Gvt Considers New Tax on Miners to Revive Foundry Sector
The government, through the Ministry of Mines and Mining Development, is considering imposing a new tax on miners, with the proceeds going toward a fee to promote the revival of the country’s foundry sector, which is a vital supplier to the mining industry.
This was said by Minister Soda Zhemu at a recent event in the capital while analyzing alternative ways to fund the retooling of the key sector, which is competing with far cheaper imports from regional competitors who benefit from economies of scale.
The mining sector is one of the biggest customers, as foundries produce a wide range of machinery and parts used in mining operations, such as crushers, grinding mills, conveyor belts, and mining trucks vital components which ensure efficient and safe extraction of minerals.
According to the Zimbabwe Institute of Foundries (ZIF), US$100 million is required for the sector to produce efficiently and become competitive against regional and global players.
Faced with this challenge, Minister Soda Zhemu mulled a tax against the miners as an option in financing the retooling of the foundries sector so that it may improve on efficiencies and ultimately compete in the global market.
“We have to create the money for us to consume that same money. Currently, there is no policy on subsidies, so we have to levy it. We have to be innovative as to how the fund can be created. It can be a tax against the miners, and then we can levy, which will then be channelled towards the foundries sector,”
”We need to continuously engage so that we come up with a ready mechanism as to how you can get a fund that is specifically for the development of your industry. I will have a discussion with the Minister of Finance to see if we can come up with mechanisms to deal with the retooling issue, and once you have retooled, obviously, you can achieve the required efficiencies and economies of scale,” Zhemu said.
The Minister added that improving on efficiencies is key going forward as the government can no longer provide the protection that used to be available in the past to put some embargo for some products as the world has now become a global village.
”You shall always have those products being manufactured in China competing with your local products,” Zhemu added.
While it might come as pleasant news to players in the foundries sector, if it comes to fruition, this will be another tax on the already heavily taxed miners.
The high tax burden on miners has been a source of concern for the mining industry, arguing that it discourages investment and hinders the growth of the sector. On several occasions, they have called on the government to review its tax regime and create a more attractive environment for investment.
The government, on the other hand, has argued that taxes are necessary to generate revenue for essential services and infrastructure projects. They also argue that the government needs to ensure that it receives a fair share of the profits from the country’s mineral resources.