3% Mining Royalties Not-Negotiable

Minister of Mines and Minerals, Dr. Kalombo Mwansa, said today the ministry was updating its policies to encourage continued private investment in the country, but said increased royalties of 3% on mining sales were “not negotiable”.

Mwansa said Zambia would not delay the implementation of the new royalties, as the country needed money in its coffers “as soon as possible” to further economic development in Zambia.

Responding to a question from the media at a mining conference at Livingstone in Zambia, he said the 3% royalty would not be “negotiable” as foreign mining companies were making “huge profits” and could certainly afford a levy in that range.

“The people of Zambia want to see how they are benefiting from the local copper industry. We have looked at royalties in the region and globally, and regard 3% as ‘realistic’.”

He added that legislation that requires that new mines in the country had a “certain percentage of local ownership” – essentially an empowerment law – was enacted last year, but a committee still had to be appointed to enforce this law.

He could not elaborate on the requirements in the law.

Mwansa said he was “generally satisfied” with Chinese investment of $800 million in the country as this translated into more jobs and increased taxes.

Chinese and other mining companies were permitted to bring employees with certain skills into the country, but this depended on the size of their investments. Zambia had a very skilled mining work force, but for instance did not have many geologists.

The Zambian government recognised the need to reduce the cost of doing business in the country and was therefore “streamlining” the administration and processing of mineral rights.

“We have seen the need for change and are working on issuing mining rights more speedily.”

The Ministry of Mines and Minerals has partnered with the World Bank and European Union to re-design and modernise the existing mining rights licensing system in Zambia, which would position Zambia in line with international best practice.

The mining sector in Zambia has regained its dominant role in the local economy with investment of $2 billion in this sector since 2000.

The government intended to keep the mining sector “risk-free” in order to attract more investments. This included focusing on the safety of workers by increasing the number of mining inspectors.

Zambia’s finance minister, Ngandu Magande, said during his annual speech to parliament in Lusaka on Friday, that the country would increase royalties to 3 percent of mining companies’ sales in order to benefit from their increased earnings.

Royalties were previously set at 0.6% for base metals and at 2% for precious metals.

Zambia will also increase mining companies’ income tax rates to 30 percent, from 25 percent, and will reintroduce a 15% withholding tax on dividends, interest, royalties, management fees and payments to affiliates, Magande said.

Copper accounts for about 70 percent of Zambia’s export income and production has been rising in recent years after the government sold the industry back to private investors after taking it over in the early 1970s.

Copper prices almost doubled last year. Zambia produced 458,296 t of copper between January and November 2006, 14% more than the 400,593 t produced a year earlier, according to statistics from the Bank of Zambia.