Zim miners call for massive fees cuts

Published: 01 November 2013

ZIMBABWE's mining industry, reeling from a punitive tax regime, has proposed massive fee cuts of almost 100 percent.

Mike-BimhaThe industry argues that most Greenfield mining projects were still in their infancy and struggling. Higher tax levels were therefore threatening their viability.

This, said the Chamber of Mines of Zimbabwe (CoMZ) in its recently released 2012 annual report, required intervention in the form of a favourable tax system to see them through a most difficult period, not a hostile tax regime that includes high fees and other statutory obligations that could pose serious threats to their survival.

The proposal could have far-reaching consequences on State revenue inflows given the fact that government has recently been largely dependent on the sector for income.

At the same times, however, a tax and fees system that would encourage investment inflows into Zimbabwe would be critical for economic recovery.

The sector's proposals also warned that high taxes and fees acted as a barrier to the entrance of indigenous players.

It recommended that fees for application for registration of precious metals or precious stone block, currently at $100 000, should be reduced to $300.

Through a statutory instrument issued in January 2012, government had placed the same fees at $1 million for diamond mining firms.

But the mining industry has proposed that this fee must also be slashed by 99,97 percent to $300.

It proposed that that platinum miners must be charged $300, from $2,5 million.

"At this stage in the development of projects, no income is being generated," the CoMZ said in the report.

It proposed that application fees for registration as an approved prospector be reduced from $5 000 to $3 000, while the application for renewal as an approved prospector must be slashed to $500, from $1 000.

Duplicate certificate of registration as an approved prospector, said the report, can remain at $1 500, noting however that even these recommended prices were too high.

The CoMZ's proposals were part of a wide range of fee cuts that the industry wants reviewed to avert the potential of a prolonged crisis which could result in mine closures and job cuts.

International commodity prices have been on the decline, worsening the mining sector's woes.

Last week, gold prices slumped to $1 277 per ounce after spending most of the first half trading between $1 600 per ounce and $1 700 per ounce.

Gold mines have been losing about $500 per each ounce produced.

Nickel prices have also declined to about $13 800, after trading close to $15 000 per tonne.

Keeping mining fees at "extremely high" rates has the potential to trigger investor flight to alternative destinations, such as Western Australia and Tanzania.

The CoMZ cited several regional and international comparatives, including in Tanzania, Nigeria, South Africa, Zambia, Botswana and Western Australia, where fees ranged between $64 and $3 000.

Zimbabwe's government has been facing significant challenges, highlighted by weak fiscal inflows against increasing demand for cash.

Government had relied on revenues from the mining industry, especially diamonds, to fund its budget.

It would be unlikely to accede to demands by mines to cut both fees and taxes.

Government has hiked royalty rates five times in the past three years, with those for gold and platinum increasing by more than 100 percent and 200 percent respectively.

The industry says these increases have frustrated growth and viability in the industry.

Labour and Economic Development Research Institute of Zimbabwe economist, Prosper Chatambara, said there was need to review mining fees in Zimbabwe, but warned that this must be balanced with a careful review of the prevailing tax system.

"Mines in Zimbabwe have been making a killing," said Chatambara.

"There has been a lot of transfer pricing," he said.

"The mining industry has not been contributing enough through taxes. Zimbabwe needs a mineral based tax system to make sure the economy is not prejudiced. I think the mining industry can actually do more," said Chatambara.
- fingaz