Zimbabwe is endowed with an array of mineral resources. In addition to having the second largest reserves of platinum in the world, the country also has deposits of gold, coal, diamonds, granite, nickel, copper, zinc, limestone, phosphates, clay and dolomites.
There are numerous opportunities in prospecting and mining of minerals as well as beneficiation of the minerals. Some examples of opportunities in beneficiation include the cutting and polishing of diamonds, jewellery manufacturing and tile manufacturing from black granite.
Mining accounts for 3.8% of GDP, about 4.5% of employment, and a third of total foreign exchange earnings of the country based on the 2007 output.
Exploitation of all these resources is still in its infancy according to estimates of the reserves available in the country (see table below).
Opportunities exist in the exploitation of all the
minerals listed below. Mining makes a significant contribution to the inputs of the manufacturing sector in Zimbabwe, coming only second to agriculture.
The support services for mineral processing industries already exist to some extent in the country with the smelting sector in particular being relatively developed.
Table: Minerals in Zimbabwe (reference: Investment Opportunities in Zimbabwe,
Government of Zimbabwe, 2006 - as printed in the ZIIC Investor's Prospectus 2009)
| Mineral | Estimated Resources |
Current Annual Extraction Rates |
| Gold | 13 million tonnes | 20 tonnes |
| Platinum | 2.8 billion tonnes | 2.4 million tonnes |
| Chromite (Great Dyke) | 930 million tonnes | 700 000 tonnes |
| Nickel | 4.5 million tonnes | 9 000 tonnes |
| Coal | 26 billion tonnes | 4.8 million tonnes |
| Diamond | 16.5 million tonnes | Infancy |
| Iron Ore | 30 billion tonnes | 300 000 tonnes |
| Copper | 5.2 million tonnes | |
| Coal-bed Methane |
Largest known reserve |
Mining Incentives
Royalties, Rentals and Taxation
Royalty which is not deductible for income tax purposes, shall be calculated as a
percentage of the gross fair market value of minerals produced and sold as follows:
* Precious stones 10%
* Precious metals 3%
* Base metals 2%
* Industrial minerals 2%
* Coal bed methane gas 2%
* Coal 1%
• Surface rentals, which are not deductible for income tax purposes, shall be charged at different rates/levels, during the prospecting/exploration phase and the development/mining phase of a mining project, and will be levied according to a published table of the rates of surface rents.
• Income tax on mining operations shall be levied at a flat rate of 15%. All capital expenditure (exploration, development and operating) incurred wholly and exclusively for mining operations will be allowed as a deduction at the rate of 100%.
• Mining companies shall continue to enjoy indefinite carry forward of their tax losses.
• A 5% withholding tax on dividends for both residents and non-residents for companies listed on
the Zimbabwe Stock Exchange (ZSE) shall be levied.
All other companies are levied at a rate of 10%
• In addition, a 5% withholding tax on interest for both residents and non-residents
shall be levied.
Allowable deductions
Separate mines (operating under separate mining titles) shall, as a general rule,
be ring fenced.
• However, upon application to the appropriate authorities, combinations could be entertained for exploration that has been relinquished by a mining company.
• In exceptional situations where a combination of mining operations of a similar nature, for a limited period, will avert a mine closure, accounts could be combined for tax purposes.
• General and Administrative Costs (G& A) incurred at a Head Office or by a Parent Company shall be limited to a maximum of 0.75% of allowable deductions (as defined in the Income Tax legislation) during pre-production phase of the project and, a
maximum of 1% of gross income for that year in the production phase of the project.
• Allowable as deduction shall be interest paid on borrowing of a debt to equity ratio of up to a maximum of 3 to 1, and any payments in excess of this figure shall be treated and taxed as a dividend.
• Loans and any other form of financial accommodation from an affiliated company or any financial institutions shall be at Arm’s Length Interest Rates.
With regards to interest rate that the Director General of the Zimbabwe Revenue Authority considers to be in excess of the market rate, that part of payment, which exceeds the market rate, shall be disallowed as deduction and the amount of interest so disallowed shall be treated and taxed as a dividend.
FCAs, Customs & Minerals Export
There shall be exemption from Customs Duty, Import Tax and Surtax and refund of VAT on all capital goods, during the exploration phase of a mining project and,
for a period of up to a maximum of 5 years from the date of grant of mining title, during the development phase of a mining project.
Mining companies shall be granted the right to market their minerals directly, in accordance with the provisions of the Minerals Marketing Corporation ZIIC of Zimbabwe Act, and subject to adequate monitoring arrangements and reporting obligations on the part of the mining company.
Capital Allowances
The Special Initial Allowance % of Cost for mining equipment is 100% The taxpayer may elect to use either the “Special Initial Allowance” (SIA) for assets acquired by him, or Wear & Tear”. Where the SIA is elected, 25% accelerated wear and tear (on a straight-line basis) is allowed for the following 3 years.
Losses
Mining companies, may carry forward losses indefinitely.
Key contact:
Richard Mbaiwa, chief executive officer
Zimbabwe Investment Agency
Email: mbaiwa@zia.co.zw
Tel: +263 475 7931 (to 7936)
www.zia.co.zw
