Treasury signals royalty climbdown

LIVINGSTONE MARUFU

Finance Minister Professor Mthuli Ncube has signalled a possible easing of Zimbabwe’s proposed gold royalty regime, saying Treasury will undertake a “fine balancing act” to preserve the sector’s viability after miners warned that the new structure could destabilise the industry.

The minister’s remarks come amid a wave of outcry from mining houses and small-scale operators who say the proposed sliding-scale royalty, pegged to international bullion prices, would make Zimbabwe’s fiscal regime one of the most punitive in the world.

“We are also looking into the mining sector where we are doing some fine balancing act. We will do a little bit of tweaking on royalties to ensure the sector remains viable,” Professor Ncube said, signalling his first major indication of a policy softening.

Under the current proposal, large-scale gold producers who were previously paying a flat 5% royalty would immediately see their burden rise to 10% at prevailing gold prices. Treasury had hoped the new regime would bolster State revenues, but miners cautioned that it could instead trigger production declines, disinvestment and a spike in side marketing.

Authorities said miners’ submissions were “compelling” and indicated readiness to adjust elements of the royalty structure to safeguard the sector, which remains Zimbabwe’s single largest foreign currency earner.

The new royalty scale proposes a 10% royalty for deliveries of 2,501 ounces and above, 5% for deliveries between 1,201 and 2,500 ounces, and 3% for output up to 1,200 ounces.

The Chamber of Mines of Zimbabwe (CMoZ) warned that the proposed 10% rate places Zimbabwe at a global disadvantage. “From the research we have done, Zimbabwe is among the countries with the highest royalty fees in the world at 10%. Some countries in Africa include South Africa at 5%, Ghana at 5% and Tanzania at 6%. This will affect the mining sector’s viability as well as promote side marketing,” CMoZ CEO Isaac Kwesu said.

Producers argue that Zimbabwe’s uncompetitive royalty burden, coupled with rising operating costs, would undermine profitability and hinder new investment in exploration, expansion and mine development.

Caledonia Mining Corporation has already warned that the higher royalty would weaken cash generation and force a reassessment of planned capital projects.

Small-scale miners, who account for nearly 65% of national gold output, warned of a surge in smuggling if the policy is implemented without adjustment. The Zimbabwe Miners Federation (ZMF) cautioned that a harsh royalty scale would drive miners into informal markets and neighbouring countries with lower taxes.

The industry further argued that the current proposal unfairly penalises compliant, formal producers while failing to address rampant leakages in the artisanal segment—leakages already costing the State millions in lost revenue annually.