FINANCE minister Patrick Chinamasa should consider reviewing the mining sector’s taxation regime as the 2014 national budget beckons, experts have said.
Elizabeth Dumbreni/Bernard Mpofu
Chinamasa, who presents the budget later next month, faces the herculean task of crafting measures that stimulate business growth as well as confidence. With official statistics showing that 711 firms closed shop between July 2011 and 2013, Chinamasa is now expected to turn to mining to grow the economy.
The extractive industry is, however, unhappy with the current mining royalties saying they discourage growth of the sectors. Latest official figures show that government collected $8 million in royalties against a target of $21 million budgeted for.
Responding to questions sent by NewsDay Business yesterday, World Bank senior country economist for Zimbabwe Nadia Piffaretti said government should now shift focus to the capital-intensive sector to grow the economy. Last year the multilateral lender commissioned a study on Zimbabwe’s turnaround.
According to the 2012 survey levels of investment, the mining sector is below potential. A revision of royalties and exploration fees and overall improvements in the business climate could help improve levels of investment in the mining sector.
“Countries that have successfully leveraged the mining sector for broader development have been able to use both the economic and fiscal linkages very effectively to improve public services and investment in both human capital and infrastructure. Chile and Indonesia were able to leverage fiscal intake from the mining sector to support business climate in agriculture (irrigation) and in the manufacturing sector,” said the World Bank.
Chamber of Mines of Zimbabwe chief executive officer John Chikombero recently told bankers in Nyanga that the mining sector will anchor economic growth and development for Zimbabwe in the short to medium term.
“Zimbabwe’s unique natural resource base could increasingly become a basis for realising broad-based growth and development, taking into account the country’s diverse mineral resources. The country has over 40 recorded mineral occurrences,” he said.
Chikombero described the mining sector as the cornerstone for economic growth in this country.
“With the new thrust of mining as the cornerstone of economic growth, it is imperative that we resuscitate existing mining operations, develop new mines, beneficiate mineral output and establish linkages between the mining sector and other sectors of the economy, particularly manufacturing,” he said.
Mining, according to the chamber, accounts for 15% of nominal gross domestic product and 58% of total exports.