‘Zim should revisit mining royalties’

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GOVERNMENT should review mining royalties to encourage large scale investments in precious metals, Christina Muzerengi, a tax expert, has said.
A royalty is a usage based tax, which is calculated as a percentage of the gross fair market value of minerals produced.
Zimbabwe’s mining royalties are among the highest in the region.
“There is a compelling case to review these royalties downwards across the sector to provide incentives and match regional peers which compete for the same dollar with Zimbabwe. Miners have been lobbying government on double taxation and reduction in royalties for years now,” Muzerengi who is a tax partner at Grant Thornton, said while making a presentation at The Financial Gazette’s Tax Conference last week.
“Zimbabwe is getting firm interest for large scale investments in precious metals…however, Sub Saharan Africa has several mineral rich countries such as South Africa, Botswana, DRC, Angola, Namibia and Zambia. This means that competition for foreign investment is becoming stiff and investors make decisions based on operational costs, which have a direct bearing on profits,” she added.
Zimbabwe currently charges royalties on gross revenue from mining products at 15 percent for diamond, 10 percent for platinum and five percent for gold.
Base metals and industrial minerals attract a royalty of two percent while a one percent charge is levied on coal revenues.
In recent years, government has sought to increase taxes on virtually consumables and popular products in Zimbabwe, so as to cover for the declining tax base — with the latest development on this front coming in the form of a review of the transfer tax from five percent per transaction to two percent per dollar.
Miners have also been lobbying for the review of mining ground rental fees for years. At $3 000 per hectare per year, the country’s ground rental charges for mining are also the highest in the region.
Namibia, Botswana and South Africa do not charge ground rentals while DRC charges $5 and Angola charges $0,02 to $0,04 per hectare.
Muzerengi said government should grant more incentives to businesses in the form of tax breaks.
The government has granted minor tax breaks to selected industries, slightly reduced levies on petroleum products and dangled its carrot to prospective investors in Special Economic Zones, maintained individual tax rates for some years now.
Muzerengi says these are not enough to warrant major shifts in prices, investment or economic boom.
“Structured tax holidays on value added tax, income tax and witholding tax for public private partnerships in infrastructure development, new and emerging exporters, manufacturing sector, tourism players, will go a long way in inducing the much needed economic growth. These will lure more investment, create jobs and unlock economic growth in the country,” she said.
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