August 23, 2017

3 things on mining companies’ 2016 wish list

It is the most trying epoch in the history of global mining. It is barely credible to think that eighteen months there was high optimism in the sector, with companies unveiling projects, both brownfield and greenfield, at the slightest hint of a return on investment. Now, it is as if they have been jolted to reality from one big trance, wishing to revert to the slumber. Hocus pocus!

Mining companies had betted on one horse called Chinese demand which has now lost the race, leaving them in anguish. But this is not the time for pity but decisive action. Hence, countries that regard mining companies as biggest contributors to their revenues, directly or indirectly, should tend the mining sector like the goose that lays the golden eggs that it is and has always been. Sadly, from the course of events, through anti investment measures, some countries are hastening the closure of mining companies .

They are three things that mining companies wish governments or bodies responsible for various mining regulation should pursue.

  1. Introduction of tax breaks

Tax is the biggest burden that mines have to bear. Understandably, they have been making pots of money for governments (justifiable under the Pay As You Earn principle) during boom times. But times have changed and mining companies revenues have been slashed drastically. Introducing tax breaks would be greatly appreciated by mines.

  1. Temporary waivers on costly compliance

Countries have different rules of the game, but, in the final analysis, they have one objective – regulating the industry and ensuring that players adhere to good practices of governance. Apparently, compliance with some of the regulations has proven to do the industry more harm than good. This has been evidenced in Zimbabwe where the government has introduced the obligatory (read punitive) precondition of a foreign investor ceding 51% of the shares of their business to an indigenous person (whatever that means). Instead of these measures, as mining companies navigate through a turbulent phase, the wise decision responsible departments or ministries should pursue should be to temporarily waive some of the requirements.

  1. Solution to ‘unreasonable’ wage demands

Mines are being coerced to cede to the demands which militant unions in some countries make to them. More often than not, the increase rates being bandied about are out of kilter with the reality of the economic environment.     And so, concerned departments or ministries, working with the chamber of mines, should set up wage blueprints for specific to the current mining conditions. However, it should be finely balanced between meeting employees’ demands and ensuring that mining operations have long-term sustainability.

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