ZIMBABWE'S Treasury is considering revoking some tax incentives granted to mining companies due to concerns over their disproportionate profits compared to tax contributions, businessdigest has learned.
This move comes amid growing concerns that while mining companies are generating substantial revenues, they are benefitting from minimal tax burdens.
Over the years, Zimbabwe has offered tax incentives to attract foreign investment, particularly in the mining sector.
However, civil society organisations argue that these incentives often benefit mining corporations more than they benefit local communities.
In an interview with businessdigest on the sidelines of the Employers’ Confederation of Zimbabwe annual congress in Victoria Falls last week, Finance, Economic Development, and Investment Promotion deputy minister David Mnangagwa confirmed that the government is now reassessing these tax breaks to ensure fairer revenue distribution.
“We do have tax holidays and incentives, or we had. And they are actually very generous,” Mnangagwa said.
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“What we are starting to do is remove some of these incentives for the mining companies. So for manufacturing, for value addition, you can come in.
“Those special economic zones, tax incentives, tax holidays will still be there but we realise that for the mining companies, they are making too much money for us to then allow them to go on a break from paying taxes.”
Mnangagwa further revealed that an analysis of the mining sector, excluding last year’s slump in platinum and lithium prices, indicated that mining companies do not require tax holidays as an incentive to invest.
“Zimbabwe is a world-class resource when it comes to lithium. It will probably be one of the largest lithium producers in the world. The quality is good. Same goes for platinum,” he said.
Civil society groups have long opposed these tax incentives, deeming them excessively generous and unjustified.
The Zimbabwe Coalition on Debt and Development (Zimcodd), for instance, has led lobbying efforts for a comprehensive cost-benefit analysis of these incentives.
Zimcodd argues that the incentives often fail to deliver expected benefits, such as job creation, local content development, technology transfer, and infrastructure development. Mnangagwa highlighted Zimbabwe's distinction as the second-largest platinum producer after South Africa.
“We realised that we are too generous in this industry, and we took these off and we will continue to find a way to make sure that in the extractive industry, we get as much benefit as we can,” he said.
“I talk of platinum mining, which makes up a huge part of our forex earnings. The biggest platinum mine in Zimbabwe, Zimplats, also has the largest reserves, and has a mine life of 40 years.
“Which means that in 40 years' time, and God willing, some of us will still be there, if we are discussing budget items, we will not be talking about revenue from platinum exports. That will not be there.
“We need to have foresight right now in our budgeting, even in employment, on how we can create subsidiary industry to fill in that gap,” Mnangagwa said.
Earlier this year, the Chamber of Mines of Zimbabwe (CoMZ) lobbied the government for temporary reductions in electricity tariffs and tax relief for platinum miners, citing falling global prices that have strained the local mining sector.
The mining industry remains a significant contributor to Zimbabwe’s economy.
According to CoMZ’s latest report, mineral revenue is expected to rise by approximately 2% in 2024.
By 2025, revenues are projected to increase by 10%, reaching US$6 billion, up from US$5,5 billion this year, driven by improved output and a recovery in commodity prices.
This year’s US$5,5 billion in mining revenue includes US$935 million in taxes paid to the government, US$1,16 billion in wages and salaries, US$1,16 billion in procurement costs, US$825 million in power costs, US$935 million paid to contractors, US$11 million in community contributions, and US$385 million in shareholder and other expenses.
Despite the high tax revenues from mining, Mnangagwa argued that Zimbabweans are not overtaxed, noting that corporate income tax and pay-as-you-earn rates are in line with regional averages.