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Zambia sets up team to end mine tax dispute

Zambian President Edgar Lungu created a technical committee to help end the dispute over a new mining tax that companies say could lead to thousands of job losses.

“There was simply one term of reference — end the impasse as quickly possible,” Amos Chanda, Lungu’s spokesman, said by mobile phone from Pretoria, South Africa, where he’s accompanying Lungu for medical treatment. The committee should complete its work before the end of March, Chanda said.

Zambia in January abolished income tax for miners and instituted higher royalties in a bid to increase its revenue from a sector the government said isn’t contributing enough to the economy. The Zambia Chamber of Mines said the new tax system, which more than tripled royalties for some operators, would lead to mine closures and 12,000 job losses this year.

Barrick Gold Corp. in December said it would put its Lumwana mine under care and maintenance as a result of the new regime and falling copper prices. Zambia is Africa’s biggest copper producer after Democratic Republic of Congo.

Creating the committee is the most concrete step yet by government to end the dispute and prevent closures. Lungu last month eased a separate stand-off with mining companies over value-added tax refunds that the government was withholding.

“The idea is to try and come up with quick recommendations” on the royalty tax, Chanda said of the committee’s main area of focus. “Whether to sustain it, negotiate it downwards or abolish it.”

Big Hopes

The committee will be led by Hibeene Mwiinga, Lungu’s special assistant for economic and development affairs, and its members include Zambia Revenue Authority Commissioner-General Berlin Msiska, permanent secretaries from the mines and finance ministries, Treasury Secretary Fredson Yamba, and Chanda.

“We are cautiously optimistic that we we will reach a solution,” Jackson Sikamo, president at the Zambia Chamber of Mines, said by phone from Kalalushi in Copperbelt province. “It is very positive. It also shows the commitment the government has in getting this resolved.”

The industry body represents the local units of companies including Glencore Plc, First Quantum Minerals Ltd. and Vedanta Resources Plc that operate mines in the country.

“There is a lot of hope,” Chanda said. “The direction things are taking is to reach an amicable solution expeditiously.”

Lungu, 58, has been in power for less than two months, after winning a narrow victory in early elections following the death of his predecessor in October. He is seeking specialist medical treatment in South Africa for a rare disease that causes the food pipe to narrow.

Zambia’s kwacha retreated by as much as 2.4 percent to a record low against the dollar on Wednesday, at least partly because of the uncertainty about Lungu’s health, according to Barclays Africa Group Ltd. It traded 2 percent weaker at 7.2461 per dollar by 3:42 p.m. in Lusaka, the capital.


Source – Bloomberg News