By Shapi Shacinda
LUSAKA (Reuters) – Weak copper prices will prevent Zambia from meeting its forecast target of raising additional revenue totalling $415 million from foreign mining firms, central bank governor Caleb Fundanga said on Wednesday.
Zambia had hoped to raise the additional revenue after introducing higher mining taxes on foreign mining companies in April, in a controverisal move opposed by the companies, but which Zambia said at the time was meant to help the poor southern Africa nation make the most of the commodities boom.
“At the current price level, it is not possible to collect those windfall taxes we have been clamouring for,” Fundanga told a media briefing.
“The falling prices (copper) will have an impact on government revenue, of most serious consequence is that there will be low GDP (gross domestic product) growth.”
Fundanga however, said the reduction would not affect social delivery plans by the government because the $415 million was not included in the 2008 budget.
Zambia has previously said it wants to spend the $415 million on improving education, health services and poverty reduction programmes in a country where 64 percent of the 12 million people live on less than a dollar per day.
Zambia raised mineral royalty to 3.0 percent from the previous 0.6 percent and corporate tax to 30 percent from 25 percent. Zambia also introduced a variable profit tax at 15 percent on taxable income above 8 percent, effectively raising mining taxes to 47 percent from the previous 31.7 percent.
Some of the foreign players in Zambia’s copper mines include Swiss firm Glencore International AG, First Quantum Minerals, London-listed Vedanta Resources Plc, Australia’s Equinox Minerals Ltd. and Chinese firms.
GLOBAL CRISIS TO HURT MINES
Fundanga said a prolonged global financial crisis would harm further investments in the copper mines, the country’s economic mainstay, and hurt economic growth, causing a reduction in jobs.
“We are all aware that some mining companies have put on hold the projects they wanted to implement and have been reducing on the number of mining suppliers, and this will affect many people,” Fundanga said.
Fundanga said the fall in copper prices also signified the importance of diversifying the economy away from mining to agriculture, electricity exports and other sectors if the government was to provide proper social services to the people.
Zambia’s copper production for the nine months to September rose 10.7 percent to 421,519 tonnes compared with the 380,907 tonnes output for the same period in 2007, he said.
Copper export earnings dropped by 32.6 percent to $758.1 million in the third quarter of 2008 compared with $1.2 billion recorded between April and June 2008 due to declining prices and lower export volumes.
Fundanga said cobalt production during January-September declined by 4.9 percent to 3,454 tonnes compared with the output for January to September 2007.
Cobalt export earnings fell to $49.5 million in the third quarter from $90.1 million in the second quarter of 2008, Fundanga said.
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