Zim fast-tracks lithium beneficiation, concerns raised

Zimbabwe’s Government is ramping up its efforts to promote domestic mineral beneficiation, focusing on platinum group metals (PGMs) and lithium, according to Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube.

However, industry players and experts have raised concerns about the feasibility and potential unintended consequences of the aggressive approach, particularly in the lithium sector.

Addressing parliamentarians at a pre-budget seminar in Bulawayo last week, Prof. Ncube outlined the Government’s measures aimed at compelling mining companies to add value to minerals within the country.

He emphasised that domestic beneficiation is not only a key pillar for economic resilience but also a mechanism for job creation and industrial growth.

“Honourable Members have bemoaned the need to expedite the process of beneficiating our minerals domestically to create employment, revive the manufacturing industry, and improve the country’s resilience to economic shocks. Government is equally concerned with the continued export of raw minerals and is in the process of encouraging beneficiation of most minerals before export,” Prof. Ncube stated.

He highlighted that it is primarily the mining companies’ responsibility to invest in beneficiation infrastructure, while the Government’s role is to create an enabling environment.

To that end, Zimbabwe introduced a 5 percent beneficiation tax on unprocessed platinum exports to incentivise local processing and has removed customs duties on importing equipment necessary for setting up beneficiation plants.

Turning to lithium, which is increasingly critical due to global demand for electric vehicle (EV) batteries, Prof. Ncube announced that the Government aims to replicate the platinum beneficiation model within two years. “The success story for PGMs should, thus, be replicated to lithium beneficiation, within a timeframe of not more than two years, in order to yield revenue to the fiscus,” he remarked.

The Government has clarified that any lithium that does not undergo substantial processing specifically, up to lithium carbonate production would still incur the 5 percent beneficiation tax. Moreover, lithium companies are now required to submit detailed beneficiation plans, without which they will not receive mining licenses, he said.

Players in the sector however questioned Government’s decision to use the VAT Act to define “unbeneficiated lithium”.

While the VAT Act describes unbeneficiated lithium as lithium exported for use in automotive or other batteries manufactured outside Zimbabwe, or for the manufacture of lithium carbonate, or for any beneficiation whatsover outside Zimbabwe, Statutory Instrument 57 of 2023 Base Minerals Export Control has a different defination which is favoured by some miners.

SI57 defines unbeneficiated lithium as any lithium in whatever form that has not undergone processing to the extent that, in the case of spodumene, the lithia content is 3 percent or above and in the case of petalite and lepidolite, the lithia content is 2,5 percent and above.

One mining executive who requested not to be named said “the VAT Act should be amended to give correct definition of beneficiation”.

“Also there should be suspension of collection of VAT on the premises of the current Acts because it doesn’t promote growth of the sector yet there has been great strides to improve the lithium industry.

“Charging VAT based on current definitions of the VAT Act is unfair since the producers are already beneficiating ores to concentrates. The VAT Act should use the definitions from SI57 which clearly stipulates the definitions of unbeneficiated lithium ores and give the percent of lithium content. This is clearly verifiable as opposed to what the VAT Acts defines.”

Minister Ncube, however, reiterated that the “superior beneficiation levels contained in the VAT Act” should take precedence, with a view to ensure optimal benefits to Government.

He said any lithium value addition process that does not result in the production of lithium carbonate will not be regarded as substantial beneficiation, hence, 5 percent beneficiation tax applies.

The announcement also sparked discussion among economists and industry stakeholders on the feasibility and potential economic impact of Zimbabwe’s beneficiation agenda, particularly during a lean season for commodity prices.

Economist Enoch Rukarwa noted that while the Government’s vision for domestic beneficiation is commendable, it could face substantial challenges.

“Beneficiation is capital-intensive and requires consistent power supply, skilled labour, and efficient infrastructure, which Zimbabwe is currently lacking in some areas,” he explained.

Rukarwa expressed concerns that if companies were unable to comply with the stringent beneficiation requirements, they might consider relocating their operations to other countries, reducing the intended benefits for Zimbabwe.

Gladys Shumbambiri-Mutsopotsi, an economic analyst, shared Rukarwa’s cautious optimism but stressed that beneficiation could be transformative if supported by a comprehensive policy framework.

“There is a lot of potential in local mineral beneficiation to boost employment and grow the manufacturing sector,” she said.

“But to make this a success, the Government needs to ensure regulatory consistency and offer incentives to attract private investment. Companies will need support to offset the initial costs of setting up beneficiation plants.”

Mining engineering expert Eng. Douglas Muzangwa expressed concerns about the practicality of achieving beneficiation targets in two years, especially for lithium.

“Establishing a beneficiation plant, particularly one that produces lithium carbonate, is not a short-term endeavor,” Eng. Muzangwa stated.

“It requires substantial investment and specialised equipment. The two-year timeline might be ambitious, but if the Government can fast-track infrastructure support and streamline regulations, it could be feasible.”

He suggested that the Government focus on creating incentives, such as tax breaks or subsidies, to ease the financial burden on mining companies.

“Setting up beneficiation plants can be costly, and the current global economic environment is challenging for the commodities market,” Eng. Muzangwa added.

“If companies perceive these policies as overly restrictive without sufficient support, there’s a risk they might hold back investments,” he said.

Despite these challenges, Prof. Ncube reiterated the Government’s commitment to beneficiation as a cornerstone of Zimbabwe’s economic policy. He asserted that while the Government acknowledges the hurdles, it is determined to achieve self-sufficiency and value retention in the mining sector.

Prof. Ncube concluded, “Zimbabwe cannot afford to continue exporting raw minerals. We must capture the value of our resources domestically to strengthen our economy and empower our people.

Beneficiation is the path forward, and we are committed to making this a reality.”

With global demand for lithium and other critical minerals on the rise, Zimbabwe’s beneficiation policy may indeed position the country as a vital player in the global supply chain.

However, as industry experts have noted, achieving this vision will require a balance between regulatory enforcement and industry collaboration to ensure Zimbabwe reaps the full economic benefits of its rich mineral resources.

Experts say the VAT Act is too broad and does not recognise any form of beneficiation which some players are doing throught processes such as floatation that produces measurable levels of beneficiation as defined in SI57.-ebsinessweekl