Two recent cases, in Zambia and Mali, have miners worried. From Moneyweb.
Zambia imposed a 15% export duty on gemstones from the beginning of the year, impacting the Kagem emerald mine, which is 75% owned by Gemfields and 25% by the Zambian government.
The 15% export duty comes on top of the 6% mining royalty already in place, meaning Kagem has to pay an effective 21% tax on revenues.
This was done without prior consultation, according to a Sens announcement from Gemfields this week.
The company points out that it already paid 31% of its revenues to the Zambian government in the form of mineral royalty, corporation tax and dividends.
In Mali, Barrick Gold is restricted from shipping gold from its Loulo-Gounkoto mining complex, and its existing gold stock is subject to an interim attachment order. If this issue is not resolved within the coming week, the company says it will have no choice but to temporarily suspend operations at Loulo-Gounkoto.
Barrick says the interim attachment order is unwarranted and contravenes agreed dispute resolution mechanisms. Several Barrick employees have been detained on unfounded charges.
What’s going on?
“I’ve seen much rhetoric on how China is uninvestable. At some point, it’s time to talk about how uninvestable the rest of Africa is. This Zambian export tax on emeralds is just another money-grab that will cause far more harm than good,” wrote The Finance Ghost on X.
“The risks in Africa aren’t worth it.”
What worries miners about the Zambian export duty on gemstones is that it is a direct tax on revenues rather than profits.
The 15% export duty was originally introduced in 2019 by the previous Zambian government but was lifted in January 2020 under pressure from emerald miners.
The Zambian government is under pressure to rein in a galloping budget deficit, which widened to 6.4% in 2024 following a severe drought that wiped out crops in many parts of the country. Finance Minister Situmbeko Musokotwane is hoping to bring the deficit down to 3.1% of GDP in 2025 and is hunting for any additional revenues he can lay his hands on.
Read: Zambia faces tough budget choices with drought, debt pressures [Sept 2024]
Resource nationalism appears to be on the rise once again in Zambia. Mines minister Paul Kabuswe told the Mining Indaba in Cape Town in 2022: “We have a stable environment, and investors can rest assured that their investments are safe. As a government we looked at impediments to investment and complaints and addressed them.”
That commitment now appears to be under question.
The reintroduction of the duty on gemstones has miners concerned that the tax grab could extend to other minerals.
Gemfields says it will engage with the Zambian government to seek “the re-introduction of the suspension of this export duty or to remove it from the legislation given the impact on sector sustainability and investment attractiveness.”
Aggregate taxes on revenues in the world’s two other major gem producers – Brazil and Colombia – range from 2% to 2.5%, which is on top of corporate taxes of 34% and 33%, respectively.
Mali
Last year the Mali government conducted an audit of Barrick Gold and determined it was owed an unspecified amount in taxes – reckoned to be as high as $500 million (about R9.4 billion).
The West African country introduced a new mining code in 2023 aimed at increasing local and state participation in mining projects, including the right to a free 10% carried interest and non-contributing shareholder interest in all mining companies. The state also has the option to purchase an additional 20% stake within the first two years of commercial operation of a mine.
Barrick CEO Mark Bristow says the inability to ship gold from Mali not only affects operations but has broader implications for the local economy, its 8 000 employees and local service providers.
Read: Mali issues arrest warrant for Barrick Gold CEO Mark Bristow [Dec 2024]
The company has initiated arbitration through the International Centre for the Settlement of Investment Disputes.
“In parallel, Barrick continues its efforts to reach an agreement with the Mali government on a memorandum of agreement to resolve the existing disputes, redefine the partnership’s future and increase the State’s share of benefits from the Loulo-Gounkoto complex,” adds Bristow.
“Barrick continues to be a steadfast partner to Mali and its people, contributing significantly to the country’s economic and social development over nearly three decades. We are committed to dialogue and finding a mutually acceptable resolution that allows us to secure the future of Loulo-Gounkoto as a vital economic contributor to Mali.”
Listen/read: Mining has become ‘really, really tough’ [Oct 2023]
Given the long-term nature of a mining project ramp-up, investors will be looking at these two African cases with concern. Some may choose to avoid the continent altogether, given the evident risks of a new government overturning existing mining codes, while braver investors may want to start charging higher risk premiums regardless of the country.
It’s clear that commitments made today may not be honoured tomorrow.
