October 23, 2017

Zambian government intends to set its mining royalties at 9% for both open-pit and underground mines

Zambia has approved a proposal to drop a recent hike in mining royalties as Africa’s second top copper producer seeks to resolve a six-month standoff with miners over the controversial tax increase.

According to Reuters, the government intends to set its mining royalties at 9% for both open-pit and underground mines. In January, the country increased taxes for open pit mines from 6% to 20% and those for underground mines from 6% to 8%, as part of major overhaul to the industry’s tax system announced last year.

The mover prompted warnings of closures and thousands of job losses, underscoring a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

From 1997 to 2013, mining attracted $12.6bn in foreign investment to Zambia, according to industry figures. The capital injection helped the southern African nation become one of the continent’s star economic performers, with average annual GDP growth of 6.4% over the last decade.

Today, mining employs 90,000 people and contributes about three-quarters of the country’s foreign exchange earnings and 25-30 % of government revenue.

But weakening prices are hitting the industry hard. On Monday a World Bank report said weak commodity prices would bring down sub-Saharan Africa’s growth rate to 4% this year, the lowest in two decades.

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