Zambia’s planned mining royalty increases could lead to more than 21,000 job losses and operators cutting $500 million in capital spending over the next three years, the Chamber of Mines has warned.
The Chamber said it’s members will have to consider “scaling back substantially” their operations if the proposed increases proceed as planned on Jan. 1, it said in response to questions on Monday from Bloomberg.
The threat ratchets up risks for the southern African nation that is grappling with rapidly increasing public debt, while trying to curtail a stubbornly high-budget deficit.
The government has responded to previous threats of job cuts by mines with its own warnings of taking over mining licenses, but has not acted on them.
Zambia, Africa’s second-biggest copper producer, plans to increase mining royalties by 1.5 percentage points across the board, Finance Minister Margaret Mwanakatwe said in her 2019 budget speech in September.
The current tax rates range from 4 percent to 6 percent, depending on the copper price.
The government also proposed a 10-percent charge if the metal climbs above $7,500 a metric ton.
The Chamber of Mines counter-proposals to the government include:
*Cap mineral royalties to 0.5 percentage points across all price bands up to $7,499 a ton, rather than the 1.5 percentage points proposed, “via an incremental and not a step sliding scale.”
*Royalty capped at 7.5 percent when copper price is above $7,500 per metric ton, rather than the planned 10 percent.
*Maintain royalties as tax deductible. Increase cobalt royalty by 0.5 percentage points, rather than the government’s planned 8 percent royalty.
*Scrap planned copper and cobalt concentrates import duties.
“Our members continue to review their operations and are having to consider scaling back substantially while reducing capital expenditure by over a half billion dollars over the next three years,” the chamber said.
“Consequently, reductions of over 7,000 direct jobs and more than double this number of indirect jobs would result. The companies hope to avert the outcome through “robust engagement,” it said.
A finance ministry spokesman and a government spokeswoman didn’t immediately respond to calls and text messages seeking comment.
Bloomberg
No biggie ,we were told by LT that 2million jobs will be created at the new 2500MW power dam. Very easy replacement of lost mining jobs.
It’s time ZCCM-IH took over more ownership in all these mines and revoked some licenses to completely take over.
These mines have been very profitable and been tax evading through transfer pricing, cooking books through VAT refunds and other means.
We know exactly what their plans are, GRZ doesn’t need to back down on their reasonable demands. Their arm twisting tactics are bad for this country.
Let them retrench and IDC needs to absorb these retrenchees into new mines opened and owned by IDC and half a billion dollars is champ change we can arrange for IDC from other funding sources.
We dare them to even leave the country and abandon the mines if they are going to be that unprofitable and the smart people of the Zambian Enterprise will take it from there.
Hahaha. Just tax them on their profits. For crying out loud you can’t be quasi-capitalist and quasi-socialist with this. Companies will negotiate their way out of whatever taxes they can. That is the nature of the beast. We would be able to leverage their obvious profitability if we weren’t so adept at undermining the bidding process. They threaten us with job-loss in part because they know that’s the language the Zambian politician speaks and in huge part because they can rely on us not to be innovative enough to create jobs with the $500 million revenue. Time to be adults Ba PF, not reactionary. Increase ZCCM shares, that makes zero sense. Tax their profits, use the revenue to finally diversify.
Thanks to HH’s greediness more people are still losing their jobs while his nest egg he acquired through undervaluing Zambian assets keeps growing in Panama there by effectively evading taxes.
This is what they call in politics as saber rattling. Call their bluff and see what happens.
Mzambia wa Zamani – The culture of reading is very difficult we know, but please do not just read headlines – the 2 million jobs that the Minister was talking about are the secondary jobs that the 2500 MW will create in Zambia and Zimbabwe – and probably beyond. It is not contract jobs for the construction of the power station.
GIVE US TAXES OR HIT THE ROAD.
We have to get appropriate taxes from the mines with or without the jobs. Iwe, CoMs, haven’t we had enough?
Zambians are taxed at every opportunity they get to make money even on toilet paper, even on every flash of a toilet. You CoMs are the miserable mouthpiece for the exploitants. Again, LPM put his foot down and started getting those taxes. MCS would not have tolerated these muzungu wanga CoM stooges. I doubt ZCCMIH can run the mines, though. They failed us before.
@Thorn in the flesh … Yes, ZCCM-IH can run these mines because ZCCM used to run the mines and they were operationally profit.
The problem was ambidexterity as MINDECO being based in Lusaka running all mining operations on remote access and control lost touch of what the actual operating costs were per each mining entity.
It became ineffective and bloated doing almost nothing just receiving reports from the Copperbelt operations and sales reports from London at the LME.
So, everyone lost foresight and the left arm didn’t know what the right arm was doing. Now couple that with the falling copper prices, the inflexible giant was too big to adapt.
Don’t forget that by as late as 1997, ZCCM was the world’s largest conglomerates with dual listings at NYSE and LSE; no General…
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Don’t forget that by as late as 1997, ZCCM was the world’s largest conglomerates with dual listings at NYSE and LSE; no General Motors, not General Electric not Microsoft, Google.
We, the smart people of the Zambian Enterprise built the world’s largest conglomerate after chasing Anglo-American which then started behaving just like CoM is doing right now way back 1973 under my parte UNIP.
So, these miners owners need to be forewarned that this ain’t the first rodeo for us, we have done it before and we can do it here again … you pay up or you start preparing for an exit.
My only worry is not whether we can run these mines or not; by God, Yes we can!! But do we have the KK kind of political power to pull this through???
I doubt it … Heaven help us all!!!
@1.7 … meant to say operationally profitable
Plz grz don’t listen to these compromised bootlickers. They have sold their souls to the devil. Get everything that is due to us chapwaa
So are you saying the 21000 jobs can be compared to the money the nation will gain. Come on some times think beyond yourselves and save the nation. With well managed mine tax collection ,every Zambian will benefit and make Zambia better than the open pit the investors will leave behind.
“Royalty capped at 7.5 percent when copper price is above $7,500 per metric ton, rather than the planned 10 percent.”
To me this gives away the tricks of the mines. How do you lose profits or how does it affect your ooerational costs if the price of copper balloons way above your target operational costs and the royalty is 7.5%, only 7.5% of a possible 100%?? This to me simply means greed . I had some sympathy for these chaps but today I see them as greedy maggots.
And trib.al opposition be cautioned before open your mouths: dont bring trib.al politics in this, see it as it is and reason with your brain and not trib.e.
Please,please Gvt do not give in to this black mail.Threaten them with taking over the mines and selling them to Chinese.Copper has bright future with electric car revolution which is on the horizon.No other gvt gives in to such threats.Ask DRC or Tanzania.Zambians are fed up with these mines’ threats and arm twisting.Play hard ball this time
Chamber of mines are always opposing what the government is doing..
Zambia govt please to listen to these fake Zambian.We need to benefit from our mines.let the close atase.We can start something else.We just have to be strong.Infact they don’t even declare the taxes.Minerals are exported without the knowledge of govt.please increase the taxes.Blooberg is just also useless news channels
‘The Chamber said it’s members will have to consider “scaling back substantially” their operations if the proposed increases proceed as planned on Jan. 1’
This is pure economic sabotage because the motive behind scaling back is driven by greed and has nothing to do with operational/production costs.It for this reason I wanted the Chamber of Mines to be represented at the recently held discussion at Edinburgh Hotel organised by Economics Association of Zambia regarding the state of mines.But as usual, they did not and ofcourse chose to speak to international media for attention.The govt should not back down on the proposed mineral royalty taxes.
If the mine owners are unwilling to pay taxes let them leave the minerals in the ground until someone who is willing to give Zambia a fair deal comes. These investors pretend that they are doing us a favor by creating a few jobs but they create more jobs and value in their countries by taking our resources cheaply and selling us products at an exorbitant prices.
21,000 jobs to be lost. Let’s a mine produces at 5 tonnes per head and 21,000 x 5 tonnes would roughly translate into 100,000 tonnes lost. If they think they can scare us they’re just wasting their time.
chamber of mines who are this fools always wen grz want to raise money from mines they come out like this its time we as people ask this guys to go to hell above all are this zambians
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The mines know HOW INEPT and CORRUPT THE PF GOVT IS SO THEY KNOW THEY CAN COW THEM INTO NEGOTIATIONS TO RENEGADE ON THEIR BUDGET COMMITMENTS!! Every time mines threaten, we hear Ministers rushing to negotiate and they never tell us publicly the results of negotiations but quietly we see that them mines do not carry out their threats and later we hear mines are paying less tax and do not pay economic electricity tariffs!! WITH A SERIOUS GOVT, THIS COULD HAVE BEEN THE TIME TO TEACH MINING COMPANIES A LESSON, BY TAKING OVER ONE MINE, INCREASE SHAREHOLDING AND BRING IN NEW INVESTORS! THEY THREATENED THE DRC WHEN THEY QUADRUPLED THE TAXES, NEVER LEFT, HAVE STAYED PUT BCOZ THEY KNOW THEY WILL STILL MAKE PROFITS!! COPPER AND COBALT VALUE WILL SKYROCKET, THERE IS NO NEED TO FALL FOR THIS…
Let these mines pay what due to Zambians
That of of the components of external environment.If you analyse PESTLE you will know all the factors.Strategic planning is the key and use that tax for your benefit.The problem with these investors is that they want to be scaring the government .Pay cut can be another way to keep people in employment,but it is only fair when the the copper or any mineral is sold at a cheaper price and they are making below average return for the share holders.If that is not the case,there in no reason for people to lose jobs because the motive is to make huge amount of money at the expense of ordinary Zambians
I THINK WE ALSO HAVE SOME REALLY CLEVER LAWYERS OUT THERE IN THIS COUNTRY THAT CAN LOOK AT THOSE CONTRACTS THAT WHERE SIGNED WHEN THE SALE OF THESE MINES TOOK PLACE.21000 JOBS AT A GO THATS TOO MUCH.COLONIALISM WILL SURELY NEVER END.
WE CAN NOT CUT THEM OUT BUT WE CAN SURELY FIND A WAY TO GO ABOUT THIS DEAL AND OTHERS DEALS TO SAVE US…
Chamber of mines is headed by Zambians but they betray their country because them are belly-full.
Simply name and shame them.
In fact eventhe proposed increase in mineral royalty is too small, let the GRZ increase farther to 5percent
CoMs, kindly get hold of your fears. We need to tax these things.
If I can taxed for building a house what about one getting “gold ” from our God given wealth. Naifwe fwine tatumfwa, we got the mines from them, we then decided to give it back to them.
Dependency on mining since and even before independence has not done much for us.
We still cant see any effort from GRZ to diversify into other sectors.
Manufacturing; agriculture/food processing, tourism etc are not getting any deliberate support.
Which KK did and was undone by FTJ.
Copper mining is a depreciation of a resources. Once gone it will never be replenished. Let’s stick to what Honorable Mwanakatwe has proposed and not deviate from this. Current Mines can leave if they want others will come.
Let them go to hell, we need investors that can add value to our minerals NOW!
kindly consider the investors confidence and ability the country has had for the past years increase the taxes and be ready to dance to the tune like your friends in the DRC no investors no money.Wage your pockets on the scale if you can conduct mining business it is not for the weak,poor Zambian people it is for the strong,wealthy people who have had the experience in the business for century.
The struggle is real ask the small scale miners what they are passing through exploration and prospecting stage 2 million dollars or more how many of you have such money.#need for consultative process before making decisions for personal gains
Honorable Minister, please revoke subsidies on electricity and fuel to the Mines, in addition to sticking to your proposed Taxes on them. They are huge profit making entities, why on earth should a poor nation still subsidize a mega multinational firm? There are enough people lining up to take over the mines if they want to leave, Copper is a depreciating resource, let’s maximize income from it while we can like Tanzania has done. let’s not be held to ransom by their threats of worker retrenchment. We need the money to pay down debts and repair our international reputation financially.
@ B R Mumba, Snr ZCCM-IH cannot run these mines because it is the same ZCCM that to ran-down the mines to a point where they became operationally unprofitable. For example, they stubbornly insisted on spending millions of dollars on projects that were doomed to fail. After implementing one such a project the copper production dropped to less than half its pre-project production rates. So the tax-paying Zambian was left with a burden to bear without any benefit. The project was scrapped but only after millions of dollars had already been spent probably adding to the current national debt. For this reason I don’t share your optimism unless you tell me they are less self-serving now. I guess it is a question of whether the leopard has changed its spots. Zambia does not lack the necessary…
I meant saying Snr ZCCM-IH cannot run these mines because it is the same ZCCM that ran-down the mines to a point where they became operationally unprofitable.