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Zambian President intervenes to resolve heated mining tax debates

Zambian President Edgar LunguNewly-elected Zambian President Edgar Lungu has begun engaging in discussions with mining companies over the country’s controversial new royalties and VAT refunds, directing government to “promptly resolve” the dispute in an effort to calm the nerves of investors.

Finance Minister Alexander Chikwanda has been appointed to discuss the issues with mining companies this week, Lungu said in a statement, adding that he wants “an amicable settlement that must end in a win-win outcome for both the mining companies and the people of Zambia.”

Lunga seeks to resolve mining row

These talks are being initiated to “expedite dialogue with mine owners and promptly resolve the impasse over the new mining tax regime,” despite the fact that Lunga has insisted he would enforce the new regulations during his campaign.

However, mining companies in the country have threatened to cut as many as 12 000 jobs and investment in Zambia, which could cost the country over 158 000 tons during 2015. A number of mining companies have already downscaled their development plans. Barrick Gold’s Lumwana mine has since halted production at its Lumwana Copper Mine, which provides employment to 4 000 locals in the area. Glencore and other companies could also be pushed to cancel their projects in Zambia.

In response, Lunga has put together a delegation led by Zambia Revenue Authority chief Berlin Msiska “to consider the impasse over the new mining tax regime and the outstanding VAT refunds for mining companies.”

Copper in Zambia needs encouragement

Zambia tripled mining royalties to 20% from 6% at the beginning of January 2015, despite the country’s faltering economic growth and the fact that copper prices are the lowest they’ve been in 5 and a half years .

Despite being ranked as one of the most poverty-stricken nations in the world, Zambia is the globe’s eighth largest producer of copper, and the metal contributes to 70% of the country’s foreign exchange earnings. The new mining tax is expected to hit Zambia’s copper mining sector the hardest.

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