It’s official: Zambia scales back mining royalties to 9%

It’s official: Zambia scales back mining royalties to 9%

Barrick’s Zambia Lumwana mine was only one of the operations jeopardized by Zambia’s royalty hike. (Image courtesy of Barrick Gold)

Zambia has approved a proposal to drop a recent and controversial hike in mining royalties and it is returning to a tax system based on profit in a fresh effort to try solving a six-month standoff with miners over the increase.

According to AllAfrica.com, the government has set mining royalties for both open-pit and underground mines at 9%. In January, Zambia had increased the levy for open pit mines from 6% to 20% and from 6% to 8% for underground operations.

The cabinet also decided to return income taxes to 30% and set a 15% variable profit tax.

The announced changes will be effective on July 1, once parliament has approved them, AllAfrica.com reported.

The royalty increase prompted warnings of closures and thousands of job losses, underscoring a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

From 1997 to 2013, mining attracted $12.6bn in foreign investment to Zambia, according to industry figures. The capital injection helped the southern African nation become one of the continent’s star economic performers, with average annual GDP growth of 6.4% over the last decade.

Today, mining employs 90,000 people and contributes about three-quarters of the country’s foreign exchange earnings and 25-30% of government revenue.