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Zimbabwean finance minister Mthuli Ncube. Picture: REUTERS
Zimbabwean finance minister Mthuli Ncube. Picture: REUTERS

Harare — Zimbabwe will double the royalty rate it charges mining companies on the platinum group metals (PGMs) they produce to 5% from January 2023 in a bid to increase government revenues, finance minister Mthuli Ncube announced in a budget review presented on Thursday.

The country is the third-largest producer of platinum, after SA and Russia, with major miners Anglo American Platinum, Impala Platinum,  Tharisa and Sibanye-Stillwater operating there.

Presenting a midterm budget in parliament on Thursday, Ncube said government income from the mining industry was low due to what he called “a generous royalty regime on some major minerals”.

“A royalty rate of 5%, which is in line with other platinum-producing countries in Africa, is proposed effective January 1 2023,” Ncube said.

SA, the world’s leading PGM producer, uses a formula to calculate the royalties it charges mining companies, based on earnings. The royalty rate is capped at 5% for refined minerals and at 7% for unrefined minerals. PMGs are: platinum, palladium, rhodium, iridium, ruthenium and osmium.

Ncube also proposed a 5% royalty rate for lithium, a mineral that is drawing investor interest in Zimbabwe, which holds some of the largest hard-rock lithium deposits in the world, as demand for battery minerals grows.

Mineral exports from Zimbabwe, mainly gold and PGMs, reached $5bn in 2021, accounting for 80% of the country’s total export value.

Ncube expects total export earnings to increase 16% to $7.3bn this year, buoyed by commodities.

He lowered 2022’s economic growth forecast to 4.6% from 5.5%, but saw growth picking up to 5% next year.

Ncube linked the lower 2022 forecast to the global economic environment and domestic factors like reduced agricultural output.

But he said preliminary figures from the first half of the year showed a better budget performance than expected, with a deficit of Z$27.9bn ($63.5m) against a target of Z$45bn.

When the 2022 budget was presented in November Ncube gave a deficit target of 1.5% of GDP.

He did not give an updated target on Thursday but said Zimbabwe would aim for a deficit of below 3% of GDP in 2023. Ncube flagged the depreciation of the Zimbabwe dollar and rising inflation among concerns but said the government was committed to addressing them.

The central bank has more than doubled interest rates to 200% in a bid to control runaway inflation, which hit about 192% in June. It has also outlined plans to make the US dollar legal tender for the next five years.

To support revenue collection, Ncube also on Thursday proposed raising the platinum royalty rate to 5% from 2.5% from the start of next year. The 5% rate would also apply to lithium, he said.

Reuters 

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