Zimbabwe doubles platinum royalty fees
Zimbabwe will double the royalty rate it charges mining companies on the platinum group metals (PGMs) they produce to 5% from January 2023 in a bid to increase government revenues.
The country is the world’s third-largest producer of platinum, after South Africa and Russia, hosting major miners Anglo American Platinum, Impala Platinum and Sibanye Stillwater.
Presenting a mid-term budget in parliament on Thursday, Finance Minister Mthuli Ncube announced that government income from the mining industry was low due to what he called “a generous royalty regime on some major minerals”.
While more tax will worry mines already creaking under higher production costs, Ncube says miners are contributing too little tax.
“Despite the significant contribution to output and export receipts, the mining sector contributed about 1.2% of GDP in direct taxes to the Fiscus in 2021. This is a significant contrast to countries in sub-Saharan Africa which averaged 2% during the same period,” Ncube says.
“A royalty rate of 5%, which is in line with other platinum-producing countries in Africa, is proposed effective 1 January 2023,” Ncube said.
Ncube also proposed a 5% royalty rate for lithium, a mineral that is drawing investor interest in Zimbabwe, which holds some of the largest hard-rock lithium deposits in the world, as demand for battery minerals grows.
Mineral exports from Zimbabwe, mainly gold and PGMs, reached US$5 billion in 2021, accounting for 80% of the country’s total export value.
Ncube expects total export earnings to increase 16% to US$7.3 billion this year, buoyed by commodities.
How do Zimbabwe royalties compare?
In 2012, Zimbabwe doubled royalties for platinum miners to 10%. However, operators under a special lease paid only 2.5%. Under pressure from miners who said this brought uncertainty to investment, government then dropped the royalty to a uniform 2.5% in 2017.
South Africa, the world’s leading PGM producer, uses a formula to calculate the royalties it charges mining companies, based on earnings. The royalty rate is capped at 5% for refined minerals and at 7% for unrefined minerals.
In Zambia, producers of copper, the country’s biggest export, pay 5.5% when the price is under US$4,500 per tonne and up to 10% should the prices firm above US$9,000 a tonne. While Zambia is not a major platinum producer, it has set its royalties for precious metals, including platinum, at 6% of the value.
Mining companies in Zambia are allowed to deduct royalties as an expense from their taxes.
In Tanzania, platinum miners pay a 6% royalty.
NewZWire