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Alba Iulia
Saturday, October 31, 2020

Two thirds of Zambia’s mines will be loss making next year-Chamber of Mines

Headlines Two thirds of Zambia’s mines will be loss making next year-Chamber of...

Chamber of Mines Zambia President Goodwell Mateyo
Chamber of Mines Zambia President Goodwell Mateyo

More than half of the copper mines in Zambia will probably be unprofitable next year with thousands of jobs on the line, as the nation raises taxes for operators, the Zambia Chamber of Mines has warned.

The Chamber said in a statement released in Lusaka on Thursday that the effective tax rate will range from 86 percent to 105 percent, with about 27,900 jobs at risk.

The Lobby Group says if the Government’s tax proposals go ahead, more than half of Zambia’s copper miners will become loss making, at current copper prices.

The warning was made today by Goodwell Mateyo, the new President of the Chamber of Mines, at a press conference held in Lusaka to announce the release of a new report entitled ‘Taxing the mining industry’.

Mr Mateyo also said that the position would be even worse for gemstone producers, who have an additional export duty to contend with.

“Zambia has become a recognised emerald producer in recent years. But the combination of royalty increases, and the new export duty, will kill off the legal gemstone industry within the next two years. The only people who will benefit will be illegal miners, who do not pay taxes, and whose costs will thus be radically cheaper than their legitimate competitors,” Mr Mateyo said.

“For a country that has acknowledged through the National Development Plan the need to diversify its minerals sector, as well as its economy, this is a completely self-defeating initiative.”

The report released today also includes research which compares Zambia’s present and proposed mining taxation regime with other copper mining countries around the world.

The research shows that if the 2019 Budget proposals are enacted, Zambia will have by far the highest tax burden of the 12 mining countries sampled. The countries include copper giants like Chile and Australia, and Zambia’s own peer group in Africa – DRC, Botswana, South Africa, Angola and Tanzania.

“The effective tax rate – the average rate at which pre-tax profits will be taxed – will vary between 86.3 and 105%, depending on the copper price. This could result in the extraordinary situation where a profitable mine would be obliged to pay more in tax than the profit it had made. No business can, or will, continue to operate under those circumstances,” said Mr Mateyo.

“The unwanted effect of these survival measures will be lost production, lost investment, lost employment, and less supplies and goods procured from other parts of the economy. When one factors this in, we estimate that the net gains the government will make next year from these changes will be a mere $28 million. This could be achieved far less destructively from a small increase in production,” it said.

“We have engaged government with counter proposals that, whilst not ideal from an industry growth perspective, strike a balance between our survival, and government’s immediate revenue needs. But ultimately we need a joint approach to growing the industry, based upon a shared understanding that through growth – and only can through growth and industrial development – can we deliver more.”

Zambia plans to introduce new mining duties, replace value-added tax (VAT) with a sales tax and increase royalties, from January, to help bring down mounting public debt.

Mining accounts for more than 70 percent of Zambia’s foreign exchange earnings.

47 COMMENTS

  1. Goodwell Mateyo don’t be a useless ***** on behalf of the fake investors. You are being an enemy of progress. We ain’t backing down. Go fish somewhere else.

    • Useful idi*t Mateyo. Like (HH) who in the 1990s sold the mines crookedly without knowing the future repercussions. These are the fruits of a botched privatization

    • So the mines are with Opposition team? Are PF Jerabos members of Chamber of Mines?
      It’s confusing, where Mateyo stands. It’s having PF government spokesman and MP , Kambwili in the mix.

    • Iwe Mateyo talk to Mr. Ba here below and you will show you how it is supposed to be done. In the meantime if you become loss making that too is fine. IDC will take over and we will be profitable as new owners.

      Nothing is going to change after next week, your honeymoon is over it is time to contribute to national development and taxation is part of the deal.

      Go find someone else to lie to … unmask transfer pricing and declare sales at FOB Lusaka and no single mine will be loss making.

      Sorry baba … that dog can’t hunt anymore!!

    • Sorry but if the mines think they’ll incur losses if taxes are raised, then they’re free to pack their equipment and leave. We’ll have better investors who will be willing to give Zambia the fair share of our resources. Most of these mining companies have been extracting our minerals for virtually free. Then they pollute our rivers and our land with toxic waste, and pollute the atmosphere with poisonous gases, causing lung diseases in our people. Then, on top of that, they refuse to pay their fair share of taxes. Just watch “Stealing Africa–Why Poverty?” on YouTube and you’ll get the idea. So if they don’t like it, they’re free to leave!

    • The Govt is killing the Goose that lays the eggs. With Copper Prices falling by 20% on the World Market many Copper Producing Mines in Zambia will become unviable and close. This will lead to loss of Foreign Exchange Earnings and Zambia’s forex import cover. Imports will decline leading to economic collapse. The writing is on the Wall.

    • This time no one is backing down. Even the NDC is with us on this one. All well-meaning Zambians are backing the government on this one. The opposition is with us. Even UPND is with us on this one.
      If they will be loss making they can go fish elsewhere. We have China to take care of us.

  2. Reality Mr Mateo.
    As a seasoned mining engineer with 51 year’s experience, including 16 years in Zambia. There are ways and means to run a mine in order to pay the GST.
    OPTIONS INCLUDE, AND ARE NOT LIMITED TO:
    * Increasing throughput through the mills by manipulation of slurry rheology. 10-15% increase is
    achievable.
    * Fill that extra capacity by processing high-grade surface waste. Surface waste has inherent value because
    it has been blasted, crushed and trammed out of the mine.
    * Trim costs across the company (electricity, explosives, reagents, mill balls, diesel etc)
    * Call in a flotation expert to assist in enhancing plant recovery
    * Where a by-product can be sold, maximise it
    * Improve concentrate filtration efficiency, this will reduce transportation cost

    • Nice one Tony. This Mateyo boy is just a foool. Let him take cash flow statement of one of these Mines for the last financial year and show us how the new taxes are going to impact their cash flow. Just putting across useless unsubstantiated states like Mateyo’s is a very clear way of showing how d.ull one is.

    • mines like fqm sentinial have done all of the above including investing heavily into the local community….. yet the government treats them the same as the most unethecal mines in zambia….. so the one company doing things right is put out of operations as if to show other ethical investors its easier to just steal from the country…. no good deed goes unpunished.

  3. Government should get rid of this Chamber of mines. It has become a mouthpiece for foreigners and not Zambians.

  4. And there they go again. This research, obviously sponsored by the mines has concluded that government tax will vary between 86.3 and 105%. What does that even mean? I don’t ever remember reading these figures in the national budget being thrown around. At most I recall single digits % here and there. Why are they muddling the water to make everything look so bad..I mean who taxes anybody at 105% in this world.

    Can this Chamber of mines put the real figures on the table than just through these abstract numbers at us. Again, if it is not profitable shut it down and move elsewhere, like Chile

  5. This boy does not say how decreasing production and therefore decreasing labour numbers, will enable the so called investors survive the new taxation regime and avoid a shutdown. One would think that a more reasonable option for the mines would be to increase production. But then remember that most of these chaps are not carrying out much mining anyway. The little copper that they “produce” and export is actually ore mined in DRC and imported for processing in Zambia before export. That fact alone, very little or no mining activity in Zambia, is sufficient grounds for the government to repossess the mines as they have not complied with conditions of their licences. Of course, the situation with northwest mines is different, they actually carry out mining activities. Their situation is…

  6. SALES TAX SHOULD BE ALLOWED TO BE IMPLEMENTED REGARDLESS AND GOV SHOULD ADDRESS THE FUTURE OF WORK AND RESHUFFLE WORKERS IN THOSE OTHER SECTORS AFTER ALL WITH ROBOTS ND AUTONOMOUS VEHICLES AND MACHINES JOB LOSSES WILL STILL COME I THESE MINES SO SALES TAX IS THE ONLY WAY FOR ZAMBIANS TO GET A SHARE AND PUT IT WHERE CAPACITY IS BEING CREATED

    MEANWHILE THEY PAY THEMSELVES DIVIDENDS LIKE IN RANGOLD ALSO

    THE COMPANY IMPLEMENTED ITS DIVIDEND POLICY IN 2005. UNDER THIS POLICY, THE COMPANY EXPECTS TO PAY TWO DIVIDENDS PER YEAR, THE FIRST AN “INTERIM” DIVIDEND DECLARED AFTER THE RELEASE OF SECOND QUARTER RESULTS; THE SECOND, A “FINAL” DIVIDEND BASED ON YEAR END RESULTS. INTERIM DIVIDENDS ARE SET AT ONE-THIRD OF THE TOTAL…

  7. …….. Their situation is definitely different from the colleagues in Copperbelt.
    So ka Mateyo mwaice, indeed you are singing your masters voice!! Tell your masters to shut down if they dare lose their operations. We can sell to others.

  8. DECLARATION DATE DIVIDEND AMOUNT PER SHARE PAYMENT DATE
    JULY 30, 2018
    CDN$0.005
    SEPTEMBER 19, 2018
    FEBRUARY 12, 2018
    CDN$0.005
    MAY 8, 2018
    JULY 27, 2017
    CDN$0.005
    SEPTEMBER 19, 2017
    FEBRUARY 16, 2017
    CDN$0.005
    MAY 8, 2017
    JULY 27, 2016
    CDN$0.005
    SEPTEMBER 19, 2016
    FEBRUARY 18, 2016
    CDN$0.01
    MAY 4, 2016
    JULY 29, 2015
    CDN$0.0330
    SEPTEMBER 21, 2015
    FEBRUARY 20, 2015
    CDN$0.0487

  9. Priming minds, so they can evade paying tax nicely…. it is high time we (Zambians) started owning these ventures ourselves. Foreign investing companies can still be welcome, but subject to an equity cap (of no more than 25%)

    • I am saying this and I am saying it again, ZCCM-IH wake up and start a new mine wholly Zambian owned. We have engineers and HR and Admin capacity to do this in Zambia. If we can revive an airline, why not a mine?

  10. ITS MOSTLY LIKELY THEY WILL SOLD TO CHINESE ITS IN THERE BUSINESS STRATERGY AND MERGERS AND ACQUISITION

    WHATEVER IT IS THE VALUE OF JOBS TO ZAMBIANS IN MINES IS SMALLER THAN THE RESOURCE SOLD AND CONTRACTS THE ONLY WAY IS THE SALES TAX SO THAT THE REVENUES FROM THIS EFFECTIVE TAX CAN BE USED TO MOVE THOSE SOON TO BE REPLACED JOBS BY AUTONOMOUS MINE VEHICLES AND ROBOTICS THAT IS THE “FUTURE OF WORK IN MINES” HOW YOU SOLVE THE PROBLEM IS TO EQUIP YOUNG ONES IN OTHER DYNAMIC MINNING SKILLS AND FOCUS ON VALUE ADDITIONS TO MOVE THE MINNING JOBS IN THE SECTOR MORE UP AND BROADER
    JOBS ARE BOUND TO BE CUT AND ITS SAD FOR THESE PROFESSIONALS NOT TO SEE THE THINKING OF GOV IN…

  11. It is quite irritating to see an African taking sides with foreign investors and standing in the way of his fellow Africans. The Chamber of Mines is supposed to be working together with the government in favour of the country by harnessing the best possible royalties from our minerals but they sound intimidated by bad weather forecast.

    Africa needs leaders with the bravery of one Idi Amin to lock up the cabin and chase all the crazy baldheads out of town. How do you support those who come to raid your barn?

    • It’s best to start clearing these traitors as way of being patriotic to the country once and for all. We don’t need some of these educated danderheads in the chamber of mines

  12. IN ADDRESSING THESE CHANGE IN ” FUTURE OF WORK’ IN MINES” IT WILL NOT ALWAYS BE TRADITIONAL FOR THOSE COMPETITIVE GLOBAL MINNING INVESTORS WITHOUT GOING AUTOMOUS EVEN TRUCKS TO DURBAN COULD BE AUTOMATED AND PEOPLE WILL NEED TO BE SINCERELY ORIENTED

    WITH ELECTRIC VEHICLES COPPER AND COBALT INCLUDING THOSE I MANSA WILL BE LIKE GOLD

    SO WHETHER YOU ARE MINES OR OTHER ZAMBIAN PROFESSION DO NOT BE DECEIVED AND BE SHORT SITED LET THE PEOPLE BE GIVEN HEFTY PACKAGES AND INVEST WELL IT MIGHT BE TO THEIR ADVANTAGE ALSO WHICH I KNOW VERY FEW MINES WILL IMPLEMENT AS CASH APPEARS TO BE KING

  13. The government should reduce on expatriates on the mines. I wonder how the mines don’t make profit when their employees in the buying departments of these mines are very rich. I think even the top management also makes deals thereby making these mines losing a lot of money but they don’t complain about making losses. Let the government collect these taxes for the country to run.

  14. DEAR MINE OWNERS,

    YOU ARE WELCOME IN ZAMBIA. WE ARE ALIVE TO THE FACT THAT WE ALL LIVE IN A GLOBAL VILLAGE. BUT DON’T PLAY VICTIM HERE. TELL US: WHY SHOULD A MINING COMPANY HAVE IT’S HEADQUARTERS IN THE ISLE OF MAN OR CAYMAN ISLANDS? WHY??? DEEP DOWN YOU KNOW WHAT YOU DO. JUST GO TO CHIBOLYA OR GEORGE COMPOUND AND YOU WILL APPRECIATE HOW POOR SOME OF OUR POPULATION IS. WE NEED EVERY PENNY FROM THE MINES FOR OUR LOT. IT IS NOT ASKING TOO MUCH IF WE SAY LET US SHARE THE WEALTH FROM THE MINES EQUITABLY. YOU KNOW WHAT YOU WERE DOING WITH VAT. SO SALES TAX STAYS.

  15. All African traitors should never speak for us. These are the dimwits that have held the country and the whole continent back. Mutati was in Egypt talking about how Africans need to never back down on the trading floor, and here comes a young Africa technocrat Mateyo showing his cowardice. We need to move as one Zambia against the mines, no PF, UPND, FDD, MMD or regional you belong too. It is one Zambia against investors behaving like parasites.

  16. Ati “we have China to take care of us”. How gullible can you actually be? You prefer investors who shoot their employees and make them work with no shoes to “take care of us”? Childish logic, Mummy says no sweets but Daddy will give me

  17. The world is moving to Electric cars and needs a lot of Copper. l don’t see any lossmaking, as it stand right now this guys make big profits already.Mateyo shouldn’t be at the Chamber of Mines.

  18. He says that Zambia has become a well-known emerald producer in the world. ….well it’s like you’re the richest person in the country but you only survive on water mixed sugar. ..what’s the point of having all that money when you can’t use it?

  19. Chinese have runs mines in Zambia before. What salaries were given to Zambian workers? Safety wise, the Chinese were the least among the mining companies. Munali hills Mine compay for the Chinese did not treat our workers properly. So it is better to bring out good suggestions that will help our government to make a good decision.

    • Munali was under the Australians who sold it South Africans who also sold it Jungchan of China. The mine itself must have a problem if can hands like that.

  20. IF these mines do not want to pay taxes , its better we keep the minerals for our children they may be more knowledgeable than us .

  21. ubufotini iwe .Always u want to boot boot fimo fimo coz of love of money.Can u put the country first iwe chi Mateyo!

  22. Ba Chemba, mulekwatako insoni. Have you really sold your souls to this extent? When last did you tell Zambians apart from copper, the minerals your friends take out of this nation. Think about the future of this nation and not only about your personal needs.
    What will change anyway Mr Educated? Given the price of copper remain the same. Mines and companies that are vat registered will make more money because the sales tax rate will be than the vat rate. The only thing the mine will not do is abusing the vat system using vat refunds which sometimes come from fictitious suppliers invoices. Stop cheating people bane.

  23. Simple Analysis on mines Sales / Purchases accounts and impact on profitability:
    Sales Account Purchases Account Vat Account(16%) Sales Tax Account(7%)
    Year 2018 $8,000 $9,000
    Output Vat $1,103.45
    Input Vat ($1,241.38)
    Net Vat ($137.93)
    Year 2019 $8,000 $523.36

    • What basically I was trying to show is that with a sales tax assumably at 7%, the mines out put tax will be less . This output tax is payable to ZRA but under the current vat system it can be reduced by input tax. Its this use of input tax by mines which results in vat refunds. So in essence the mines would pay nothing on the selling of copper. So I can’t see how the none claiming of input tax will affect the profitability of the mines. The cry of mines is purely about vat claims nothing else but they can’t come out clearly because they will appear as people who don’t care about the welfare of this nation so they will use people like Mr Mateyo to say things he does not understand.

  24. Can our esteemed copper mine companies in Zambia be more transparent than they have been. You can fool some people some times but you cannot fool all the people all the time. Everyone knows that those trading in our
    red metal are richer than Zambia itself. The question is what is the justification for this? Cut out all middlemen so that the Zambians can get what is naturally theirs through equitable tax. We need massive infrastrure development to develop our country from our God given natural resources.

  25. Mr Mateo Sir, pardon me but that is all nonsense.

    All businesses will have bad economic outlooks at some point or other. Fact is even in the good times they refuse to cooperate with the gov’t. We MUST get more from the mines and preserve the resources for future generations. We can leave those mi es fallow if they go rather than get next to nothing while they take the Lions share. WORK FOR ZAMBIA not conglomerates.

  26. Ba mine thy make a lot of money,of all the years thy have worked in Zambia an the profit they have made can they complain today,give us back wat is due to us back FQM, intelligent lungu don’t back down mudala we feed to benefit from God given resources,it’s pointless to be kongolaling outside Wen we have lots of mines in our land.i am an FQM employee.go PF go ahead

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