THIS week, I have decided to revisit the issue of mining taxes owing to the negative impact this could have on our country’s economy if it continues to drag-on.
There is still uncertainty in the mining industry following the increase in mineral royalty for open cast and underground operations in the 2015 National Budget.
The mineral royalty threshold for open cast and underground mining operations was increased to 20 per cent and 8 per cent respectively.
President Edgar Lungu has since tasked the Zambia Revenue Authority (ZRA) and the Ministry of Finance to ensure that the mining tax impasse is resolved amicably without delay.
The President’s point is that ultimately, every Zambian should benefit from the funds accumulated from the mineral royalties as these are channeled to facilitate improvements in other sectors such as education and health.
The Zambian mining sector accounts for over 20,000 direct and indirect jobs with additional ones expected to be created both in the short and long terms.
Despite these impressive statistics, there has been very little to show worth Zambia’s minerals, because over 50 per cent of the local population are wallowing in paucity.
But the mines have argued that the move will slow down expansion projects and this may force them to totally withdraw their investments from Zambia.
If nothing is done about the mineral taxes, mine suspensions and the postponement of major capital projects will lead to over 12, 000 direct job losses in 2015 alone.
It estimated that in this year alone, production will exceed 158, 000 tonnes of copper, adding that more worryingly, over the next five years lost production will exceed 1.1 million tonnes of copper.
Furthermore, Zambia stands to lose over $1 billion of export earnings in 2015, and a staggering $ 7 billion over the following five years which is said equates to around 30 per cent of the GDP.
It is therefore prudent that an amicable settlement to this issue ends in a win-win outcome for both the mining companies and the people of Zambia.
The mining industry is one of the largest private sector employers in Zambia accounting for thousands of direct and indirect jobs and one would not even want to think about the adverse effects of any mine collapsing.
The cost structure of running a mine at the same time when other economic sectors rely on state funding for survival means that such a business can only be run by private hands.
The need for dialogue over this matter cannot be over emphasised and the stakeholders need to collectively open dialogue to identify how a win-win situation can be reached.
If the mines are threatening closure in the name of failing to meet production targets due to increased cost of mining buoyed by a tight mineral royalty regime, they must indicate this to Government formally.
Mining firms are at liberty to supply Government with operating plans so that together, consensus can be reached between the two stakeholders.
The Zambia Chamber of Mines (ZCM) needs to play an active role in facilitating for this because they are a direct link between Government and the mining companies.
ZCM should engage Government, the investors and the unions continually so that issues affecting the mining industry are attended to collectively from the grassroots.
Government has assured that it is ready to dialogue with any mining investor who feels hard done by following the move to increase mineral royalties.
Mining operations have transformed the economic life of many towns in Zambia and need to be sustained to supplement the efforts of Government in bettering the lives of people.
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