Chinese mining companies in Zambia start paying taxes in yuan

Chinese mine operators in Zambia started paying royalties and taxes in yuan in Africa’s second-biggest copper producer, the latest sign of the growing acceptance of the currency on the continent.

Payments using the Chinese unit began in October, the Bank of Zambia said in reply to emailed questions on Wednesday. The Zambian authorities are the first in Africa to confirm they are accepting mining-tax payments in renminbi.

Africa is emerging as a key arena in Beijing’s efforts to internationalize the yuan, especially in nations that are heavily indebted to it. Kenya this year converted dollar loans it owed to China into yuan-denominated debt, Ethiopia began talks to do the same, and Zambia said it would consider following suit.

“A large portion of copper exports go to China and the Chinese mining firms already receive some, if not all, of their payments for their exports to China in renminbi,” the central bank said. “The Bank of Zambia has the diversification and building-up of its reserves as a key objective, and purchasing renminbi enables the bank to actualize this objective.”

Holding a portion of foreign-currency reserves in renminbi will also enable Zambia to service its debts to China in a more cost-effective manner, according to the central bank.

The bank first introduced rules in 2018 that require mining companies to sell dollars to it to pay royalties. It expanded the regulations in 2020 to cover all mining-tax payments, part of efforts to bolster the government’s dollar reserves as it struggled with a rapidly rising external-debt burden.

Mine operators can now choose to sell either dollars or renminbi to the Bank of Zambia in order to make tax payments. The central bank last month began publishing the official renminbi-kwacha exchange rate to facilitate the change.

“The practical acceptance of renminbi will depend on the Bank of Zambia’s reserve-management policy, pricing mechanisms and operational guidance to the market,” Joseph Jalasi, senior partner at Dentons’ local unit, told Bloomberg.

Canadian mining companies First Quantum Minerals Ltd. and Barrick Mining Corp. accounted for about two-thirds of Zambia’s copper output in 2024. But China Nonferrous Mining Corp. Ltd. and other Chinese operators are spending billions of dollars to boost production of the metal, just as it posts its biggest annual price gain since 2009.

(By Matthew Hill and Taonga Mitimingi)