WITH effect from January 1, 2015, mining companies operating in Zambia will be required to pay an increased fee in mineral royalty following the approval of a new mine tax regime for open cast and underground operations through the National Budget.

Government had decided to increase the mineral royalty threshold for open cast and underground mining operations to 20 per cent and 8 per cent respectively, in a bid to maximize on revenue collected from the mines.

This will ultimately benefit every Zambians as the funds accumulated to from the mineral royalties will be channeled to facilitate improvements in other sectors such as education, health and agriculture.

The move to hike mineral royalties has however not augured well with the mines and some of them are already plotting to either slow down expansion projects or totally withdraw their investments from Zambia.

It estimated that in 2015 alone, as a direct result of the introduction of the 2015 budget, mine suspensions and the postponement of major capital projects will lead to over 12, 000 direct job losses.

It is further estimated that production losses in 2015 will exceed 158, 000 tonnes of copper, adding that more worryingly, over the next five years lost production will exceed 1.1 million tonnes of copper.

Furthermore, Zambia stands to lose over $1 billion of export earnings in 2015, and a staggering $ 7 billion over the following five years which it said equates to around 30 per cent of the GDP.

The mining industry is one of the largest private sector employers in Zambia accounting for thousands of direct and indirect jobs and one would not even want to think about the adverse effects of any mine collapsing.

No one would like to see investors running Lumwana, Mopani, Kansanshi, Konkola, Nchanga, Lubambe and Luanshya mines pull out of Zambia on the pretext that they are not minting any reasonable profits because of a tightened mineral regime!

Government has already ruled out the option of nationalisation, obviously looking at the cost structure of running a mine at the same time when other economic sectors rely on state funding for survival.

Thus, the need for dialogue over this matter cannot be over emphasized and the stakeholders need to collectively open dialogue to identify how a win-win situation can be reached.

If the mines are threatening closure in the name of failing to meet production targets due to increased cost of mining buoyed by a tight mineral royalty regime, they must indicate this to Government formally.

There are technocrats in the ministries of Finance and Mines’ who can analyse the impact of tax on mining companies and this should have been done even before the changes in next year’s budget were proposed.

Mining firms are at liberty to supply Government with operating plans so that together, consensus can be reached between the two stakeholders.

The Zambia Chamber of Mines (ZCM) needs to play an active role in facilitating for this because they are a direct link between Government and the mining companies.

ZCM should engage Government, the investors and the unions continually so that issues affecting the mining industry are attended to collectively from the grassroots.

Government has assured that it is ready to dialogue with any mining investor who feels hard done following the move to increase mineral royalties.

These operations have transformed the economic life of many towns in Zambia and need to be sustained to supplement the efforts of Government in bettering the lives of people.

Compliments of the season dear readers and wishing you all a prosperous 2015

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