Reprieve for platinum miners

via Reprieve for platinum miners – Sunday News Feb 14, 2016

Gabriel Masvora, Business Editor
THE Government has legislated the postponement of the 15 percent Value Added Tax (VAT) on unbeneficiated ore to 1 January 2017 bringing finality to uncertainty over the issue which has been haunting platinum mining companies.

Finance Minister Patrick Chinamasa in November 2014, while presenting the budget for 2015, announced that Government had deferred the levying of a 15% VAT on unbeneficiated ore to 1 January 2017.

However, the subsequent Finance Bill and Finance Act of 2015 did not include the deferment which meant that at law the postponement had not been effected. Although Government was not collecting the tax, some of the companies were including figures as money accrued in their financials.

In its financials for 2014, Aquarius Mining which jointly owns Mimosa in Zvishavane with Implats noted that it had accrued $4,5 million for the year due to the tax. Mines and Mining Development Minister Walter Chidhakwa confirmed that the Finance Ministry has now formalised the announcement bringing finality to the matter.

“It (legislation of the postponement) is now in the Finance Act so yes it is now formal,” he said.

Aquarius Platinum also confirmed that the announcement has been formalised.

“In the 2015 National Budget presentation, the deferment of the VAT on unbeneficiated platinum to 1 January 2017 was proposed. However, the subsequent Finance Bill and Finance Act of 2015 did not include the deferment. Post balance date, the deferment to 1 January 2017 was legislated,” the company said in its half year report to December 2015 which was released last week.

The company said the formalisation of the announcement will result in no levy having to be paid on unbeneficiated ore exported during the 2015 and 2016 calendar year and will not result in a change in the carrying value of the Mimosa equity.

The Government had in 2013 threatened to enforce the levy to force platinum companies to beneficiate minerals locally instead of exporting them raw. All the platinum mined in Zimbabwe is beneficiated outside the country, resulting in loss of revenue and exportation of employment.

The Government want the mining companies to build a smelter in the country so that the platinum is processed locally.

The country has been losing millions of dollars through exporting primary goods especially minerals. Although the issue of deferment of the 15 percent VAT has been cleared Aquarius Platinum said there was still an issue of royalties which has not been clarified.

Mining companies want Government to ensure that royalties paid by the miners are deductible for income tax purposes.

“The proposal to render royalties payable by Mimosa non-deductible for income tax purposes was implemented with effect from the year of assessment beginning on 1 January 2014, and therefore impacted Mimosa from the start of the 2014 financial year on 1 July 2013. This position remained unchanged in the 2015 National Budget. The financial impact of the non-deductibility of royalties was $1,7 million for the half-year to December 2015, 50 percent of which is attributable to Aquarius. Negotiations are continuing with the authorities to confirm that the royalties are deductible for income tax purposes.”

The company also announced that it was now working with the Ministry of Youth, Indigenisation and Economic Empowerment over the issue of indigenisation.

The Ministry on 8 January gazetted new frameworks, templates and procedures for implementing the indigenisation policy.

The Government announced that the indigenisation requirements which calls for all companies in resource based sectors like mining to be 51 percent owned by locals was mandatory.

However, only one major miner — Blanket Mine in Gwanda whose major shareholder is Canadian-based Caledonia Mining — has met the requirements. All the major platinum mines Zimplats, Mimosa and Unki are still majority owned by foreign companies.

“Mimosa continues to interact with the Ministry of Indigenisation and Ministry of Mines to work towards a sustainable solution in relation to indigenisation.”

Mining is seen as one of the biggest sectors which can help in turning around the economy but issues have been raised over the full extent which the country is benefitting from the minerals. Most of the mines are in the hands of foreigners and Government only benefits through tax while the bulk of profits remain in the hands of foreign multi-lateral companies.