Election in Zambia unlikely to change mining royalty structure

January 26, 2015

The Zambia presidential election victory for lawyer Edgar Lungu means the controversial copper mining tax will likely remain in place.

A royalty system that began on Jan. 1 abolished a flat rate of 6 percent and increased royalties to 8 percent for underground mines and to 20 percent for openpit mines. Zambia is Africa’s second largest producer of copper but the change in royalties has hurt the industry and has cost 12,000 jobs according to mining companies, Platts reported.

Lungu has said he would discuss the matter with the companies, but fought his campaign with a pledge to follow the policies of his predecessor, Michael Sata, who signed the royalty legislation into law just before he died last year.??By contrast, the opposition candidate, economist Hakainde Hichilema, said he would scrap the new royalty taxes if he was elected.

Lungu said his government's policies would remain consistent and predictable.

The introduction of a mineral royalty in place of a corporate profit-based tax as the final tax is meant to ensure that mines pay the right taxes, he said.

“The government’s desire to ensure companies pay the right taxes will continue,” he added.

Ruling party candidate Lungu secured a narrow victory in this week's presidential election, defeating his closest rival Hakainde Hichilema who said the election had been “stolen.”

Lungu said his government wanted to maintain an open dialogue with investors while providing for its citizens.

“We shall try as much as possible to balance your interests against those of our people,” Lungu said, referring to investors in the southern African country.

The new government will support small-scale farmers and create jobs to fight poverty and social inequality whose levels are unacceptably high, he said, adding: “It unsettles me to see families go hungry when this is a wealthy nation.”

The enactment of a new constitution is a top priority and Lungu immediately appointed prominent lawyer Ngosa Simbyakula as justice minister to oversee that process.
 

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