'Review of taxes, utility costs'

'Review of taxes, utility costs'
Published: 18 July 2018 (343 Views)
THE change in the indigenisation laws and the ongoing ease of doing business reforms should be complemented with a deliberate review of taxes and utility costs, which continue to frustrate domestic productivity, Falcon Gold Zimbabwe Limited board chairman, Mr Ian Saunders, has said.

Under the new regulations any investor from any part of the world can now acquire and control any level of shareholding in a business except for platinum and diamond sectors.

This is a departure from the previous 51/49 percent shareholding in favour of locals, which was criticised for frustrating foreign investment.

While Mr Saunders commended the new dispensation for increasing investor appetite for Zimbabwe for the first time in years, he said more structural reforms are needed to consolidate the gains achieved so far.

The mining and tourism sectors have registered notable increases in international investor attention so far this year, as President Emmerson Mnangagwa's Government moves to boost economic growth under the "Zimbabwe is open for business" drive, with foreign direct investment commitments running into billions of dollars.

Mr Saunders, whose company continues to trail in a loss making position, said although prospects are positive for the mining sector in particular, Government can buttress these with favourable fiscal and cost environment reforms.

"The tax regime remains unfavourable and power tariffs remain unacceptably high, even though at various times the Chamber of Mines has been assured that gold mining electricity tariffs would come into line with those enjoyed by other sectors in the mining industry," he said.

"Nonetheless we have started to see some positive changes in the policy and economic environment for mining in Zimbabwe and we hope that these new developments will have a meaningful impact on these long outstanding matters."

Zimbabwe's economy has stagnated in recent years, resulting in closure of companies and loss of jobs, in what economists have attributed to a restrictive policy framework and the impact of sanctions.

With the recent change to the indigenisation laws, together with various policy pronouncements, it appears there is an increasing investor appetite for Zimbabwe for the first time in years, added Mr Saunders.

"These positive changes, coupled with Government addressing the high gold mining power tariffs, and the unfavourable tax regime, could see a significant growth in the gold mining industry in Zimbabwe, but until these key factors are addressed, the viability, and hence the attractiveness of the gold mining industry in Zimbabwe will remain sub-optimal," he said.

In its unaudited interim financial results for the half-year ended March 31, 2018 issued last week, Falcon Gold posted a comprehensive loss of $1.68 million compared to $2.42 million in the same period last year.

Total assets value dropped to $6.28 million from $7.59 million in the same period in 2017. During the period output also declined to 1.920 ounces of gold compared to 2.970 ounces in the same period last year. Resultantly, revenue was negative at $2.58 million compared to 3.65 million in the prior period.

Commenting on the group's performance, Mr Saunders said the difficult macro-economic climate has contributed to sustained losses, which have also seen the firm fail to do any exploration work during the period under review.

He said the directors have reviewed and considered the state of the operations at the firm and believe the upgrades of equipment and full operationalisation of both Golden Quarry and Camperdown Mines, would yield a positive outcome.

"With the recent operational difficulties and serious liquidity problems…exacerbated by the dispute with RioGold, which is currently not resolved over the payment of proceeds from the Dalny Mine sale, these factors have resulted in operating losses and negative cashflows," said Mr Saunders.

Government and the private sector are agreed on the need to come up with incentives to steer industrial development and make Zimbabwe a favourable investment destination.

According to the Cost Driver Analysis of the Zimbabwean Economy study published by the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu 2014), Zimbabwe is a high cost country when compared to its regional neighbours within Sadc.

The study covered eight cost drivers, which are labour, water, electricity, finance, transport and trade logistics, tariffs and trade taxes as well as information and communication technology, as major constraints to domestic competitiveness.

- chronicle

Tags: Taxes, Costs, Mine,
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