malvernmugadzikwa
Business Writer
The legislation that allows ZIMRA to charge VAT on lithium concentrates “requires attention” as it is not in line with other existing statutory instruments, the Chamber of Mines of Zimbabwe has submitted to parliament.
This comes after Lithium producers received directives from ZIMRA to pay VAT on lithium concentrates.
ZIMRA is citing the VAT Act particularly section 12B as the basis for collecting the 5 percent VAT on un-beneficiated lithium.
This is notwithstanding that the Base Minerals Export Control (Un-beneficiation Base Minerals Ores) Order 2023 (SI5 and SI57) defines a minimum level of beneficiation for purposes of export, meaning lithium bearing ores which in the case has lithia content of 3 percent or more and in the case of petalite and lepidolite has a lithia content of 2.5 percent and above.
But with ZIMRA demanding its dues, the Chamber of Mines, in its submissions to the Portfolio Committee on Budget, Finance, Economic Development and Investment Promotion, appealed for the alignment of the definitions of the two pieces of legislation “that will enable ZIMRA not to charge and collect the VAT”.
The Chamber said “the 2025 National Budget remained silent on this matter and thus it requires attention”.
The large scale miners representative body also said
royalty specifically for lithium, PGMs and diamond has remained high, impacting negatively on the viability of the subsectors.
It said royalty is a direct cost of production; thus, high royalty increases the cost structure for mining companies.
“Price linked royalty allows Government to maximise revenue collections during price booms while ensuring viability of producers during periods of depressed prices,” said the Chamber.
This comes as royalty for lithium went up from 2.5 percent, to 7 percent, which the miners deem as “high and unaffordable”.
The increase in royalty came at a time lithium prices were slowing down, declining from a pick of US$81,427/ tonne in November 2022, to the current price of around US$10,600/ tonne.
“To note, the Country’s lithium industry is still new, with the majority of producers having commenced production in the past 2 years.”
The Chamber of Mines has since recommended a lithium royalty structure that will see base royalty of 5 percent appliying for lithium prices of up to US$15,000/ tonne (paid regardless of the fluctuating market price and secures a minimum revenue flow to the government), royalty of 7 percent for prices between US$15,000 – US$20,000/ tonne and Royalty of 10 percent for lithium prices exceeding US$20,000/ tonne.
Interestingly the move by the Government to seek more benefits from the lithium resource comes at a time when some governments are offering incentives to lithium miners.
Premier Roger Cook’s Government in Western Australia (WA) is acting to provide assistance to critical lithium industry, supporting thousands of local jobs and the State’s push to become a global battery minerals processing hub.
In a recent statement, the WA Government said it will
provide support to lithium miners in the ramp-up phase of production and downstream processing facilities for a period of up to 24 months, after which lithium prices are expected to recover to an economically sustainable level.
Through the Lithium Industry Support Program, Government Trading Enterprises (GTEs) including DevelopmentWA, Synergy and Water Corporation will temporarily waive government fees to support the continuation of downstream processing of lithium, for up to 2 years, to a total value of $90 million.
To support lithium miners in the ramp-up phase of their project, port charges and mining tenement fees will be waived for up to 24 months, to the value of $9.37 million.
A $50 million loan facility will also be available to help lithium miners access temporary interest-free loans to help sustain their operations, based on demonstrating their current financial position and operational plan.
Companies will be required to repay the loans through regular quarterly payments over the two years following the end of the interest-free period, which will cease after average lithium spodumene prices have exceeded US$1,100 per tonne for two successive quarters, or by
30 June 2026 if not stopped before then.
The Lithium Industry Support Program builds on the Cook Government’s WA Battery and Critical Minerals Strategy and existing initiatives supporting critical minerals industry jobs, including the Strategic Industries Fund investment, helping to deliver common-user and other enabling infrastructure at strategic industrial areas (SIAs).
Premier Cook said: “WA’s lithium industry supported more than 11,000 local jobs last financial year and has three new lithium hydroxide refineries currently in construction or commissioning.
“Lithium will continue to be an incredibly important element moving forward – particularly for the global energy transition.
“It is also at the centre of WA’s economic diversification story, as we work to position our State as a global leader in downstream processing.
“This package will provide important temporary and responsible support for WA’s fledgling lithium industry, taking into account the extremely challenging market conditions it is facing.
“This package is aimed at helping our critical lithium industry and its workforce to the other side of this turbulent period – supporting local jobs and doing what’s right for WA.”
Bongani Ndlovu