Zambia: Mineral Royalties Up 2.4 Per Cent

GOVERNENT has increased mineral royalties in the mining sector from the current 0.6 per cent to three per cent effective April 1.

Finance and National Planning Minister, Ng’andu Magande, announced during his 2007 budget presentation in Parliament yesterday that apart from the mineral royalties, Government had also increased company income tax for the mining sector from 25 per cent to 30 per cent.
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The mining sector continued to be key to the economic development of Zambia.

At the time when copper prices were low on the international market, mining companies were offered tax concessions for them to make their projects viable.

Since copper prices were now high on the world market, Government saw the need to review concessions so that the nation could benefit from increased earnings by the mining companies.

The increase in mineral royalties was from two per cent to three per cent for precious metals.

Government would engage mining companies with development agreements into negotiations for their mutual consent by contracting parties to revise the tax regime to the new rate.

The minister acknowledged that financing investment by equity was difficult and many companies relied on financing a significant proportion of their investment by loans.

It was realised that the current debt equity ratio of 2 -1 was restrictive by international standards, resulting in most investors in the mining sector being affected.

Government has since relaxed restrictions for mining companies on the choice between equity and debt.

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