Zambia’s new budget proposals are likely to be disadvantageous to the country’s mining sector. These sentiments were expressed by the Australian High Commissioner to Zambia. High Commissioner Bronte Moules called for a stable business environment to ensure mining sector investors continue to contribute to the economic and social development of the country.
Speaking during a tour of First Quantum Minerals’ (FQM) Sentinel Mine at Kalumbila, Ms. Moules said that foreign investment – of world-class standard and done responsibly – can be a really important contributor to a country’s economic development.
Her visit comes at a time of increasing pressure on the mining sector following September’s 2019 Budget announcement. The budget included proposals for an additional 1.5%-point increase on all mineral royalty tax bands. This is including an additional 10% mineral royalty tax when the copper price exceeds US$7,500 p/t.
Disparagingly, mineral royalties would be non-deductible for corporate income tax purposes under the plan. Other proposals include the introduction of a sales tax to replace VAT. This would mean that companies could not reclaim tax on input purchases.
Ms. Moules was optimistic about the overview of the weight with which the issue was being carried. She further added that such consideration would positively impact the investments made in the mining sector. Copper accounts for 70% of Zambia’s exports. The Sentinel and Kansanshi mines supply approximately half of that copper.
FQM has invested US$6.4Bn in Zambia and employs over 8,800 direct employees. It is also the country’s largest taxpayer, having paid US$3.4 billion to the Treasury since 2005.
FQM Country Manager, General Kingsley Chinkuli, explained that the recent Budget proposals threatened the stability of the mining sector. As such, this could most likely result in job losses and reduced tax revenues across the industry.