A new Zambian tax system that prompted Barrick Gold Corp. to halt operations at its Lumwana mine may lead to 12 000 job losses in the industry next year, the country’s mines chamber said.
The system that takes effect on January 1 may also push companies including Glencore Plc and First Quantum Minerals Ltd. to cancel projects, and cut Zambia’s copper output by more than 158,000 metric tons next year, the Chamber of Mines said in a statement today. That risks further slowing economic growth in Africa’s second-biggest producer of the metal that the International Monetary Fund said yesterday may fall to a 12-year low in 2014.
Zambia’s parliament this week approved Finance Minister Alexander Chikwanda’s 2015 budget, which includes a law replacing corporate income tax for mines with higher royalties. Levies for opencast mines rise to 20 percent from 6 percent and increase to 8 percent for underground mines.
“The 2015 budget will adversely impact tens of thousands of lives, and we ask government to pause whilst it reconsiders its implementation on January 1,” the chamber said.
Barrick said on Thursday it would start the process to place its Lumwana copper mine under care and maintenance because the new tax system made the operation unviable. Zambia lost its place as Africa’s biggest copper producer to the Democratic Republic of Congo last year.
Slowing economy
Zambia’s economy will expand at the slowest pace in 12 years in 2014 after mining production was hurt by technical shutdowns, according to the International Monetary Fund.
Zambia’s economy will grow by 5.5 percent this year, Tsidi Tsikata, who led an IMF team for an article IV consultation this month, said in an e-mailed statement late on Thursday in Lusaka, the capital. That’s the slowest pace since 2002.
“Zambia’s growth potential remains high, but the medium- term outlook is clouded by domestic and external risks,” Tsikata said. “Lower world copper prices and the announced shift to a royalty only mining tax regime with high rates are likely to adversely affect the mining sector.”
Zambia is due to hold elections next month after Michael Sata died in October. His death sparked a bitter leadership battle in the ruling Patriotic Front party as well as the main opposition with factions of each party failing to agree on who should stand in the elections.
Zambia lost its place as Africa’s biggest copper producer to the Democratic Republic of Congo last year.
Bloomberg News
