FINANCE minister Mthuli Ncube has doubled platinum royalties to 5% from next year to ramp up revenue collection.
NYASHA CHINGONO
The government in 2017 slashed the royalty rate for all platinum group mining companies from 10% to 2.5% to encourage viability.
But Ncube said 5% is in line with other platinum-producing countries and would improve receipts.
“Low fiscal receipts are attributed in part to a generous royalty regime on some major minerals. A case in point is the royalty rate on platinum, which was reduced from 10% in 2015 to 2.5% in conformity with a court judgement. The reduced rate was subsequently aligned across all platinum producers,” Ncube said in his mid-term budget and fiscal review statement.
“Compared to revenues accruing from mining activities and rates charged on other precious minerals and metals such as gold, the royalty rate on platinum is sub-optimum. For example, royalty rates on gold range from 3 to 5%, depending on the international commodity price.”
Ncube argued that the tax regime is the major instrument for sharing benefits from finite minerals.
“It is necessary to maximise revenue to the fiscus.”
The royalty rate cut had been affected to ensure equity and fairness in the taxation of platinum group metal miners.
Ncube told legislators that the mining sector contributed only 1.2% to the gross domestic product (GDP) in direct taxes in 2021.
“This is a significant contrast to countries in Sub-Saharan Africa which averaged 2% during the same period.”
Ncube also proposed a 5% royalty regime for lithium, which has attracted investor interest during the first half of the year.
Zimbabwe holds Africa’s largest lithium reserves and the fifth largest globally. Masvingo province is home to the Bikita Minerals mine – site of the world’s largest-known deposit of the metal at around 11 million tonnes. The resource, however, has remained largely untapped for decades due to a lack of investment.
In his budget review statement, Ncube lowered this year’s economic growth forecast to 4.6% from 5.5%, but he saw growth picking up to 5% next year.
Ncube attributed the lower 2022 forecast to the global economic environment and domestic factors like reduced agricultural output.
But he said preliminary figures from the first half of the year showed a better budget performance than expected, with a deficit of ZW$27.9 billion (US$63.5 million) against a target of ZW$45 billion.
He did not give an updated target on Thursday but said Zimbabwe would aim for a deficit of below 3% of GDP in 2023.
Ncube flagged the depreciation of the Zimbabwe dollar and rising inflation among major concerns, but said the government was committed to addressing them.
The central bank more than doubled interest rates to 200% in a bid to control runaway inflation, which hit around 192% in June.
