Zimbabwe to raise tax on diamond mining, sets ambitious 2014 growth target

via Zimbabwe to raise tax on diamond mining, sets ambitious 2014 growth target By: Reuters 20th December 2013

Zimbabwe announced plans to raise the tax on mining companies for diamond sales in its budget on Thursday and said it was planning a new levy on unprocessed platinum as part of efforts to force platinum mines to set up a refinery in the country.

Finance Minister Patrick Chinamasa said the tax on diamond royalties would rise to 15% from 10%, effective next month.

Most diamond mining in the country is done by private companies in joint ventures with the government although a unit of Rio Tinto does some diamond mining.

President Robert Mugabe, who won a disputed election in July, is struggling with an economy that is shedding jobs, failing to woo foreign investors and racked by electricity shortages.

Nonetheless, Chinamasa predicted the economy will grow 6.4% in 2014, a big jump from the 3.4% projected for this year, backed by mining and agriculture. Analysts, however, said the figure was very ambitious.

“This is anchored on a strong recovery of the agriculture sector and improved performance in mining and the construction industry,” Chinamasa told Parliament in his budget speech.

After growing at higher rates between 2009 and 2012, the economy slowed down this year after a mid-season drought and while businesses and investors held out for the July 31 election.

The UN World Food Programme has said the country faces its worst food shortages in four years, with up to 2.2-million people needing food relief.

Analysts said the country could miss its growth target next year given global commodity prices are expected to be depressed, the country is attracting few foreign investors and farmers are behind in their planting this season.

“I just don’t see where the growth will come from, I think it is very ambitious,” John Robertson, a leading private consultant economist in Harare said.

INDIGENISATION LAWS

The government is trying to stem declining revenues which will be 3.6% below target this year.

Chinamasa did not give details on the proposed new levy on unprocessed platinum, which would likely affect the world’s two largest platinum miners, Anglo American and Impala Platinum.

Foreign investors are sceptical of Harare’s policies, including the controversial black economic empowerment drive that forces foreign-owned firms to sell majority shares to blacks.

The policy, known locally as indigenisation will not change, Chinamasa said.

“I want to re-affirm that the indigenisation laws are here to stay and there will be no amendments to annul or dilute them,” he said.

The Finance Minister also repeated that the government would continue to use the US dollar and South African rand and could adopt other currencies.

Since the country ditched the Zimbabwe dollar in 2009, the country’s central bank has lost its ability to set interest rates and lend to struggling smaller banks.

Chinamasa said the government would raise between $150-million and $200-million by March 31 to capitalise the central bank and would take over the bank’s $1.3 billion debt.

 

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