Battle lines drawn over Zambian mining tax

24 May 19

A leading Zambian economist has dismissed dire warnings about a new tax that mining corporations claim will spark “mass layoffs” and economic collapse.

Mathews Muyembe, chairman of the Copperbelt branch of the Economic Association of Zambia business lobby group, says the move is “long overdue” and has wide public support.

New mining duties and increased royalties – dubbed by critics as an expression of “resource nationalism” – were announced by Finance Minister Margaret Mwanakatwe last September and will come into force next month.

The move aims to bring down mounting debt in an effort to shave the fiscal deficit to 6.5% of GDP this year from 7.4% in 2018, and has been heavily criticised by mining corporations.

Zambia will increase a sliding scale of royalties in minerals by 1.5 percentage points and is introducing a new 10% tax on copper when prices exceed $7,500 per tonne, Reuters reported.

The extractives industry accounts for about 6% of Zambian GDP, with 92% of this coming from copper and cobalt mining.

On Thursday, the Chamber of Mines said Zambian copper output in 2019 could be as much as 100,000 tonnes lower than last year due to the impact of the mining tax on production, reported Reuters.

In a statement, the chamber  said the new tax regime was “forcing miners to do the unthinkable – to cut production”.

However, in the South African newspaper Business Day, Muyembe wrote: “According to claims circulated by multinational mining houses that dominate the country’s sector, the new legislation will spark ‘mass layoffs’ and threaten a collapse of the nation’s economy.

“But if we really want to have an honest debate about mining and social development, any objective examination of the numbers indicates precisely the opposite outcome.”

Muyembe said that with the IMF warning that Zambia’s fiscal deficit and debt load will preclude the country from aid programmes, the urgency of the “long overdue” reform could not be overstated.

He added: “Enough is enough, and it should be interesting to note that in our heavily polarised country, this is one move that is supported across the political spectrum.”

 

 

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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