Exposed: Why govt pivoted on platinum tax

A dramatic drop in export revenue from Zimbabwe’s platinum miners during the first quarter forced Finance and Economic Development minister Mthuli Ncube to somersault on plans to charge a beneficiation tax, NewsDay Business heard yesterday.

The 15% beneficiation tax, which was part of government’s strategy to force platinum miners to establish domestic refineries, was due to come into effect soon.

But it had already sparked debate since it was announced about five years ago, with miners warning that the ramifications would be dire for an industry that was already battling to cope with a harsh tax regime.

Zimbabwe’s platinum miners are among the country’s biggest export earners, according to Reserve Bank of Zimbabwe (RBZ) data.

Experts say sluggish United States dollar inflows from the miners — Unki, a unit of the Johannesburg Stock Exchange-listed Anglo American, Mimosa Mining Company and Zimplats affects State finances.

Persistence Gwanyanya, a member of the RBZ’s Monetary Policy Committee, disclosed yesterday that there had recently been deadlocks over the beneficiation tax.

“Our challenge started during the first quarter of this year,” Gwanyanya said while contributing to the Big Debate, an economic analysis platform organised by Alpha Media Holdings.

“The biggest contributors of foreign currency, platinum miners, did not bring forex because of an issue they had about the beneficiation tax. This is why we had a deep in foreign currency during the first quarter,” Gwanyanya added, referring to Zimbabwe’s escalating foreign currency crisis, which has seen the domestic currency tumble as exchange rates run amok on both the official and parallel markets.

In the past week alone, the local currency depreciated by about 12% against the United States dollar on the official market, sliding from US$1:$268 last week, to US$1:$290 this week, as inflation breached the 100% mark for the first time since July 2021.

Gwanyanya said the country received the highest levels of foreign currency between October and March every year, but this year’s first quarter was one of the most difficult for authorities.

The drop in platinum revenue came as output increased by 2% to 121 000 ounces (oz) in the period, compared to the first quarter of 2021, according to a World Platinum Investment Council report released last week.

Last year in the first quarter, output stood at 118 000oz.

Total output for 2022 is seen at 465 000oz, down 4% on last year.

The southern African country holds the world’s third largest proven platinum reserves after South Africa and Russia.

Output from Zimbabwe has an impact on global output and pricing trends.

Zimplats, Unki and Mimosa ship out semi-processed matte for final refining in South Africa.

In its first quarter report, WPIC said Russia’s invasion of Ukraine at the end of February sent shockwaves through the markets and refined platinum production in the period under review declined 13% year-on-year to 1 279 000oz, primarily on lower output from South Africa.

South African production fell 16% to 167 000oz year-on-year during the review period.-newsday