The mining sector declared a paltry K35 billion mineral royalties out of a staggering profit of about K1,589,196,180,000 it recorded in the financial year of 2005 to 2006.
Minister of Finance and National Planning, Ng’andu Magande, said in Lusaka yesterday that the mining sector had a profit of US$397,299,045 last year.
The profit is based on the mineral royalty tax of the current 0.6 percent.
However, Government has informed mining companies that would increase the mineral royalties to 3 per cent
Mr Magande said last yearâ€™s profit margin was a significant improvement on the US$242,452,534 declared in the year 2004/2005.
He said this also reflected a tremendous leap in the profits following losses of US$274,486,745 in 2002/2003 and US$43,251,785, recorded in 2003/2004.
â€œIn 2005/2006, mineral royalty receipts improved to a level of K35,749,042,707. The contribution of the mining sector in form of mineral royalties has been positive,” Mr Magande said.
He said mining sector declared K3,633,795,469 as mineral royalty for the 2002/2003 period while in 2003/2004, the State only collected K792,168,131.
The minister attributed the paltry declaration in the 2003/2004 financial year to low copper prices on the world market and the withdrawal of Anglo-American Corporation from the mining sector in Zambia.
”A positive outcome was experienced in 2004/2005 with mining companies contributing K6,308,022,604 as mineral royalty,â€ Mr Magande said.
And Mr Magande said there was a process in place to ensure that tax audits were conducted to verify the profits declared by mining companies.
He said the audits covered company tax, value added tax, mineral royalty and pay-as-you-earn.
Mr Magande also explained that there were no tax-free imports in the development agreements with mining companies.
He, however, said the Mines and Minerals Act provided for companies with large-scale mining licences to submit approved programmes of mining and metallurgical processes, which were technically scrutinised within the law.
He said when the Minister of Mines and Minerals Development was satisfied and approved the programme, the importation of materials and equipment for the purpose of implementation of the programmes were then given tax concessions.
”Note that the concession in this case is for materials and equipment. The materials and the values to be considered are specified.
During execution of the implementation, the quantities and values are monitored to check compliance with the agreed and approved quantities and values,” he said.
Mr Magande said Government had made it clear that the development agreements would be renegotiated as provided by the clauses of the development agreement and that the nation would be informed as and when the process had been firmed up.
And Mr Magande said the mining sector continued to perform well in 2006.
He said real gross domestic product growth in the mining and quarrying sector increased to 19.6 per cent from 7.1 per cent in 2005.
Mr Magande attributed this to the rise in mineral production, investments in rehabilitation of infrastructure and technological innovations in existing mines, the coming on board of new mines and increase in small-scale copper mining activities.
He said copper production increased by 11.5 per cent from 461,748 tonnes in 2005 to 515,010 tonnes in 2006.
Mr Magande said cobalt production, however, dropped from about 5,537 tonnes in 2005 to 4,658 tonnes in 2006.
He said Government was happy that direct employment in the mining industry was now close to 50,000 employees.
Mr Magande said Government would continue to promote both large and small-scale mining by providing a conducive business environment, updating current legislation and providing more geological information to allow for extensive exploration work.
He said Government would provide support to the small-scale mining sector, given its potential in employment creation and poverty reduction.
Mr Magande said through the use of the mining revolving fund, small-scale miners would continue to be assisted with funds for, among other things, hire of plant and equipment.
Meanwile KALUBA BWALYA reports that the Mine Workers Union of Zambia (MUZ) has welcomed Government’s decision to temporarily suspend new applications for mining rights for six months.
MUZ president, Raymond Mbulo, said in an interview yesterday that the decision to suspend applications for mining rights was good, as it would accord Government a chance to adequately scrutinise some applications.
“MUZ will always support any Government decision that is well intended and also that addresses the plight of miners in the country,â€ he said.
Mr Mbulo said having a computerised system was a good development, as it would ensure that applications were processed faster and more transparently than the manual system.
Minister of Mines and Minerals Development, Dr Kalombo Mwansa, announced on Saturday the intended suspension of the issuance of mining rights.
This would be effected from July 1, to December 31,2007.