Zambia is now officially the highest cost mining country worldwide following the implementation of the new fiscal regime on January 1, 2019.
According to data availed by the Zambia Chamber of Mines, the cost of operations for mining companies in the country has skyrocketed to the highest globally, mainly due to the government’s hiked mining fiscal regime, which took effect, Tuesday, January 1.
The 2019 mining fiscal regime now sees an increase in mineral royalty rates by 1.5 percentage points at all levels of the sliding scale.
Government has, among other key measures, rolled out import duties of five per cent on copper and cobalt, while equally introduced an export duty on precious metals including gold, precious stones and gemstones at the rate of 15 per cent kicking in from New Year’s Day.
Data availed by the Chamber of Mines shows that Zambia now ranks as the world’s highest cost in terms of operations, simultaneously making the country as the least attractive investment destination.
The Chamber’s International Comparison Index shows Zambia’s 2019 fiscal regime has increased royalties and extraction taxes from between four and six per cent to 5.5 and 7.5 per cent; royalties are now no longer deductible against Corporate Income Tax (CIT); dividends taxes shoot up to 20 per cent from 15 per cent, while export duties on Manganese and precious gemstones rises to 15 per cent from 10 per cent.
These hiked taxes give Zambia the highest overall score on the Index to 23 surpassing Russia, Chile, Germany, Tanzania and the Democratic Republic of Congo (DRC), among six other top mining destinations.
Chamber of Mines president Goodwell Mateyo warned that the new fiscal regime effectively prices Zambia out of the world market as the least attractive investment destination.
“Mineral royalties being deducted for purposes of CIT, we have said, no, you can’t deduct mineral royalties; this has made us an outlier; we’ve priced ourselves completely out of the market if you look at all of the rest of our peers,” Mateyo said during a media presentation to journalists in Lusaka.
“Dividends on taxation; this has been pushed up to 20 per cent. If you are able to pay a dividend, it’s gone up to 20 per cent! Again, off the market; we’ve moved from amber to red. Import duty; it’s gone on higher end from amber to red; export duty, again, 15 per cent of Manganese, which was already an outlier, is now the highest amongst anywhere in the world! Even more worryingly, there’s a 15 per cent export duty on precious stones, which takes us away from everyone else amongst our peers.”
He argued that the higher taxes will dissuade mining investment flows into the country.
“The average score, the result, if you compute all of this post-budgetary changes, on an empirical Index, it takes us to a score of 23, which is way off the rest of our peers. So, what we have essentially done is we have priced ourselves out of the market for investment into mining,” said Mateyo.
“And if there’s an investor out there with investment capital into mining, are they going to invest in this destination or will they will they be looking to invest in the other destinations on the amber or on the green…?”