Monday, April 15, 2024

Mining companies fail to show how higher taxes introduced in 2019 will affect their profitability


Ministry of Mines and Minerals Development Permanent Secretary Paul Chanda
Ministry of Mines and Minerals Development Permanent Secretary Paul Chanda

Reuters New Agency reports that Mining companies operating in Zambia have failed to show how higher taxes introduced in 2019 will affect their profitability despite objecting to the new framework, says a senior government official.

Africa’s second-largest copper producer increased its sliding scale for royalties of 4%-6% percent by 1.5 percentage points from January 1 and introduced a new 10% tax when the price of copper exceeds $7,500 a ton.

Zambia also plans to replace VAT with a sales tax by April to help bring down mounting public debt.

The Chamber of Mines said in December that as a result of the changes, more than 58% of Zambia’s copper producers would be loss-making at current prices.

Paul Chanda, permanent secretary for mines, said his ministry had asked individual mining companies to provide financial models by Friday last week on how the new taxes would affect them, but none had done so.

“We wanted them to show how the new taxes will affect production and profitability, but so far we haven’t received anything,” said Chanda.

“Two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others.”

Mining companies may lay off more than 21,000 workers because of reduced capital expenditure over the next three years resulting from the higher taxes, the Chamber of Mines said last month.

Mining accounts for more than 70% of Zambia’s foreign-exchange earnings. Companies operating in the country include First Quantum, Glencore, Barrick Gold and Vedanta Resources.


    • Govt will bruised badly on this one, and Chandas ( Paul, Sunday, Amos, Kingsley) will dance pelete. PF govt simply has no capacity to meaningfully engage with the mines. It is a much more complex undertaking than running a bar in Chawama. Watch the kwacha in coming months!!

    • The huge debt has made PF00Ls to kill & open the goose that lays the golden eggs thinking there must be plenty gold inside its womb.
      They’ve introduced ridiculous taxes which are strangling the economy, e.g. taxes on rentals, boreholes, toll gates, health insurance, speed cameras, new vehicle licenses & the new sales tax.
      – You cant develop a nation on debt.
      – You cant develop a nation using high taxes.

    • Zambia is no longer a favourable investment destination in Africa for credible investors under the current government as we are made to believe because economic indicators are painting a gruesome and unstable picture. The Chinese? I am sorry to say they are not reliable because they mostly play dirt and believe in capital flight. What have we benefited as a nation from Chinese investment so far? Other than PF and its leaders, they are just choking the local SMEs. Therefore government should not trivialise the issue at hand because it has serious negative consequences politically, economically and the image of the country internationally both in the short term and long term if mishandled

  1. They dont have any argument except that the profit will be smaller. But you are mining in an indebted country so you have to pay for the debt. The country is also lax with controls so you can even mine minerals you dont declare and noone will find out. Stop crybabying

  2. These are the available chances sata would voice out cleverly to outwit govt

    And these are opportunities for hh to prove he is genious. Lets here him voice out cleverly how he would end the empass. Instead he is in hotel lobbies forming the 10 united football team.

    Wining strategy is tenders. And arresting lungu in 2021

    • Kaili its politics of hate. The only thing ba pf asks for is evidence even when they know their wrong. so hh and his squad can easily win the hearts of Zambia only if they play a high pressing game e.i provide evidence simple.

  3. The guys are just laughing that it has taken so long time for the Zambian Government to wake up after they had made a lot of supper profits through VAT claims, side sales to hide profits etc. GRZ please dont listen to this lairs. In fact you can increase more than this. Why should these guys refuse to pay tax while us poor consumers are always paying, why should we subsidize the mines?? Please let Zambians get a fair share.

  4. I love the government’s stance, but they also need to be ready for the worst. These guys complaining about taxes are former colonialists; they are not interested about developing Zambia but their own pockets. Government better be ready to employ the Zambians in those mines and take over; make sure all knowledge is shared and same structures put in place. The Zambians are hard workers, foreigners do nothing.

  5. Hehehehe

    Strange how by now the pf kaponya rats are not sontaring and signing like monkies about how HH sold the mines even when there is no mention of HH…

    only to find lungu is also a privertisation theif ……..hehehehehe

    What a brilliant move by UPND to push for an enquiry of privertisation , now the kaponyas are quite knowing lungu was neck deep selling Zambian companies …

  6. They’re playing games with with our government. They have no excuse for not complying so now they start delaying tactics.

    They have made fortunes from our copper and boosted their countries’ economies while the majority of Zambians still live on the edge of human existence. For once, let’s get this right and demand the right price for our resources. It is a sin to sell our God-given wealth below it’s value! It is even better to leave it unmined in the ground until such a time that we develop our own strategy to mine, process and market it by ourselves.

    • @nine chale
      Listen to yourself! If you wanted those fortunes your government should been running the mines themselves
      By the way what made run away from zambia with no intentions of returning back if you’re that patriotic

    • ndobo, I didn’t run away from home, I just came to the part of the world where my natural resources end up. I’m on a mission to live and learn, to earn and then finally return..

  7. The president is not taken seriously by mine owners because he announces those serious issues at airport, political gathering and on the street. He has a point though.

    • It doesn’t matter where the announcements are made, they are still valid. Trump uses Twitter for his serious announcements and you think the airport, street or a political gathering are less appropriate?

    • @nine chale
      You have a weak president, admitted it Sata was much more of a man for issues like this, but this guy no gats nothing, zero

    • @ndobo I think he is underrated by many. He is a great leader in his own right. What matters is not being in the fire but how well you pass through the fire…

  8. I will tell you something, no single mine is talking about shutting down, just laying off workers and reducing production. Now any business knows that the more the production the greater the volume of revenue and profits, not necessarily percentage profits. It’s called economies of scale. I tell you these chaps have no case against taxes, but the reason is not far to find. These mines are being run from top to bottom by artisans who have no power of analysis, hence as PS Chanda says correctly, none can submit a model. What is a business model to a white artisan? It’s jargon to such ilk.

  9. This is where you need REAL leadership. There has to be a robust government position, based on facts, data and contractual obligations in regard to the mines. What is the PF’s policy, on our minerals/resources? The gist of all this is that we are NOT in control of our resources. Even where you allow a lot of foreign ‘investment’, you still need to be able to ensure that you have processes, rules, regulations and economic policies that allow the country to benefit adequately from the resources on behalf of the citizens. So when I refer to leadership, I mean Lungu sitting in front of the cameras and ‘spelling out’ where we are, his governments intentions/policies in relation to this issue and what needs to happen, henceforth.

  10. “Reuters New Agency reports that Mining companies operating in Zambia have failed to show how higher taxes introduced in 2019 will affect their profitability despite objecting to the new framework, says a senior government official.” The minister of mines does not understand the implication of a higher tax on the mines. Unfortunately, the government does not have plan B and C incase the mines reduce manpower. It is only the workers that will be laid off that will suffer. Either the Chinese or the west investors will not be willing to make less money. the government should look out of the” box”.

  11. It’s clearly arm twisting by the mines, otherwise why not shut diwn and sell your mine if you making or will make losses? Can reducing labour large scale make you profitable? Unless of course they are actually not mining but processing ore from Congo which is what they are doing in fact. KCM and MCM are not mining are they?

  12. No arm twisting, let them comply with the laws of the land and that includes the amended Tax law. The country in which the mines operate has laws which must be respected. The mines are by far the major beneficiaries of the roads and other facilities put in place by government using the loans as such they ought to support the government by paying the minimal taxes announced. Surely crying over a 1.5% adjustment on royalties? What is the impact on their profitability of such an adjustment that should lead to layoff of workers.When a company sells a product subject to a sales tax, the company must collect the sales tax and subsequently remit it to the appropriate government. For example, if a retailer sells a product for $100, and the state sales tax rate is 7%, then the retailer will…

  13. Continued.
    collect $7 from the customer and then transmit that $7 to the state government. In this case sales Tax doesn’t affect the cost of production. THE GOVERNMENT HAS DONE A GOOD JOB ON THIS MATTER AS SUCH ALL ZAMBIANS MUST SUPPORT IT. Its good for our country. Infact its long overdue.

  14. Like I said we are our own enemies. …look at Mr Mateyo a Zambian heading the Chamber of Mines painting a gloomy picture without giving specific statistics.

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