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MINING FIRMS READY TO INVEST $2.5 BN IF TAX IS ADJUSTED FAVORABLY

By BUUMBA CHIMBULU

ABOUT US$2.5 billion is expected to be invested in the Zambia’s mining industry for expansion programmes.

In addition, the industry is expected to invest US$439 million in capital expenditure if adjustments are made to the current mining tax regime, Zambia Chamber of Mines (ZCM) president Godwin Beene said.

According to the Zambia Chamber of Mines Newsletter, Government recently held a mining indaba to address issues bordering on mining taxation.

Dr Beene indicated that the unfavourable mineral royalty tax had continued hold up fresh capital worth over US$2.5 billion from international financial institutions for expansion, which he said was out of reach for most mines because of high mineral royalty regime.

Presently, the mineral royalty stood at 10 per cent.

He said adjusting the calculation of mineral royalty tax to Pay-As-You- Earn (PAYE) sliding scale, instead of the current stepped up scale, was the solution to unblocking investments in the industry.

Dr Beene recommended that Government should allow deductibility of mineral royalty as an expense to improve returns and make third-party capital affordable.

He said this should be coupled with investment in exploration to find new deposits and increase the lifespan of the industry which was at the most, less than 30 years.

Dr Beene sees a simultaneous building of new mines once adjustments are made to the mining tax regime to promote stable growth and build diversity in the economy.

He observed that diversification in mining and other sectors had been suboptimal in the past because it was viewed as a parallel growth process to that of existing mining.

This had shown that most real growth in the economy was corollary to the growth in the existing mining.

“The industry continues to be caught flat-footed by the good copper prices as it is unable to take advantage by significantly ramping up production,” Dr Beene said.

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