Zimbabwe Parliament suggests giving mining companies time to develop before beneficiation

Full contribution

HON. MUNENGAMI: Thank you Hon. Speaker. I rise here to report on the Portfolio Committee on Mines and Energy, a report which Hon. Mliswa just gave me 20 minutes ago. Like you said earlier on, I will go straight to the recommendations. I will start with the Ministry of Mines and Mining Development.

The Committee on Mines and Energy is of the view that the 2018 national budget should have fully incorporated inputs from the Portfolio Committee on Mines and Energy and other stakeholders in the mining sector. The Committee is also of the view that there were some outstanding areas which, if addressed, will unlock the full potential of the industry, deepen the inclusivity and maximise its contribution to the social economic development of the country. Some of the outstanding measures which the Committee strongly thinks will raise revenue in the sector and contribute to the economy growth include the following:-

Beneficiation penalty tax framework

The Committee welcomes the deferment of the export tax on unbeneficiated platinum to 1January, 2019. The new penalty tax framework which takes effect on 1st January 2019 only considers precious metal processing as a sufficient condition for any producer to be excluded from the penalty tax. Thus, it implies that for any mining company to avoid the penalty tax. it must simultaneously invest in mining development, set up smelter facilities, install base metal refineries as well as installing the precious metal refinery before commencing all extraction. This appears not only as punitive but also impossible as investors need time to recover their capital before reinvesting it to the next stage of the value chain.

The practicality of the beneficiation tax framework must be improved by granting investors some tax break or tax holidays between each stage of the beneficiation value chain to allow them time to recover committed capital so that they can reinvest into the next stage of the beneficiation value chain.

As a Committee we propose the following period breaks for the beneficiation tax framework.

Mine Development – 7 to 10 years, depending on the nature of the project. The time frame must be sufficient enough for the company to develop mine and build sufficient feed stock for beneficiation.

Smelter facility – 7 to 10 years, depending on the nature of the project. This period covers construction of the smelter of at least two years and five to seven years to recoup invested capital

Base metal refinery – 7 to 10 years also. The time frame covers a minimum of two years for construction of the BMR and five to seven years to recoup invested capital. It is further proposed that individual company’s unique circumstances such as the life of the mine and size of the assets must be carefully weighed into the time line considerations. We are also imploring the Government and platinum producers to agree on a precious metal tour treatment facility for Zimbabwe as in the case of Fidelity Printers and Refineries Gold Processing. This would reduce burdened platinum producers and ensure huge capital savings that can be deployed in developing new mines and create more jobs.

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