ZAMBIA’S finance minister, Bwalya Ng’andu, told state television on Sunday the country would listen to mining company grievances over double taxation claims, but current fiscal rules are nonetheless halting $2bn in new copper sector investment, said Bloomberg News.
The newswire cited Zambia’s Chamber of Mines as saying that a royalty payment regime had to be removed. As matters stand, Zambia does not allow mining firms to deduct the royalty from its overall tax payment leading to a double payment.
“We need this royalty payment regime removed for progress to begin,” Sokwani Chilembo, CEO of the chamber told Bloomberg News. “If the government thinking is otherwise, good luck.”
The revenue-based royalty increases from a minimum of 5.5% to 7.5% when copper trades at $6,000 to $7,500 a ton, with a further jump to 10% should prices top $9,000, said Bloomberg News. Copper has traded above $6,000 since the end of June.
Canada’s First Quantum Minerals has halted $1bn in proposed expansion of its Kansanshi facilities in Zambia whilst EMR Capital has taken a similar view with its Lubambe copper mine. Lubambe CEO, Nick Bowen, said earlier this month that Zambia’s changing tax regime makes investment difficult.
The Zambian government has clashed repeatedly with its mining sector over the last two years. It attempted to force through the liquidation of Konkola Copper Mines which is controlled by Vedanta, and has threatened to withdraw the mining licence of Mopani Copper Mines, run by Glencore, after the Swiss group said it would put the mine on a care and maintenance programme.
Bloomberg News said these developments may relate to President Edgar Lungu’s “manoeuvring” as he attempts to resolve the country’s economic problems ahead of national elections next year.
This comes amid rapidly deteriorating economic conditions for Zambia. Its debt burden is set to reach 110% of gross domestic product this year, according to Moodys, the credit ratings agency. Lungu’s administration has asked for a freeze on bond interest payments owed to international investors.
Zambia is the second largest producer of copper in Africa. The metal accounts for 70% of its export revenues. However, the chamber expects the coronavirus pandemic to cut output this year to about 764,188 tons, far short of Zambia’s target of one million tons.
