Zambia’s mining sector welcomes budget concession but costs still set to soar

Bwalya Ng’andu, finance minister, Zambia

ZAMBIA’S mining sector welcomed a decision by the government to retain its value added tax (VAT) instead of replacing it with a non-refundable tax as previously proposed.

However, other imposts that were ratified following presentation of the country’s national budget on September 27 would make mining more expensive, it said.

Finance minister, Bwalya Ng’andu, said Zambia would reduce the capital allowance for capital expenditure to 20% from 25% and limit VAT claims on electricity to 80% from 100%, among measures affecting miners.

“These new measures will make rehabilitation and maintenance more expensive at a time when we are already struggling to keep our plants in good shape,” Sokwani Chilembo, CEO of Zambia’s Chamber of Mines told Reuters.

Zambia is struggling with high levels of debt and has sought to extract more revenue from its mining sector, much to the dismay of the sector.

Last year, Zambia promulgated new royalties for its copper industry – a development mining firms said would result in a decline in new investment. Zambia’s copper production is forecast by the Zambian Chamber of Mines to fall to 750,000 tonnes. This would be the first time production has declined since 2013.

Citing data from the International Monetary Fund (IMF), Bloomberg said Zambia’s debt would increased to about 90% of gross domestic product (GDP) from less than 50% of GDP in 2014, a year before Edgar Lungu first stepped in as the country’s president.