Government must urgently review the 2019 mining fiscal regime to ensure that growth in the sector is sustained and tax revenues to the Treasury are maintained, insists the Zambia Chamber of Mines.
But Mines Minister Richard Musukwa says government will not tolerate any kind of arm-twisting from the mining sector, advising them that government’s doors remains wide open on any pressing issue troubling players, including the disputed fiscal regime.
Speaking during a keynote address at the 2019 Zambia International Mining and Energy Conference (ZIMEC) in Lusaka, Thursday, Zambia Chamber of Mines president Goodwell Mateyo appealed to government to revisit the controversial 2019 mining fiscal regime.
The 2019 mining fiscal regime, which took effect from January 1, 2019, increased mineral royalty rates by 1.5 percentage points at all levels of the sliding scale, and so far resulted in some mining companies significantly scaling-down their operations.
“The industry has since been faced with a mining tax regime that leaves our mining destination as an outlier, with higher tax rates compared to peer mining jurisdictions. Honourable Minister of Mines (Musukwa), we continue to respectfully request that the government revisits the mining tax regime, which only serves to deter investment in the sector,” Mateyo appealed.
“We further request that serious consideration be given to the counter-proposals on mining taxation as submitted by the Chamber of Mines.”
He expressed continued optimism that the punitive fiscal regime would be reformed.
“As a Chamber, we remain resolutely committed to meaningful engagement with the government. As president of the Chamber, personally, I remain quietly optimistic that through dialogue we shall be able to find a balance between a tax regime that encourages investment in the sector on the one hand, and one that also ensures that the government is able to generate sufficient resources from the sector to finance its development goals and agenda,” he said.
And Mateyo, who is also Mopani Copper Mines’ general legal counsel, called on government to expedite completion of the Cost of Survey Study to attract much-needed private sector investment in the energy sector.
“Hon Minister of Energy (Matthew Nkhuwa), it will be important that the Cost of Survey Study that has been relaunched is successfully concluded to ensure that cost reflective tariffs are in place to attract further investment in the sector,” said Mateyo.
But Musukwa said that government’s doors remained wide open on any pressing issue troubling the mining sector, including the disputed fiscal regime, insisting that the usual “arm-twisting” tactics will not be tolerated.
He argued that the mining industry’s prospects remained positive this year despite the ongoing turbulence with some mining companies scaling down operations.
“…However, despite the setbacks, the mining sector is poised to continue registering positive growth because government stands ready for constructive dialogue with all stakeholders to address the concerns and avert any adverse consequences. At this juncture, I wish to extend a leaf to all affected parties, Mr president of the Chamber of Mines, to engage with government and come up with justifiable solutions for implementing some of the (fiscal) changes that have been suggested,” said Musukwa.
“To that effect, I also wish to inform this gathering that government will not take kindly to any form of arm-twisting on the part of the industry with regard to their obligations. Zambia is open to investment. However, government’s expectation is for the investors to operate within the confines of the law! Failure to do so will result in government imposing sanctions and disengaging with the unwilling partners who don’t want to cooperate with government and the people of Zambia.”
The ninth successive ZIMEC indaba closed, Friday, and was held under the theme: “Creating an attractive investment framework to catalyse Zambia’s mining & energy sectors.”
One Response
Open Letter to Zambian Government
To the Political Parties /President Sir /Mining Minister/ Common Man of Zambia
As a common man who has earlier worked in great Country Zambia and in Mining sector , I am absolutely aghast by the current events around Mining Industry and specially how unfairly KCM is being treated . Below text of few words is hence my effort to explain the educated lot of what is Mining Industry and how it works so that multiple wrong perception can be cleared – Zambia is a great country and it has to achieve more heights – with wonderful people and sensible bureaucrats its important hence to take care of this Industry and assist them grow further. Any harm now would have far reaching consequences specially to Copper Belt Town and civilization around it . It’s a request hence to take a step back , understand the real issues and address them – we have countable companies who are in this field and talking to them , understanding and resolving will go a long way to encourage further investment – The world is Watching – We are in Middle of Globalization and hence cant absolve our self of any reaction.
Mining and Income out of Mining is the most confused word in Zambia wherein the general perception is all Mining Companies in Zambia are generating billions of dollars on year to year basis but are giving nothing in return to Zambian Economics. This misnomer has been used multiple time to fool common man however the same is incorrect.
The same Industry has infact all potential to invite more of foreign investor in Zambia – as it’s the external face of Zambia to International community – Zambia needs investor the way any developing economy needs however if investors are not treated fairly it has all potential to have multiple detrimental effect – including increase in cost of financing – including kwacha free fall – increase in inflation – decrease in social spending etc etc
Mining Industry is a long term Industry – meaning Industry where you need to invest on year to year basis on finding new resource, developing new mines, updating technology in addition to your day to day cost of running current operation .
The final product out of Mine is Copper however where the selling price of mined metal is not decided by Miners but host of multiple external factors whereas cost of production remains same . In short this implies that only thing which is in control with any Mine to some extent is his cost of Production. Zambia is a land locked country and hence to move any consumables/spare/equipment from port to plant in addition to exporting copper out of Zambia is a high cost activities – the same makes mining cost way higher than any of the other international mines . We are talking about 2000 Km travelling one way . Not to mention , age of mine – the oldest mine grade of copper reduces and hence in older days if Copper Grade was 5% now it is average 1% depending on mine to mine – the same means a miner needs to mine more copper ore for the same amount of Copper – the same essentially increase cost of Mining Operation.
Average cost of Mining in Zambia is way higher than any of their international counterpart and hence it is always important for any Mine to survive – they constantly need to check and be in control of costs. Its hence detrimental to any international investor to accept or face multiple changes in taxation/rules/regulation/cost – the same reduces their appetite for further investment and reduction of continuous investment is the worst thing which can happen to any Mine.
Copper Price has moved from $2800 to $9800 /Mt of Copper – and hence multiple years Mining companies don’t make any profit but run on losses but the same losses are covered by buffer of any profit made at higher Copper Price .
In short –
1. Mining is a continuous long term planning business wherein mine owners need to plan for 5/10 years in ahead
2. They need to spend continuously on mine development and also ensuring modernization of process/equipment
3. Zambia being land locked has amongst the highest cost of mining
4. Many of the Zambian Mines are old with lower Grade of Copper with very high mining cost
Every Mine is Zambia is going through its own life cycle – the same means their own challenges , concerns and Issues . I would urge Mining Ministry to play constructive role engage with all mines on one table and do following 5 step :
– First understand each and every mine in detail with their challenges
– Ensure One Zambia Spirit – Means each and every other mine supports each other first prior exporting , support with raw material , support with technology
– Give responsibility of Town development to each and every mine – make each mining town new Lusaka , develop industry around mining towns
– Save each Mining house from bad press , correct general public perception
– Have simpler/consistent/long term Taxation policy in line with what other international country has but by constructive mode of communication
Mining Ministry however should have senior people with years of mining experience – the same would definitely assists for right and meaningful contribution. Its time to do the right talking.