(Bloomberg) — Zambia’s presidential candidate for the main opposition party, Nevers Mumba, said he will review a plan to impose mining royalties if he wins this month’s election.
Royalties that are set to triple for some mines will “paralyze” economic growth efforts in Africa’s second-biggest copper producer, Mumba, president of the Movement for Multiparty Democracy, said in an interview on Dec. 30 in the capital, Lusaka. The increased taxes that came into effect on Jan. 1 are “incredibly high” at 20 percent of revenue for open-pit mines and 8 percent for underground mines, he said.
Zambia raised royalties from 6 percent and scrapped corporate income tax of 30 percent for mines in a system that Finance Minister Alexander Chikwanda said was simpler to administer and would avoid “illusory” profit taxes. The move prompted Toronto-based Barrick Gold Corp. to put its Lumwana mine under care and maintenance and led the main industry lobby group to warn of closures and lower revenue.
“The moment you raise it to those levels without engaging those in that field you paralyze your efforts to build an economy,” Mumba, 54, said. “I’ve already made a passionate appeal to Barrick Gold. I’ve told them to hold their fire and see what happens” after the Jan. 20 election.
Mumba, a former televangelist who was Zambia’s vice president under Levy Mwanawasa who died in office in 2008, is one of 11 candidates campaigning for the post. The elections were triggered by the October death of Michael Sata, who had ended 20 years of rule by Mumba’s party when he was voted into office in 2011.
Open Race
Defense and Justice Minister Edgar Lungu is the presidential candidate for Sata’s Patriotic Front, following a contentious succession battle. He has won a high court order saying he was properly elected as the PF’s presidential candidate.
Hakainde Hichilema, leader of the United Party for National Development, is also running for president. The eight other candidates are from smaller parties.
The race between the three candidates is still an open one, “depending how we handle the next few days,” Mumba said.
The PF, which won 42 percent of the vote in the 2011 election, will probably retain power, according to a Dec. 19 research note by Eurasia Group analysts, including Philippe de Pontet. The MMD secured 36 percent of the vote three years ago and the UPND came third with 18 percent.
The ruling party’s policies have strained the economy, Mumba said.
“They have overstretched their resource envelope and they do not have money now to back up their political pronouncements,” he said. “Our growth is going to get a beating.”
The International Monetary Fund estimates the economy probably expanded 5.5 percent in 2014, which would be the slowest pace in 12 years. Growth in the $27 billion economy was forecast by the government at 6 percent last year. – BLOOMBERG
