Zambia’s mining revenues doubled from 2010 to 2011

Its latest EITI report reveals that the country's mining revenues nearly doubled to US $1,360 million.

Zambia’s 2011 mining receipts nearly doubled to US $1,360 million (7,503 million Zambian Kwacha) compared with the year before and is now over 30% of government revenue, according to their latest EITI Report published on Monday 17 February.

The increase is explained by a number of factors.  Firstly and most importantly, new tax rates were introduced in 2008 that came into force in 2011.  This meant that in 2011 company tax increased from 25% to 30 %, and mineral royalties increased from 0.6% to 3%.  As well as the new rates for 2011, mining companies were required to pay all arrears arising from the 2008 changes for 2008-2010. In addition, the government further introduced a variable profit tax and windfall tax.  With many companies coming to the end of their tax breaks, this meant that there was a 165% increase in revenue from corporation tax (US $395m) in 2011, and receipts from royalties almost trebled. 

Secondly, the revenue increase recorded in 2011 was also partly due to a 7% increase in copper production and a 17% increase in metal prices driven by demand from Asia, especially China.  Finally, the sale in 2011 of 2.28% stake by the state owned copper company (ZCCM-IH) in Equinox Minerals Limited, the former parent company of Lumwana Mines, was worth US $157m.

Given that much of the increase was related to payment of arrears (almost US $300m), a windfall tax, and the sale of state shares, similar tax revenues cannot be expected in future years.

It is worth noting that Zambia is Africa’s largest producer and exporter of copper and cobalt.  It depends heavily on its mining sector, which accounts directly for 9.5% of GDP. Indirectly, the mining sector contributes about 50% of GDP. One company, Kansanshi Mining, contributed 55% of the total government revenues from the sector in 2011. Kansanshi Mine is the largest copper mining company in Zambia and contributed almost 30% of the copper produced in 2011.

On launching the report, Hon. Richard Musukwa, Deputy Minister of Mines, Energy and Water Development said that the government is committed to implementing the EITI as demonstrated in the Mineral Resources Development Policy which was launched in 2013. He urged the Zambia EITI Council together with relevant stakeholders to address the challenges raised in the EITI report. 

 

Visit this page for more information on the EITI process in Zambia.