Enhancing tax collection from mining in Zambia through effective regulation and monitoring of mineral production

Enhancing tax collection from mining in Zambia through effective regulation and monitoring of mineral production

Mineral Production Monitoring Support Project

The project came at the right time, as the government of Zambia is very particular about revenue collection. We want the mines to pay what is due to government, and this project will capacitate us to ensure that the mines account for everything that they produce. As a nation, I think that we are going to benefit a lot.

Director of Mines, Mr Mooya Lumamba

CONTEXT

The mining industry is sometimes accused of short-changing African taxpayers, and national authorities are accused of not doing enough to prevent this trend. In Zambia, the biggest issue facing the mining sector has been transparency, namely the accurate reporting of what is produced and exported. Copper mining is a particularly complex and fast-moving business, and government agencies haven't always been able to keep up. A €4.7m capacity-building programme funded by the European Union is strengthening Zambia's mining sector by helping it move toward better, more transparent practices.

OBJECTIVES

  • To strengthen the Ministry of Mines & Mineral Development's core function of overseeing the monitoring of mineral production in Zambia.
  • To build and use robust analytical and reporting systems, thereby increasing the accuracy of revenue collection from the mining sector.

RESULTS

  • Improved regulation: Project experts have designed an improved reporting format, which are being used by the mines for their monthly production reporting. This new format makes it possible to trace the production and movement of various intermediate products between mines and processing companies, so that the production, and the royalties due, can be attributed correctly.
  • Better systems, more transparency: All minerals require export permits to be granted by the Ministry of Mines. On 1 June 2016, the new online export permit module went live. The Ministry is now processing and issuing all mineral export rights via digital interface (a hard copy is produced for customs verification).
  • More skills: On-the-job training of the Ministry's staff focussed on the analysis of regular production reporting by the copper mines. More structured training on various specific topics is being developed.
  • Better equipment: The first batches of brand new laboratory equipment were delivered to the Ministry’s Geological Survey Department. This equipment directly supports the objective to strengthen the Ministry of Mines and Minerals Development's capacity for effectively monitoring the production of Zambian mines and gemstone producers. The new and modern equipment includes sampling and gemology equipment, microscopes and magnifying lens lamps, two analytical balances and one muffle furnace.

FACTS AND FIGURES

  • The extractives industry accounts for around 6% of Zambia's GDP (24bn euros in 2014), with 92% of this coming from copper and cobalt mining.
  • The Government of Zambia in 2014 collected 9.78 billion kwacha (around €800 million in current value) in revenues from the extracting industry.
  • Revenues from the mining industry represented about 20% of the Government's budget in 2014 (€3.8 billion).

TESTIMONY

Meet the first user of the export permit produced by the new system on 1 June 2016

The stenographer of the Ministry of Mines and Mineral Development, Ms Jean Mwenfa Simukonda, who was the first to issue an export permit using the new system, says using the digital interface has made recordkeeping easier. "The system can also easily trace if a processing mistake has been made due to the automated audit trail," she explains. "And the 'revenue report' option makes it easy for me to provide senior management with accurate data on payments made."