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In a speech read on his behalf by the Platinum Producers Committee chairman Mr Hebert Mashanyare during the Mine Entra 2012 conference in Bulawayo yesterday, the Chamber of Mines president Mr Winston Chitando said the mining industry stood ready to discuss policies that foster mineral production in the country.
“The mining industry is a major pillar of the economy and has played a critical role to the Gross Domestic Product. The current performance is in deficit position compared to its full potential in terms of contribution to the economy.
“The confidence of the current and potential investors has been shaken by policy initiatives Government has adopted,” he said.
He said such policies were centred on mineral development laws, royalties on minerals, environmental management policies, indigenisation and economic empowerment laws.
Mr Chitando said the fiscal environment was sensitive to growth and development of the mining industry.
“Given the sensitivity of mineral taxation in the country, the country should come up with effective tax rates to attract investors in the industry. Currently, the mining sector is subject to a myriad of taxes such as capital gains, licence and registration fees, corporate tax, local authorities’ tax as well as environmental management fees. Unjustified increase of tax burdens investment promotion in the sector.”
He said Zimbabwe’s tax regimes at the moment were on the excessive side taking into consideration that royalties for minerals was ranging between 1 percent and 15 percent, corporate tax 15 percent, capital gains tax ranged between 15 percent and 25 percent while Pay As You Earn levied on companies amounted up to 35 percent.
“Zimbabwe’s effective tax rate at the moment is estimated at 60 percent. The total effective tax rate is considered very significant if compared to other countries such as Ghana and South Africa whose effective tax rates are 56,7 percent and 32 percent respectively,” he said, adding that because of excessive effective rates, the country was becoming less competitive in attracting investors.
Mr Chitando said the recent increase on royalties was also pinning down mineral productivity.
“The hardest hit is the gold sector with investors still trying to recover. At the moment, the gold sector needs $2,3 billion investment requirement in the short to long-term while platinum needs $2,8 billion.
“The Chamber of Mines has come up with royalties’ percentage proposals. For example, we have proposed royalties of 3,5 percent on platinum, 5 percent for chrome, 2 percent nickel, iron ore 2 percent, diamond 10 percent that at the moment is at 15 percent,” he said.
He said the absence of a mineral development policy was also working against investment promotion in the mining industry.
“The formulation and adoption of a Mineral Development Policy is long overdue. The policy acts as a guideline to investors and Government. Clarity of the policy is important in attracting investors. As mining industry, we want it articulated by Government,” he said.
He added that the Mines and Minerals Amendment Act was critical in decisively dealing with many issues such as the utilisation of land under title and the disputes arising from inappropriate pegging of claims.
He said Government and individual mining companies were presently involved in discussions over the Indigenisation and Economic Empowerment law.
“We hope the discussions will articulate positive results to foster economic policy in the mining industry,” he said.
Mr Chitando said Zimbabwe’s power tariffs were on the excessive side compared to countries in the region.
“Current power tariffs need to be reviewed. Zimbabwe power tariffs are the highest in the region pegged at US0,10c per kilowatt while countries such as South Africa charge US06,67c per kilowatt,” he said.
Online Reporter