Depressed mineral prices hit Zim royalties

HARARE - Mining royalties — one of Zimbabwe’s key revenue heads — took a knock in the quarter to September 2013, slumping 39 percent to $39 million due to depreciating international mineral prices.

During the period under review, tax collector Zimbabwe Revenue Authority (Zimra) targeted to collect $63,7 million in mining royalties.

Sternford Moyo, Zimra’s chairperson, said the decline is “in addition to royalties from diamonds which were negatively affected by the placing of some diamond mining companies under sanctions.”

“Therefore, the recent decision by the European Union to lift sanctions that had been imposed on ZMDC will go a long way in aiding the performance of this revenue head,” he said.

This comes as the country has pinned its economic growth hopes on the mining and agriculture sectors.

However, former Finance minister Tendai Biti recently revised downwards the mining sector’s growth target from 17,1 percent to 5,3 percent while agriculture is now expected to grow by 5,4 percent from an initial 6,4 percent.

He said the sectors under-performed in the first half of the year.

Economic analysts say the decline in metal prices could be attributed to the unanticipated slowdown in the Chinese economy, which signalled a setback in the global economy and hence a lower demand for precious metals.

This is against projections by the recently elected Zanu PF-led government’s economic blueprint — Zimbabwe Agenda for Socio-Economic Transformation (Zimaset) — which has projected mining industry to grow by 16,7 percent.

Meanwhile, Moyo said Zimra missed its total revenue target of $904,9 million by one percent during the quarter due to harsh economic conditions.

“The marginal negative variance was due to the harsh economic conditions prevailing in the country and the sluggish economic performance during the run-up to the harmonised elections,” he said.

Moyo added that “the economy continued to face challenges such as erratic power supplies, liquidity constraints, depressed industrial capacity utilisation, among other challenges within the period under review.”

Although Value Added Tax (Vat) performance was below expectations since net collections amounted to $284 million against a targeted $291,1 million, the revenue head contributed the largest portion to total collections.

Individual tax collections amounted to $211,3 million surpassing a target of $171,2 million by 23 percent.
Moyo said that the improved performance of the individual tax revenue head was largely buoyed by salary adjustments and performance awards granted to employees.

“Furthermore, audit and follow-up initiatives by the authority resulted in improved compliance from clients, thereby boosting revenue collections,” he said.

He added that despite the revenue head surpassing the target, companies have been scaling down in operations in order to reduce operating cost through either retrenchments or closures.

Excise duty’s collections for the third quarter increased by four percent to  $129,9 million against $125,5 million due to an upward review of the rate of duty for fuel whose price was raised by five cents per litre in March this year.

“In addition, monitoring of imports by Zimra through escorts, audits and follow-ups boosted compliance levels,” said Moyo adding that “more inflows are expected from excise duty as the festive season approaches due to increased consumption of excisable commodities such as beer and fuel.”

Company tax fell three percent to $102,4 million against a target of $105,2 million negatively impacted by depressed capacity utilisation which dropped from 44,6 percent in 2012 to 39,6 percent in 2013, according to Confederation of Zimbabwe Industries’ manufacturing survey report.

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