I DONT WRONG ZIM

Accounting firm warns exorbitant taxes may drive mining companies out of Zim
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By: Oscar Nkala
1st June 2012
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Accounting firm Deloitte & Touche says some mining houses operating in Zimbabwe might be forced to eventually leave the country if mining taxes and royalties, which are much higher than those levied in other countries in the region, are not revised downwards.

Deloitte & Touche Zimbabwe CEO Tawanda Gumbo says: “Our tax legislation at the moment means that a lot of mines will close operations in the future. As businesses, we look at the total impact of doing business before making an investment. Zimbabwe’s royalties on gold and diamonds are high and need reviewing. In Angola, royalties on gold are pegged at 5%, while the figure in Tanzania is 3%. Both Namibia and Zambia levy royalties of 5% on gold, while Botswana levies 10% royalties on diamonds, compared Namibia’s and Angola’s diamonds levy of 5%.”

Following increases effected in January, Zimbabwe now levies 7% royalties on gold, 10% on platinum and 15% on diamonds.

Further, Gumbo says the high mining taxes and royalties will deter new investors from considering the country when choosing investment destinations.

Government’s continued delay in completing the drafting of the proposed Mines and Minerals Amendment Act, which began in 2009, is also causing anxiety and uncertainty among mining companies, he adds.

“We need to finalise the Act, and, if it is finalised, we urge government not to change it for the next 15 or 20 years.”

Chamber of Mines of Zimbabwe VP Allan Mashingaidze says the high royalties mining taxes make Zimbabwe one of the most expensive countries to operate a mining business.

Early this year, Zimbabwe hiked mining fees and levies by up to 5 000% for some precious metals. The fees for platinum and diamond mining claims went up from $500 000 to $2.5-million and then $5-million in January. “The fee structure is unworkable. The industry is already overburdened by the totality of statutory charges, royalties, levies and commissions. It’s estimated that 60% of every dollar earned in revenue goes to government, making Zimbabwe one of the most expensive countries to mine,” Mashingaidze says.

However, government has defended the steep hikes, arguing there is need to increase State revenue and curb the speculative holding of mineral claims.

Mines and Mining Development Minister Obert Mpofu ruled out all prospects of a downward review of the fees when he appeared before the Parliamentary Portfolio Committee on Mines and Mining Development recently. He said: “Since we increased the fees, we have collected $10-million because now we have serious miners who are mining, compared with the scenario we had before, where people would hoard mining claims for speculative purposes. We have traced them and found that most are registered outside the country and have only been keeping the claims here for speculative purposes. Since the review of fees, we have realised an increase in government revenue from mining.”

On the drafting of the Mines and Minerals Amendment Act, Mpofu said further consultations with various stakeholders was needed.

Edited by: Martin Zhuwakinyu

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