Lusaka, Zambia — MININGREVIEW.COM — 20 May 2008 – Zambia is unlikely to collect a projected US$415 million (R3.1 billion) from new mining taxes this year because of disruptions in power supply, which cut production in the country’s copper and cobalt mines.
Quoting ministry of finance permanent secretary Emmanuel Ngulube, Reuters reports from here
that the first money of the projected US$415 million (R3.1 billion) for this year is due to start coming in June. “But, the power outages are a big challenge because they will indeed affect the production of the mines,” he said, “therefore we expect the revenue to reduce.”
This additional income would have been a direct result of Zambia’s new tax regime, which came into effect on April 1. It involved an increased mineral royalty to 3% from 0.6%, while corporate tax on miners has risen to 30% from 25%. The Zambian government also introduced a 15% variable profit tax on taxable income above 8%, and a minimum 25% windfall profit tax.
Zambia has a power deficit of about 250 megawatts, and this led state utility Zesco Ltd to ration power due to rising demand for electricity from the copper mines.
Derek Webbstock – chief executive of Luanshya Copper Mines, which operates Baluba copper mine and Chambishi Metals Plc, Zambia’s leading cobalt producer – said the company had lost US$5 million (R38 million) after the two power failures in January. Some industry officials said they had stopped operations at some mines to avoid endangering lives of miners and damaging equipment.
Miners said the new tax would discourage investment in the sector, which is a major employer and foreign exchange earner for Zambia. And Chamber of Mines of Zambia head Frederick Bantubonse, said this could lead to mining companies facing problems in raising capital for mine upgrades and expansions.
Caption, Pic 1: Kansanshi copper mine – one of the biggest mining operations in the country.