Lusaka, Zambia — MININGREVIEW.COM — 28 March, 2008 – Zambia’s parliament this week approved an amendment to the Mines and Minerals Act that will increase taxes and abolish existing agreements between the government and mining companies operating in the central African country.
Bloomberg News reports that the bill – which will be signed into law by President Mwanawasa on April 1 – will lift royalties on sales fivefold to 3%, and increase corporate income tax from 25 to 30 %. That will raise the effective tax rate on mining companies from 31 to 47%.
The Bloomberg report quotes Zambian Chamber of Mines general manager Fred Bantubonse as saying that what he describes as “the government’s unilateral decision to dishonour existing development agreements” is disappointing. In a telephone interview he said: “This is arm twisting.”
Bantubonse predicted that the new law would result in mining companies reconsidering any expansion projects because of poor returns. “Any bad law always affects future investment,” he insisted.
Meanwhile in the neighbouring Democratic Republic of Congo (DRC) 15 non-governmental organisations – including London-based Global Witness – have issued an e-mailed statement saying the government must improve transparency in its mining contract review process if it is to maintain credibility.
“Although the publication last week of the Mines Review Commission’s report should be welcomed, the next stage of talks in which a government panel will complete settlement agreements with mining companies lacks clarity,” the statement claimed.
“This is an important step towards restoring confidence and transparency in the DRC mining sector,” the Congolese and international NGOs said, “but it marks the beginning rather than the end of the process.”
President Joseph Kabila last year began the review of contracts with foreign miners – including such mining giants as BHP Billiton Ltd., Freeport-McMoRan Copper & Gold Inc., AngloGold Ashanti Ltd., De Beers and First Quantum Minerals Ltd. – to amend those contracts deemed unfair to the state.
The commission’s report – completed in November 2007 – was made public for the first time last week. It recommended changes to all accords with companies, including the above-mentioned major players.