adminZambia has bowed to pressure from mining companies to review a punishing hike in mineral royalties that led investors to threaten to pull out of the copper-rich country. It has proposed to set its mining royalties at 9 percent for both open-pit and underground mines, a source in the presidency is quoted in Business Day as saying.
Zambia’s decision to increase royalties for open-pit mines to 20 percent from 6 percent and those for underground mines to 8 percent from 6 percent in January had rattled unions and miners, forcing the government to review the plan.
Global mining firms running mines in Africa’s second-largest copper producer had expressed concern that the new royalties could harm their earnings, and some warned of shaft closures that could have led to the loss of about 12,000 jobs.
The proposed changes to the mining royalties came about after President Edgar Lungu last month directed the finance and mining ministers to amend them by April 8, saying the southern African nation could consider temporarily reverting to the tax regime that prevailed in 2014.
The Democratic Republic of Congo, meanwhile, plans to increase mine royalties and raise its stake in future projects as it tries to carve out a bigger slice of the country’s decade-long metal-extraction boom, says a Bloomberg report.
The central African country’s mining industry has seen record growth since the 2002 code came into effect at the end of almost a decade of civil war.
Now the government is demanding terms more favourable to the economy from companies.
‘The growth of the mining sector, both industrial and artisanal, which should bring the state substantial revenue for economic and social development, has not fulfilled numerous expectations,’ the government said in a note explaining the revisions given to parliament last month.
The proposed code raises royalties on copper and cobalt revenue to 3,5 percent from 2 percent and on gold and other precious metals to 3,5 percent from 2,5 percent.
The royalty on diamonds and other gems will increase to 6 percent from 4 percent.
The government’s free share of new mining projects will increase to 10 percent from 5 percent, according to the code, while profit tax jumps to 35 percent from the current 30 percent.
Miners say the changes will hamper investment and have worked to delay the code revisions for almost three years.
Any increase by the Democratic Republic of Congo in the taxes it levies on mining will stifle new investment in the mineral-rich African country, gold miner Randgold Resources’ CEO said while on his way to the DRC to lobby the government to roll back the proposal.
Fin24 reports that Randgold operates the $2,5bn Kibali gold mine in the central African country.
Bristow said Kibali would never have been developed under the current proposal.
Bristow said the Kibali mine, and other existing mines in the country, were protected by a 10-year stability clause, which means they would not have to pay the new taxes for 10 years after such proposals were passed into law.
It is only new mining ventures that would be hit by these new rules. Mining companies say that Congo’s regulatory environment must be particularly attractive to draw investors, given the country’s poor infrastructure and political instability.
A host of African nations including Zambia, Ghana, Mali, and Côte d’Ivoire have in the past few years attempted to boost revenues from the mining sector by imposing higher taxes, only to later roll back such proposals. – Business Day
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