Tax increase to impede mining growth
The stance by the government to implement beneficiation tax during the first quarter of next year will squeeze mining growth, the Chamber of Mines of Zimbabwe has hinted.
Speaking at the Business Post Budget analysis Breakfast meeting held in the capital Chamber of Mines President Mr Thomas Gono said due to softening commodity prices, implementing a beneficiation tax would affect the growth of the mining industry.
He said the mining industry growth has been relying on its own resources due to failure to attract external capital therefore softening commodity prices might lead many mines to fail to reach targets to beneficiate lithium to lithium carbonates due to lack of funding.
Gono said as the Chamber of Mines they understand that governance is a fiscal position. He however said that productive sectors, including the mining sector, require supportive measures in light of the unfolding and softening of the commodity prices.
“We submitted that taxes and royalties be moderated. While lithium companies are expected to provide beneficiation plans, we hope that the agreed roadmaps must be flexible to accommodate peculiar gestation periods and life of mines of the projects. In addition, we were also expecting the budget to align beneficiation tax from the platinum group metal concentrates to the agreed beneficiation roadmaps for the PGMs.
“We are of the view that the projects in the economy will squeeze the capacity for organic growth. It’s very difficult to mobilize funding from outside. So what is there for us is actually to use only funding for organic growth. Thus the medium-term prospects for the economy will be on the downside. There is a need for the government to support productive sectors to restore viability and generate impetus for increased activities in the outlook,” Gono said.
Speaking on the sidelines of the event, the Chamber of Mines CEO Mr Isaac Kwesu said the expectations and position of the chamber was specifically for the government to consider supporting the mining sector during this difficult phase by giving some form of reprieve that reduces cost.
“As you are aware, our mining industry is currently going through a difficult phase of commodity slowdown. The prices are very, very low. The cost structure has not been helping. We have seen the cost of doing business mining being propelled up in the past 12 months. So from the budget statement, our expectations and position of the chamber was specifically for the government to consider supporting the mining sector during this difficult phase by giving some form of reprieve that reduces cost. This includes possibly the royalties for specific minerals such as PGMs and minerals. Lithium, which went up, as well as the cost of electricity. The tariff also has gone up by more than 40%,” Kwesu said.