Govt to maintain mining sector tax breaks
Oliver Kazunga-Senior Business Reporter
THE Government says it will continue to grant tax holidays to mining industry investors given the sector’s significance to Zimbabwe’s economy, a senior Government official has said.
This follows incorrect media reports suggesting that the Treasury planned to revoke some mining incentives, including tax holidays, granted to some investors due to concerns about their disproportionate tax contributions.
In its State of the Mining Industry Survey Report and Prospects for 2025, the Chamber of Mines of Zimbabwe (CoMZ) indicated that revenue from mining will this year grow by 2 percent to reach US$5,5 billion and next year the figure is projected to rise by 10 percent to US$6 billion.
The positive revenue growth trajectory is driven by increased output and some anticipated commodity price recovery.
The CoMZ indicated that the distribution of the mining revenue stands as follows: procurement (excluding contractors) 21 percent) — contractors 17 percent — Government taxes (17 percent) — employment costs (21 percent) —power (15 percent) — communities (2 percent) — shareholders and others (7 percent).
In recent years, the Government has granted tax holidays to the mining industry investors to attract Foreign Direct Investment (FDI) into the sector, one of the key sectors anchoring Zimbabwe’s economy towards its vision of achieving upper middle-income status by 2030.
In an interview, Permanent Secretary in the Ministry of Mines and Mining Development Mr Pfungwa Kunaka said: “Where I am sitting, we still need investments in the mining sector and we need to provide all the necessary incentives that we can because we are looking at a sector that is supporting the whole economy.
“We also need to be careful and take responsibility to ensure that such a sector is still ticking — I would be one person who would say we need to maintain incentives that we can afford for the mining sector.
“If there are other considerations, they can come in because as Zimbabwe we want to ensure that we get maximum value — but any changes that we need to be looking at, I think they need to be well considered so that they don’t work against any performance that we have in the mining sector.”
Data from the Zimbabwe Investment and Development Agency (ZIDA) indicates that the mining sector accounts for 70 percent of FDI, 80 percent of exports,19 percent of Government revenue, 3 percent of direct formal employment and 13,5 percent of national income.
The CoMZ report also highlighted that the sector had reservations about prospects for optimal fiscal regime in 2025 on the back of the multiplicity of existing taxes, high royalty, beneficiation taxes, special gains tax and high fees and levies.
Mr Kunaka said: “What I am advocating is a situation where as a country and as Government, we continue with certain basic incentives that are required in the mining sector.
“But indeed where we need to change in order that the country gets maximum benefits, we need to look at those carefully and see how we apply those.”
The chamber anticipates that capacity utilization in the mining industry would reach 90 percent next year from 84 percent this year driven by minerals such as gold, ferrochrome, and Platinum Group Metals.
Resultantly, employment will rise to 58 700 in 2025 from 57 000 this year.
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