FINANCE, Economic Development and Investment Promotion minister Mthuli Ncube is on a mission to raise resources to meet the country’s growing needs.
Zimbabwe’s debt to international financial institutions, estimated at US$13,6 billion, means it cannot access budgetary support to plug the budget deficit.
The country is on its own thus it must raise resources through taxes and borrowing from the domestic market.
Borrowing from the domestic market creates its problems amid concerns that it crowds out the private sector.
The domestic debt stood at US$9,8 billion as of December last year.
Taxes have become the go-to for revenue. In the 2026 National Budget, the government seeks to raise ZiG288 billion (about US$9,4 billion) in revenue. This constitutes 16,9% of GDP. Tax revenue will be ZiG281,5 billion (about US$9,2 billion). The remainder will be non-tax revenue.
In the budget, Ncube proposed a raft of measures which include the introduction of new taxes or tweaking existing ones to mobilise additional revenue.
Ncube has proposed a tiered royalty regime for gold, effective next month, saying the fiscus is not benefiting from increased mining activity and commodity booms. It said a significant portion of the profits were accruing to investors.
Under the three-tier structure, gold sold at US$0-US$1 200 per ounce will attract a 3% royalty, US$1 201-US$2 500 will draw 5%, while prices above US$2 501 will incur a 10% royalty.
The proposal has alarmed gold producers.
Victoria Falls Stock Exchange-listed Caledonia Mining Corporation has warned of reduced profits at a time when it wants to develop the Bilboes project in the next three years. Bilboes will overtake Blanket Mine as Caledonia’s flagship project.
In a statement last week, the Jersey-domiciled miner warned that sustained high gold prices — ordinarily a boon — would perversely result in a larger share of earnings being siphoned off through royalties, weakening cash generation for operations, expansion and shareholder return.
It said the tax measures would weaken returns from its Bilboes project, which has a five-tonne annual potential.
Caledonia’s shareholder, Baker Steel Resources Trust Limited, has gone further, warning that the proposed royalty structure could reduce the Bilboes Mine project’s net present value by as much as US$150 million.
Small-scale miners, who deliver over 70% of gold, have also warned Ncube that his plans scare off new investment and could fuel gold smuggling.
When primary and secondary gold producers sing from the same hymn, it is a powerful signal that consultation has been inadequate.
In the short term, the proposed tiered gold royalty regime may boost government revenue. However, it risks undermining the very sector that is the country’s foreign currency lifeline.
The yellow metal has been one of the single largest foreign currency earners, raking in US$1,38 billion in the period January to June this year, nearly half of the US$2,8 billion total export proceeds during the period.
If operators scale back, the forex coffers will be affected.
Fidelity Gold Refiners has been on a campaign to entice small-scale miners to sell gold through official channels by paying incentives and prices that are comparable to those on the international markets.
These efforts have borne fruit with gold production reaching 37,06 tonnes in the first 10 months of the year, on course to reach the revised target of 45 tonnes.
All this progress could be reversed if Treasury plunges headlong into its tiered royalty regime. This will trigger small-scale miners to sell the yellow metal through informal channels.
By increasing royalties when gold prices rise, authorities are sending a troubling signal to investors: success is punishable.
Taxing the golden goose too hard does not make it lay more eggs. It kills it.
