Saturday, June 18, 2011

Government reviewing 2008 mining fiscal regime

COMMENT - The MMD is just blowing smoke. You can't 'urge' mining companies to make less profit. They are not going to 'hear the call'. They are under legal obligation to maximize profits (unlike the government apparently) and as a result, mining policy cannot be left up to them.

Government reviewing 2008 mining fiscal regime
By Chiwoyu Sinyangwe
Fri 17 June 2011, 12:20 CAT

THE government is currently altering the 2008 mining fiscal regime credited with higher taxation for mines to bring it in line with “international best practices”, says mines minister Maxwell Mwale. And Vice-President George Kunda says there is need to improve transparency in the mining sector to promote good governance in the country.

Mwale told key industry leaders attending the inaugural two-day Zambia International Mining and Energy Conference (ZIMEC) in Lusaka today that the 2008 mining fiscal regime was not adequate to deal with current dynamics in the sector.

Mwale said the government’s focus was to attract more players in the mining sector by providing incentives to investors.

“My government is aware of the mines development cycle and the need to improve the attractiveness of investing in Zambia’s mining industry,” said Mwale in a keynote address to the conference dominated by foreign mining firms.

“To this effect, the Mines and minerals development Act of 2008 is undergoing review to bring it in line with international best practices and ensure that sector contributes to economic growth.”

After years of Development Agreements with foreign mining firms which the country was tied to under the World Bank and International Monetary Fund-influenced chaotic privatisation of the vast copper mining, the government under late president Levy Mwanawasa in 2008, introduced a new fiscal regime to raise Zambia’s revenue collection from the mining sector – the country’s main economic stay.

The new law praised by key interest groups in the country but disputed by the foreign mining firms among other things raised corporate tax to 30 per cent, mineral royalty to three percent from 0.6, introduced a windfall tax of 25 per cent in times of unprecedented high international copper prices.

Mwale also said there was need for the government to ensure benefits accruing in the sector in current high metal prices were invested in priority areas, as the current growth in mining sector was unsustainable.

Any sudden slump in either the price or demand of copper may negatively impact on the growth of the sector and subsequently, on economic growth,” said Mwale.

“Therefore, the government has a challenge to ensure that benefits accruing from the sector in these times of high prices are invested in sustainable economic activities.”

And Vice-President Kunda urged mining firms to support the Extractive Industries Transparency Initiative (EITI) to improve management of minerals to benefit the country.

“Transparency is a tenet of good governance and I urge all stakeholders to be actively involved so that we achieve the objective of subscribing to the initiative,” said Vice-President Kunda.

Among the mining firms attending the conference included giant mining BHP Billiton, Brazil’s Vale, First Quantum Minerals London-listed, and Canadian and Australian-listed Equinox Minerals, while conspicuously missing is Mopani and Konkola copper mines.

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