Mining firms charged with plotting “economic sabotage”

19 Dec, 2018

Threats by mining firms to cut down on labour and capital injections in view of a new mining tax regime is nothing but pure economic sabotage, an economic think-tank said.

The Zambia Chamber of Mines, an association of foreign mining firms operating in the country, said it may cut down capital expenditure by as much as USD$500 million over the next three years if the government goes ahead with its plan to introduce a new tax regime effective Jan. 1 2019.

But the Economics Association of Zambia (EAZ) said the threats should not be tolerated especially that over 70 percent of the country’s foreign exchange earnings is derived from the mining industry.

“We would like to express as a concern that employees should not be used as a tool for arm-twisting government. The current mine tax regime is archaic and only allows exploitation of Zambia’s mineral resources. It is also unfair to reduce mining activities and capital injections at a time metal prices are favorable,” the association said in a press release.

According to the association, the mining sector is an important sector in Zambia and a major contributor to the country’s economy, adding that the country has one of the favourable investment environments in the world.

“The number of incentives such as electricity and fuel subsidies, tax and non-tax incentives have come at a great cost to the nation. It is therefore unfortunate that the mines remain uncooperative and opposing every time a new tax regime is proposed to enhance revenue collection from the sector which is expected to benefit the citizens,” it added.

Zambia, it said, is not the only country in Africa to tighten its mine tax regime to close any leakages and enhance mine contribution to economic development.

In the 2019 budget, the government announced a new tax regime which comes into effect on January 1. The government intends to increase mineral royalty rates by 1.5 percentage points at all levels of the sliding scale as well as introduce a fourth tier rate at 10 percent on the sliding mineral royalty regime which would apply when copper prices rise beyond USD$7,500 per tonne.