Zambia Forecloses Mining Windfall Tax Re-Introduction

Zambia, Africa’s top copper producer, will not reintroduce a mining windfall tax it scrapped in 2009 because it may force mine closures, the minister of finance said last Thursday.

“Mining has a long gestation period and we don’t want to tax the mines out of business,” Alexander Chikwanda said on state-owned ZNBC radio

“In fact, there are a lot of complaints from the mines on the government’s hike in the mineral royalty tax from three per cent to six per cent but we need to strike a balance,” he said.

Zambia’s former Mines Minister Wylbur Simuusa said in February the country might bring back the windfall tax if copper prices hit 10,000 dollars per tonne. Prices are now at around 8,455 dollars.

But Chikwanda said that could push up mine production costs by as much as 500 dollars per tonne, which he said would be too high.

Zambia scrapped the 25 per cent windfall tax in 2009 following complaints from miners that it raised production costs and discouraged investment.

The new government of President Michael Sata doubled royalties on copper miners to six per cent in the 2012 budget to bring in revenue to increase social sector spending and farm subsidies.

Miners have warned that such move may cause them to scale back operations.

Foreign miners operating in Zambia include First Quantum Minerals, London-listed Vedanta Resources Plc and Glencore of Switzerland.