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Zambia’s president gives Ministers two weeks to change mine tax

Zambia’s president Edgar Lungu directed his Finance and Mines Ministers to change by 8 April a new tax system that companies have said would lead them to shut mines. Lungu asked Mines Minister Christopher Yaluma and Finance Minister Alexander Chikwanda to consider option to resolve the impasse. These include negotiating interim tax deals with the individual mines most affected, modifying existing laws, deferring the new regime or temporarily reverting to the old mine tax as a new one is negotiated, he said in an emailed statement last week.

“Dialogue between my government and the mines shall continue,” said Lungu, who was elected in January. The Ministers must make recommendations to Cabinet by the April 8 deadline.

Lungu did not say when any changes would come into effect.

Under a law passed in January, royalties more than tripled to 20% for some mines. This will cause 12000 job losses and shutdowns, according to the Chamber of Mines in Africa’s second-biggest copper producer. The system will disrupt government’s objective of increasing revenues from companies including Glencore and Barrick Gold.

It also threatens to cut growth in an economy Fitch Ratings forecasts will expand at the slowest pace in 13 years in 2015.

The Zambian kwacha gained the most in a month after Lungu’s announcement, advancing as much as 4.2% against the dollar.

Source – Bloomberg