THE World Bank says it will focus on the mining sector in its next Zambia economic brief to be released in 2015. Zambia’s mining industry was one of the major areas of concern in the World Bank’s fourth country economic brief released in the first week of December, 2014.
The 2014 fourth Zambia economic brief which focused on financial inclusion through mobile finance service provision with special emphasis on rural communities, also discussed new mining taxation regime as one of the challenges facing the country’s economy. World Bank country director for Zambia, Malawi and Zimbabwe, Dr Kundhavi Kadiresan felt tax changes by the government for mining companies had the potential to wean investor confidence if not handled with care.
The government has since approved an upward adjustment in taxes for the mines with mineral royalty increasing from six to 20 per cent for open cast mining and from six to eight per cent for underground mining. Barrick Gold Corporation, the parent company for Lumwana Mine in Solwezi, threatened to halt operations as a result of the new tax approval, putting 2,000 jobs in jeopardy. However, mines minister Christopher Yaluma said the government would not back-peddle on the latest changes but that there was room to further dialogue with respective mining companies.
Nonetheless, Dr Kadiresan said even after the presidential election on January 20, there was need for Zambia to resolve policy issues surrounding the mining sector, including the Value Added Tax (VAT) refunds to the mines. She said the government’s policy shift in dealing with the mining sector could adversely affect investor confidence.
Finance minister Alexander Chikwanda ardently pushed for a refund of the disputed US$600 million (about K3.6 billion) in value-added tax to the mines which accumulated over a period. The Zambia Revenue Authority had withheld the over US$600 million in value added tax repayments to mining companies that had failed to provide importer documentation required to qualify them for VAT reclaim on the zero-rated copper exports.
But Dr Kadiresan said changes proposed to tax policies could affect profitability of mining companies and could curtail their operations.