Newly inaugurated Zambian President Edgar Lungu is insisting that his government will continue to enforce the controversial new law that has seen mining taxes triple in January 2015.
Despite fears that the new mineral royalty tax could lead to mine closures, President Edgar Lungu said on Sunday that his government’s policies would remain consistent and predictable, adding that a mineral royalty in place of a corporate profit-based tax as the final tax will assist in ensuring that the government pays the right taxes.
“The government’s desire to ensure companies pay the right taxes will continue,” he said, after being sworn in.
Looking at Zambia’s new mining tax
Recently, Zambia has raised the royalties on mines, which is threatening as many as 12 000 jobs in the country. The new tax regime will see levies for open-cast mines increase from 6% to 20%, while those for underground mines will rise to 8%. Corporate tax of 30% has also been scrapped in order to counter transfer pricing.
The Zambian Chamber of Mines has expressed concern that these royalties will stifle the country’s growth, since a number of mining companies have already downscaled their development plans. In fact, Barrick Gold’s Lumwana mine has since halted production, and Glencore and other companies could be pushed to cancel their projects in Zambia, which could cost the country over 158 000 tons during 2015.
Zambia is Africa’s second biggest copper producer, and mining currently makes up 12% of gross domestic product and 10% of formal employment in Zambia.
Open dialogue needed
The new mineral royalty tax intends to provide for Zambia’s citizens, Lungu said, but added that he wanted to continue an “open dialogue” with investors. “We shall try as much as possible to balance [investor] interests against those of our people.”
He added that his focus would be on supporting small-scale farmers and creating jobs to fight against unacceptably high poverty and social inequality levels. “It unsettles me to see families go hungry when this is a wealthy nation,” he added.
His top priority Lungu is the enactment of a new constitution immediately, he added, and has appointed prominent lawyer Ngosa Simbyakula as justice minister to oversee that process.