HomeBusiness DigestMining sector to rake in US$2,6bn

Mining sector to rake in US$2,6bn

Chamber of mines tax economist Isaac Kwesu said last week , mining contributed US$2,1 billion to national exports, representing 50% of total exports in 2011.

If beneficiation is added to minerals, then the mining sector would account for 60% of total exports, Kwesu said.

According to the Finance ministry, exports are expected to rise to US$5,3 billion from US$4,3 billion in 2011.

Government has said it came up with incentive schemes for beneficiation in the platinum, gold, lithium and dimension stones sectors.

In the region, only diamond-rich countries such as Angola and Botswana have got mineral export contributions at 90% and 83%respectively, while Zambia — which has rich copper mines — is at 80%. However, South Africa, which has a diverse economy, has a mining sector contribution of 35% compared to the Sadc average of 55%.

The Zimbabwe mining sector contributes over 13% to GDP and accounts for over 50% of total exports. However, there are other indirect benefits from the sector such as it being a catalyst for infrastructure and rural development, employing over 45 000 people directly.  By 2016 the mining sector is expected to employ 54 000 people.

Speaking at the Chamber of Mines seminar last week, Kwesu said even though direct contribution is at 13%, the indirect multiplier effect which would include backward and forward linkages such as transport, supplies and electricity generation, would take the contribution to about 18,4% of GDP.

In terms of foreign direct investment, the mining sector accounts for more than 50% of total fixed investment and 75% of total private sector investment.

Last year, the total tax paid by the mining sector to government is believed to be around US$311 million, which is about 12% of the revenue collected by government. However, the contribution would increase to around 18% should diamond revenues be incorporated.

In total, Kwesu said government takes up to 17% of mining industry revenue and 60% of the sectors profitability or effective tax.

In terms of the distribution of the revenue last year, salaries and wages took up 15% with local and foreign supplies at 36%. Tax payments to government accounted for 17% while other operating expenditures were at 21%. Profit after tax was 11%.

The figures however do not include diamond revenues. Total dividends received from diamonds last year were US$150 million while the mineral is expected to contribute US$600 million.

Namibia’s mining sector has a 20% contribution to government; Zambia 13%, South Africa 12,2%, while Tanzania is at 10%.

Kwesu, however, said there were high stake-holder expectations coupled with gross misunderstanding of the mining economics, adding this piled pressure on the sub-optimal mining sector.  This is because the sector requires US$5-7 billion in the next five years in order to boost capacity utilisation. — Staff Writers.

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