Cut taxes, ease forex rule, drop power tariffs: Zimbabwe miners’ wish list for Mthuli’s mid-term budget

Zimplats: Miners want a buffer from falling global metal prices (pic: Scotty Photos)

As Finance Minister Mthuli Ncube prepares his mid-term budget statement, miners are sounding alarm on the impact of government policy on an industry already bleeding from low metal prices.

In an appeal to Ncube, the Chamber of Mines warns that large-scale miners may scale back production due to high costs and taxes, pleading for lower taxation and power tariffs. Here, we take a look at what the miners are proposing.

Cut it: Capital Gains Tax

In his 2024 budget, Ncube introduced a special capital gains tax on gross proceeds from the transfer of mining title. If someone holds a mining project in Zimbabwe, and they sell it to a foreign investor, a 20% is charged. Ncube also wants the tax backdated 10 years.

The Chamber of Mines says the tax is bad for business. The miners also argue that investors that came in before this tax “should not be affected by this new law as it brings uncertainty on Zimbabwe as a destination for investments”. They say the tax must not be charged to the buyer, that it must be cut to 5%, and not backdated.

Too high: Royalties

Government raised royalties on platinum by 180% from 2.5% to 7% last year, saying Zimbabwe needed more value from minerals. This increased costs for miners by 5%, and the impact is now harder as prices fall. Miners are recommending that royalties be determined by metal prices; 3% when platinum prices are below US$1,100 per ounce, and 5% when they rise above US$1,100/oz.

Diamond royalties of 10% are too high, they say, and these must fall to 7%. South Africa charges a 5% royalty on its diamonds. Royalty on lithium went up from 2% to 5%, at a time producers are “still new and would require Government support”. Lithium prices fell by up to 80% last year, hitting mines. The Chamber recommends a lithium royalty of 3%.

Drop it: Tax on unprocessed platinum

Government charges 5% on all platinum exports to force mines to fully refine it in Zimbabwe. The Chamber of Mines says the tax should be dropped as the industry has a roadmap to set up a joint refinery to process concentrates locally. Work on a base metal refinery was one of the projects that Zimplats put on ice as it slowed down expansion this year due to weak prices.

Losing value: Forex retention

Miners, like other exporters, keep 75% of their earnings in USD, with the remaining 25% paid in local currency. This, the industry says, takes away the forex they need for operations. The platinum industry says, due to this policy, the forex available to them has fallen from US$1.7 billion in 2022 to US$1 billion in 2024. The Chamber of Mines wants government to instead take more taxes in ZiG. “This measure will help create a home for the 25% mandatory surrender portion liquidated into ZiG and free up some foreign exchange to meet operational requirements and fund expansion projects and construction of beneficiation facilities.”

Pay less: Power

Miners pay USc14.21/kwh for power, which they say is too high. They recommend a tariff of USc10/ KWh. The Chamber warns: “PGMs producers have indicated that it has become unsustainable to run their smelters at the current tariff. If the situation is not resolved, we may witness scaling down of smelting activities in the PGMs industry.”

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