Prospect Lithium Zimbabwe (PLZ) has called on Government to lead by example by accepting the Zimbabwe Gold (ZiG) currency for tax payments, arguing that the current mismatch between local-currency revenues and foreign-currency tax obligations is creating a significant financial burden for mining companies, Mining Zimbabwe can report.
By Rudairo Mapuranga
PLZ Commercial Manager Leo Huizenga made the call while appearing before the Parliamentary Portfolio Committee on Mines and Mining Development during the Committee’s fact-finding visit to the Arcadia lithium project.
Huizenga said PLZ receives approximately 30% of its revenue in ZiG, while about 84% of its tax obligations have to be settled in foreign currency.
The mismatch, he said, leaves the company with significant ZiG balances that are difficult to use because many of its production inputs, particularly imports, require payment in foreign currency.
“Our company gets 30% of its revenues in ZiG… Yet, we are having to pay approximately 84% of our taxes in foreign currency,” Huizenga told the Committee.
He said allowing companies to use ZiG to settle a greater portion of their tax liabilities would ease the pressure created by the currency mismatch.
“Enabling us to pay our taxes in ZiG will relieve us of a major, major burden,” he said.
Government should lead by example
Huizenga argued that Government’s acceptance of ZiG for tax payments would strengthen confidence in the local currency while providing businesses with a practical avenue to use the ZiG revenues they already receive.
“We believe it will be desired by us that the Government would lead by example, accepting the ZiG, rather than demanding us to use it,” he said.
The comment comes against the backdrop of Zimbabwe’s efforts to increase the use and acceptance of ZiG in domestic transactions while maintaining access to foreign currency for external obligations and imports.
Huizenga said the problem was particularly acute for mining companies because their operations depend heavily on imported machinery, equipment and other inputs.
He said PLZ also faces difficulties when trying to use ZiG to pay local suppliers, with some suppliers reluctant to accept the currency.
“Demanding our suppliers locally to accept ZiG, we are receiving a great pushback from companies, and yet, we need our imports,” he said.
The import dilemma
The company’s argument highlights a broader challenge facing Zimbabwean businesses operating in a partially dollarised economy.
A mining company can receive a portion of its domestic revenue in local currency while simultaneously facing foreign-currency requirements for machinery, equipment, chemicals and other imported inputs.
This can create a situation where the company has local-currency balances but insufficient avenues to convert those balances into the foreign currency required to sustain production.
Huizenga cited the power sector as another example of the challenge.
He pointed to a neighbouring power plant, saying the facility purchases coal in US dollars and consequently charges PLZ in US dollars for power and steel supplied to the operation.
The example illustrates the difficulty for companies that are required to transact partly in local currency while significant portions of their cost base remain effectively dollarised.
A policy issue for miners
PLZ’s proposal is not simply a request for a tax concession, but a call for greater alignment between the currency in which companies receive revenue and the currency in which Government collects taxes.
For the mining sector, the issue is particularly significant because miners are major taxpayers but also have substantial foreign-currency capital and operating requirements.
Huizenga said allowing companies to settle taxes in ZiG would reduce the accumulation of local-currency balances that cannot easily be deployed towards imported inputs.
The company is therefore asking Government to become an active participant in building confidence in the local currency rather than relying primarily on businesses and suppliers to drive its acceptance.
Part of wider fiscal concerns
The currency issue was raised alongside another fiscal concern during PLZ’s presentation to Parliament.
Huizenga also called on the Ministry of Finance to allow certain export taxes and levies to be deducted when calculating income tax, arguing that the current treatment creates an additional tax burden on lithium exporters.
He said the two issues together affect the company’s cash flows and Zimbabwe’s competitiveness as an investment destination.
The calls come as Government seeks to attract further investment into lithium processing and deepen local beneficiation.
For PLZ, the argument is that a more predictable currency and tax environment would allow companies to retain more cash for investment in local processing capacity.
The company has invested approximately US$400 million in beneficiation facilities through PLZ and Arcadia Technology Zimbabwe and says it has paid more than US$100 million in taxes and royalties.
Huizenga’s appeal to Government therefore puts the question of currency acceptance directly into Zimbabwe’s broader debate over how to make the mining sector more competitive while strengthening the role of ZiG in the domestic economy.
