Zambia today bowed to pressure from mining companies to review a punishing hike in mineral royalties that led investors to threaten to pull out of the copper-rich country. “Cabinet has today approved changes to the mineral royalty tax regime and President Edgar Lungu has directed ministers to bring to cabinet next Monday details to be presented to parliament for approval,” presidency spokesperson Amos Chanda said in a statement. The statement did not specify how much the revised levy would be.
Mining companies had been up in arms over the more than threefold increase in the royalty, from 6% to 20 per cent, which took effect in January. The government’s about-turn followed “extensive consultations with the mining industry” and took account of the sharp fall in copper prices and output, Chanda said. Copper prices have slumped in recent months over concerns of an economic slowdown in China, the biggest consumer of the metal.
Zambia is the world’s eighth-largest copper producer. The government had initially forecast copper prices remaining above US$ 6 780 a tonne for 2015 and domestic production reaching 959 696 tonnes. It has since revised the budget to reflect copper at US$ 5 665/tonne, and total output coming to 839 000 tonnes.
The royalty hike caused a furore when it was announced last year. Canadian mining giant Barrick Gold announced it would suspend operations and lay off workers at its Lumwana copper mine over the levy. The country’s Chamber of Mines has warned it could cost the country US$ 7bn in lost output over the next five years – nearly a third of its GDP.