Zambia mining industry says new rules to scare investors, deter local processing

Zambia mining industry say new rules to scare investors, deter local processing

First Quantum Mineral’s Kansanshi mine. It is the eighth largest copper mine in the world, as well as Zambia’s biggest.

Zambia's Chamber of Mines is asking the government to reconsider its decision to hike corporate income tax rate on mineral processing from 30% to 35%, effective since July 1, as they claim it will scare away investors and discourage processing to add value.

The country, Africa's second largest copper producer, also resolved last month to cut mineral royalty rates from 8% to 6% for underground operations, and from 20% to 9% for open cast mines.

Maureen Jangulo Dlamini, head of the mines chamber, said the industry is not happy with the new tax regime, originally aimed to put an end to a nine-month standoff that severely hit the country’s output and profits.

“A two-tiered rate, differentiated by mining method, is not conducive to the long-term health of the industry and government revenues,” she said in a statement. “It does not address the need for continued investment in the country’s mines, nor does it address the fact that there are some opencast mines with higher operating costs than underground mines and vice versa.”

Withheld value-added tax (VAT) refunds continue to be another point of contention between authorities and the mining industry.

For years, the government has declined refunds to mining companies and other exporters, which they say have not produced import certificates from destination countries — a step the government considers key to full transparency.

But miners argue it is impossible to do because third parties trade their commodities.

So far major copper miners are owed nearly $800 million in VAT refunds stretching back to 2013, data from the chamber of mines shows.

Mining accounts for 12% of gross domestic product (GDP) and 10% of formal employment in Zambia.