Chamber Requests Government Support to Revise Fiscal and Electricity Frameworks
The Chamber of Mines of Zimbabwe (CoMZ), representing the country’s large-scale miners, has called on the government to revise fiscal and electricity frameworks that are increasingly straining operations and driving up costs in the mining sector, Mining Zimbabwe reports.
By Rudairo Mapuranga
Speaking at a Pre-Budget Capacity Building Workshop for the Parliamentary Portfolio Committee on Mines and Mining Development, held in Bulawayo on Wednesday on the sidelines of the Mining, Engineering, and Transport (Mine Entra) Expo, former Chamber of Mines President Collin Chibafa emphasized the need for government support to help reduce the cost of doing business and prevent inconsistencies in policy application.
Chibafa highlighted that the high operational cost environment has pushed mining companies to focus on enhancing efficiency, maximizing current resources, postponing projects, and, in some cases, reducing workforce sizes.
“There are increased costs due to higher royalties, elevated electricity tariffs payable solely in U.S. dollars, and the need to finance ongoing projects. Mining companies are now focused on improving efficiency, maximizing existing resources, deferring projects, and, unfortunately, sometimes reducing workforce costs. I request that the sector be given support as we work through these fiscal challenges,” Chibafa said.
He noted that the Ministry of Finance faces revenue collection challenges, with the remaining formal sectors bearing a disproportionate portion of the tax burden. Chibafa urged for policies that create an enabling environment for mining to drive the country’s growth without being excessively taxed.
The issue of capital gains tax, he explained, has added to the perception of policy inconsistency. He advocated for a return to the tax’s original rate, arguing that if adjustments are needed, they should apply prospectively rather than retroactively.
“The first issue relates to the special capital gains tax. To illustrate, consider roads where the maximum speed limit is 120 kilometres per hour. With this tax, they went back five years, set the limit at 80, and now fine anyone who was driving above 80 at that time. From the sector’s perspective, it was applied retrospectively. People conducted transactions based on the rules that existed, and now the government has retroactively increased the tax rate to 20% from 5%. Our plea is for this tax to be revised back to its original level. If there is a need to increase it, Parliament should apply it going forward rather than retroactively,” he explained.
Chibafa also urged a review of the country’s royalty rates, which he noted are higher than those in the region, particularly for platinum (7%) and diamonds (10%). He proposed aligning Zimbabwe’s rates with regional standards, lowering diamond royalties to around 7%, and possibly introducing a price-linked royalty rate for platinum, with rates fluctuating in response to market prices.
The sector is also committed to advancing down the value chain. Zimplats, for example, will commission its expanded smelter this year, with the capacity to process ore for other companies, shifting exports from concentrate to smelted material by year-end. Plans are in place for a base metal refinery, and the Chamber has requested a continued deferral of the beneficiation tax as these initiatives take shape.
Mining fees and levies, another major cost factor, also need government attention. As market-driven industries, mining and farming do not control their prices, and with current low commodity prices, high fees and levies strain profitability. A recent additional 1% levy further exacerbates costs. The Chamber proposes adjusting these fees to a more sustainable level.
Foreign exchange remains a critical cost for mining companies. While 75% of their revenue is retained in foreign currency, the remaining 25% in local currency is difficult to spend. Suppliers align prices with parallel market rates, effectively doubling costs. Moreover, ZIMRA only accepts tax payments in foreign currency, adding strain on miners. Chibafa urged the government to set an example by accepting local currency to promote its use, as miners lose value with a currency that depreciates over time.
On electricity, Chibafa acknowledged ZESA’s need for viability but highlighted that current tariffs are high and misaligned with regional benchmarks. Although miners are open to importing power at regional rates, they are required to use domestic power, which is costly and affects the sector’s overall viability. The Chamber appealed to Parliament to address the escalating cost pressures that hinder the competitiveness of Zimbabwe’s mining industry.