deduction, as well as a downward review of royalty rate on diamond from 15 percent to 10 percent.
Prof Ncube said the Government has dangled a sliding scale royalty rate for gold, which takes into account price fluctuations at five percent for prices above US$1 200 per ounce and three percent for prices below US$1 200. He said in the case of holders of a special mining lease, corporate income was taxed at a special rate of 15 percent. The minister said a holder of a special mining lease may be exempt wholly or partly from non-residents tax on fees remittances and royalties
Some of the incentives include rebate of duty on goods for the prospecting and search for mineral deposits, goods for use in petroleum exploration or production, goods imported in terms of an agreement entered into pursuant to a special mining lease, suspension of duty on goods imported for specific mine development operations.
He said the recent incremental Export Incentive Scheme was put in place by the Government through the RBZ to achieve, among others, the need to boost exporters’ productivity and to encourage other firms to venture into exports.
“The scheme also seeks to grow exports, enable exporters to benefit directly from export receipts, encourage firms to list and participate on the Victoria Falls Stock Exchange and Victoria falls Offshore Financial centre,” said Prof Ncube.
In order to increase productivity, he said the Government was also improving energy infrastructure through revamping of old plants and construction of new plants to ensure a reliable supply of power. In the case of a holder of a special mining lease corporate income tax is levied at a special rate of 15 percent, which is much lower than the normal mining lease
Prof Ncube said five key minerals being gold, diamond, base metals, coal and chrome have been targeted for value addition and beneficiation in the short term with prospects for more job creation along the value chain.
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