Biti says Finance Minister ‘a slave to mining interests’; Mthuli explains platinum tax suspension

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By Reason Razao

HARARE East legislator Tendai Biti has accused Finance and Development Minister Mthuli Ncube of being a ‘slave of the mining interests’ for failing to firmly tax mining companies which he said are prejudicing the country billions of dollars in revenues.

Biti, who is a former Finance Minister, raised red flags over the proposal to suspend by 12 months, the obligation of platinum houses to pay VAT on un-beneficiated platinum that is coming out of Zimbabwe while allowing mining companies to pay royalties partly in local currency.

 Speaking in parliament Tuesday, Biti, bemoaned the predicament saying the initiative is siphoning huge amounts of revenue out of the country.

“All the minerals which we are producing are exported yet the Minister, in his wisdom or more appropriately in his lack of wisdom, he is proposing that royalty should be paid 50 percent in Zimbabwe dollars and 50 percent in foreign currency, giving them a further incentive for stealing the much needed resources of this economy,” Biti said.

“There is no objective reason or rational basis of why miners who are earning in US dollars should then be given an opportunity of paying their taxes in local currency.

“It does not make sense at all unless the Minister is captured by mining interest,” he added.

The opposition Citizens Coalition for Change (CCC) legislator also questioned the initial terms that were agreed on between government and ZIMPLATS, saying the mineral extracting company failed to construct a platinum refinery despite the condition being the major reason the company was granted massive tax incentive.

“Ostensibly in his explanation, the reason is to give tax incentives to mining houses so that they can build a refinery in Zimbabwe. ZIMPLATS has been in this country for a period of 20 years and they have not built a refinery,” Biti said.

“Over and above this, platinum is nickel. Nickel is part of the platinum minerals group that comprise of palladium, nickel, platinum, lithium, gold, silver and rhodium.

Finance Minister Professor Mthuli Ncube

“There are about six groups of PMGs. We already have a nickel refinery in Bindura at Bindura Nickel Corporation yet consistently, all the platinum houses have refused to use Bindura Nickel.

“As a result, you have this anomaly that platinum houses in Zimbabwe, with the key culprit being Mimosa and Unki, are exporting raw platinum out of Zimbabwe…What these mining houses are declaring, they are just declaring one mineral. Zimbabwe is being prejudiced,” claimed Biti.

As a result of a loan of 200 million dollars that was borrowed from China in 2006, government gave 26 million ounces of platinum to the Chinese, as mortgage bond.

“ZIMPLANTS is sitting on reserves confirmed, validated platinum reserves of 176 million tonnes.  Whatever price you use, whether it is $1000 an ounce or it is $2000 an ounce, you are talking of billions of dollars,” said Biti.

In response, Ncube defended the policy intervention saying the stipulations were set after careful deliberations and external consultancy with International Monetary Fund Fiscal Affairs Department in Washington.

“So we mulled over this and we came to the view that this made sense.  Let us suspend the beneficiation tax and then increase royalty to 2.5percent to five percent. Thus, it was a very systematic process that we were involved in and we are very happy as Treasury to share the advisory note from the IMF because we believe that it was based on sound analysis but we are talking about a 12 month’s suspension.

“We stand ready to review and drop the axe after 12 months if we feel that we are not making progress on the promises made by these companies,” Ncube said.

The Minister however concurred with Biti that the threshold on royalties could be increased.

On the issue of royalties of five percent that perhaps this is too low, maybe it should be increased to 10 percent and so forth, look we have just moved from two percent  to five percent.  Who knows we might get to the 10 percent next year,” said Ncube.