MUROWA Diamonds (RioZim) yesterday appealed to Parliament to lobby for reduction of mining taxes on ground rentals and royalties, saying the exorbitant taxes were chasing away investors.
BY VENERANDA LANGA
Rio Zim chief executive officer Bhekinkosi Nkomo and his team from Murowa Diamonds told the Parliamentary Portfolio Committee on Mines that the 15% royalties charged on rough diamonds was too high and negated President Emmerson Mnangagwa’s ease-of-doing business thrust.
“If you look at our neighbours and compare the royalties charged, you find that Zimbabwe is at 15%, Namibia 10%, Botswana 10%, Angola 5%, Australia 5%, Sierra Leone 3% and Democratic Republic of Congo at 2,5%,” he said.
“The current levels of royalties compared to our neighbours is quite high, yet we need to be attractive on the policy side to attract some capital, and so we recommend that royalties should be in the region of 5% to 7% as a starting point.”
Nkomo said the deductible royalties for tax purposes were also too high at 15%, which means that if a miner sells diamonds worth $100, a 15% royalty is deducted leaving the company with $85, which raises the royalty charged effectively to 20% and was unattractive to investors.
“The Mines and Minerals Act (chapter 21:05) also has no provision that allows ground rental fees to be levied on mining companies. As it stands there is a charge of $3 000 per hectare levied on miners. Given that diamonds are a rare occurrence, diamond miners need to have bigger ground to explore and discover diamonds, but at the rate of $3 000 per hectare, it makes diamond mining unviable,” he said.
Nkomo said for Murowa to get a further three years of mining diamonds, they needed to invest a further $125 million, adding that the 51:49 indigenisation ratio for diamond and platinum mining must be reviewed in order to attract investment.
On the 15% discount for local diamond cutters, Nkomo said it was detrimental to local diamond producers because of the disparities in purchasing power where the value of money in real time gross settlement, bond notes and United States dollars differs.
“We feel this would leave diamond producers getting 55% in value of their diamonds and will render mines unviable,” he said.