Zim diamond miners want royalty rate reduced
HARARE – Diamond mining companies in Zimbabwe are lobbying for a further reduction in royalties, a report from a recent mining survey shows, as miners look at ramping up production.
Mining executives surveyed said at 10 percent, the royalty rate for diamond miners was “still the highest in the world.”
Government reduced the diamond royalty rate in 2019 to 10 percent from 15 percent after the companies complained over huge extraction costs resulting from a shift from alluvial to conglomerate diamond mining, which fetches more dollars but is more expensive to extract.
“Diamond producer respondents indicated that the diamond royalty at 10 percent is still the highest in the world and is undermining the viability of producers,” said the survey, urging the Government to cut the rate in line with best practices.
Chamber of Mines of Zimbabwe chief executive Isaac Kwesu told The Herald Finance & Business that the royalty rate of the diamond industry “was too steep for investors,” urging the government to offer more incentives to encourage investments.
“In most cases, the investors become impatient and take their money elsewhere,” he said. “We encourage taxes that support investors and not penalise them.”
Russia’s Alrosa and Anjin are among diamond producers operating in the country.
The diamond industry plea comes as local platinum producers have raised concerns over the beneficiation tax framework to be re-introduced effective January 1, 2022.
Platinum miners are lobbying for tax holidays on beneficiation projects to stimulate investments into the sector. Lithium producers have also made similar requests, arguing the current tax beneficiation framework was discouraging investments into the value addition facilities.
Zimbabwe’s economic blueprint, the National Development Strategy 1 (NDS1) says the re-introduction of a “beneficiation tax” on unprocessed base metals is meant to push miners to set up a value addition to discourage the exports of concentrates and matte.
It said the local mining sector will enhance its beneficiation and value addition strategy through five key minerals namely gold, PGMs, diamonds, coal, and chrome.
While 10 percent of all locally produced diamonds are earmarked for local beneficiation, only about 0.5 percent are being cut and polished in the country, it said in the NDS1.
Cut and polished diamonds are estimated to bring about an eight percent increase in value compared to the exportation of raw diamonds, hence, the NDS1 will seek to increase the level of locally cut and polished diamonds from 0.5 percent to 5 percent by 2025. – The Herald Finance & Business.
Godongwana faces policy tightrope with medium-term budget this week
Finance Minister Enoch Godongwana.
JOHANNESBURG – Finance Minister Enoch Godongwana faces the challenge of presenting a clear strategy to revive South Africa’s torpid economy and return public finances to a sustainable path when he presents his first medium-term budget tomorrow.
Key metrics in the spending plan for the next three years will benefit from windfall mining revenue and upward revisions to gross domestic product, with the budget deficit likely to narrow faster than previously expected.
Still, the country is contending with surging debt and loan-servicing costs as the havoc wrought by the coronavirus pandemic compounds a deterioration in state finances caused by overspending, mismanagement and corruption.
Debt levels are expected to continue rising, peaking at 79.2 percent of GDP in the 2027 fiscal year, according to the median of seven economists’ estimates in a Bloomberg survey.
While that’s better than the National Treasury’s February projection that it would stabilise at 88.9 percent of GDP in 2026, the improvement is largely due to a statistics agency review that found Africa’s most industrialised economy to be 11 percent bigger than previously estimated.
Investors will look to Godongwana for concrete plans to rein in debt and reduce anticipated budget shortfalls.
Since his August 5 appointment, the former labour unionist and head of economic transformation in the ANC has pledged policy continuity.
He’s expected to stick to predecessor Tito Mboweni’s fiscal consolidation plans and focus on “growth-stimulatory measures, with a move away from accelerating current expenditure,” according to Annabel Bishop, chief economist at Investec.
His resolve may be tested by the ANC’s worst electoral performance last week since the end of White-minority rule in 1994.
Opposition to austerity measures from factions within the party could intensify and lead it to promise more social support before national elections in 2024, said Lumkile Mondi, a senior economics lecturer at the University of the Witwatersrand.
The Treasury this year shifted focus to make a primary budget surplus, instead of a spending ceiling, its most critical fiscal anchor. Two-thirds of economists in a Bloomberg survey, however, don’t expect the government to meet its target of reaching that by 2025. – BLOOMBERG NEWS.