Miners, govt in showdown

LIVINGSTONE MARUFU

Zimbabwe’s gold miners and the government are heading for a showdown over foreign currency retention threshold and royalties which the miners described as punitive.

Miners are also pushing for the reduction of punitive taxes and the cost of importing cash.

Business Times can report that the crunch meetings which started a few weeks ago are expected to be concluded end of this month.

Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said that miners have engaged the government and the central bank to end illicit deals in the gold sector. 

“Challenges affecting the gold sector should be approached in a holistic manner and we have tabled that forex retention should be raised for miners since they are the ones laying golden eggs.  Government should therefore give us preferential treatment because we know what we are capable of producing if they review retention,” Chinyenze said.

He added: “We also need the government to review mining taxes downwards; especially the royalties are very punitive and hurting production.”

The government charges 25% for royalties and corporate tax and Value Added Tax levied at 15% and exploration fees. Others are pay as you earn, which ranges from 0% to 35% and withholding tax.

Chinyenze said the sector does not need freebies and wants to pay taxes that are reasonable and enable the gold producers to continue operating.

“We should meet half way in taxes. We need viable policies that can help both the miner and government as some unfriendly policies create room for smuggling   resulting in the country losing billions of dollars,” he said.

“Authorities should sit down and evaluate the costing of importing compared to the cost of smuggling [US$1.2bn]. “We should make concessions with the government to improve the operations of the mining sector.”

According to figures obtained from the Reserve Bank of Zimbabwe, the country has got 13 million tonnes of proven gold reserves with only over 600 tonnes extracted since 1980.

Chinyenze said good mining policies can help the country to extricate itself from the challenges it is facing.

Recently, Fidelity Printers and Refiners general manager Fradreck Kunaka, said taxes and levies were affecting the mining sector.

“Royalties are a hindrance to the mining sector as they cause miners to look for other alternative markets which do not charge these levies,” Kunaka said.

He said the authorities have improved on payments as they are now doing spot payments in some instances and others who bring the yellow metal will be paid within one working week.

Chamber of Mines of Zimbabwe CEO Isaac Kwesu said it was critical to review royalties and other taxes.

“We need royalties and other mining taxes to be reviewed and we shall continue engaging the authorities,” Kwesu said last month.

Kwesu said rural district councils and the Environmental Management Agency are now accepting payment in local currency. Previously, they only wanted forex.

Primary gold producers want the monetary authorities to raise forex retention levels to above 70%.

Kwesu said production levels across the industry would improve if authorities raise the retention levels.

This year, the government lowered the forex retention threshold to 60% from 70% implemented in July last year to help the importation of critical raw materials.

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