By BUUMBA CHIMBULU
THE mining industry is studying the impact which will be caused by the recent directive from Governments to remit all taxes over and above mineral royalties in dollars and directly to the Bank of Zambia (BoZ).
Zambia Chamber of Mines (ZCM) Chief Executive Officer, Sokwani Chilembo, said the industry was studying the impact such a directive would have on the sector’s operations, particularly on the cash flow.
“We are still studying the impact and we will get back to you.
It is alright as long as any refunds associated with tax payments are done on time,” Mr Chilembo said in an interview yesterday in Lusaka.
The directive from Government, meant to cushion the country’s foreign reserves which have dwindled to US$1.4 billion, came into effect on June 4, 2020.
Previously, only mineral royalty tax was paid in dollars since 2017 while the rest were being paid in Kwacha.
Value Added Tax (VAT) will however still be paid in the local currency.
The Zambia Revenue Authority (ZRA) wrote to all mines effective 04 June, to remit all taxes in dollars and directly to the central bank.
Key drivers of dollar demand in the Zambian market include central bank purchases for debt service purposes and shoring up of foreign currency reserve and energy demand for petroleum among others.
Some experts have, however, warned that the foreign exchange market would shrink in magnitude and so would turnover as currency conversions would not be churned as much.
Mr Mutisunge Zulu, a Financial Analyst, said the Zambian market had for years suffered exchange rate depreciation from the poor execution of energy demand causing spikes in exchange rate.
Mr Zulu also said the country still remained of the view that agriculture input demand to kick in the third quarter of this year would exacerbate demand for dollars.
“There is increased possibility that there could be a shift in procurement of seed and fertiliser through Ministry of Agriculture, the implications being these conversions will not be done through commercial banks anymore.
“If this does actualise, foreign exchange activity will mute further in the Zambian market,” Mr Zulu said.
By BUUMBA CHIMBULU