Zambia’s government has flinched first in a standoff with the mining
industry and will roll back contentious mining taxes next week.
The controversial taxes negatively impacted both profits and
production in Africa’s second-biggest copper producer.
Companies such as Glencore PLC and Barrick Gold had threatened to shut
operations, arguing the business climate wasn’t profitable under such a tax
regime.
Zambia’s ongoing disagreement with these companies has become a litmus
test for dozens of African nations trying to balance compensation for their
mineral wealth with conditions that attract investment.
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| A truck transports ore at a Zambian copper mine |
Mines fuel approximately half of Zambia’s economy and 67% of exports,
according to the Extractive Industries Transparency Initiative, but contribute
just 30% of the government’s tax revenue.
However one main point of contention remains unresolved.
The Chamber of Mines of Zambia says major copper producers are owed
nearly $800 million in value-added tax refunds stretching back to 2013.
“Clearly it’s unhelpful, there’s no doubt about that,” said John
Gladston, head of government affairs for First Quantum in Zambia. He said
First Quantum is owed about $250 million in VAT refunds.
Zambian President Edgar Lungu, who inherited the tax dispute
when he was elected in January, made resolving the clash with industry a
priority.
In an address to his cabinet, Lungu directed the Zambia Revenue Authority
to expedite talks with the extractive industry companies and resolve the
impasse.