19.2 C
Lusaka
Monday, February 26, 2024
spot_img
HomeMiningFirst Quantum Minerals Contributed 61% of Zambia's Mining Income in 2021

First Quantum Minerals Contributed 61% of Zambia’s Mining Income in 2021

Zambia’s largest taxpayer, First Quantum Minerals (FQM), paid ZMW 20.4 billion (USD 1.4 billion) in taxes and royalties to the government in 2021. This record sum amounts to 61% of the total amount – nearly ZMW 34 billion (USD 2.1 billion) – received by the Zambian government from the entire mining industry that year.

These figures were disclosed in the independently audited Zambia Extractive Industries Transparency Initiative (ZEITI) 2021 annual report on tax payments and receipts, which was published on May 20, 2023.

ZEITI is the national chapter of the Extractive Industries Transparency Initiative (EITI), the global standard for the good governance of oil, gas and mineral resources. ZEITI is an independent body that publishes an annual report documenting all payments made by mining companies and revenues received by the government. Importantly, the EITI conducts a reconciliation between the amounts paid by companies and the amounts received by government entities to reveal any discrepancies. Zambia joined the EITI in 2009, and annual reconciliation reports have been available to the public since 2008.

Despite a decline in Zambian copper production in 2021, surging copper prices led to a significant increase in government revenue from the mining sector. The two most notable increases were recorded for mineral royalties and company income tax. Mineral royalty receipts from the industry increased from ZMW 5.2 billion (USD 0.3 billion) to ZMW 12.7 billion (USD 0.7 billion), mirroring the increased receipts in income tax from ZMW 5.1 billion (USD 0.3 billion) to ZMW 12.7 billion (USD 0.7 billion).

Royalties are charged as a percentage of sales, escalating as the price of copper increases. The substantial increase in income tax, which is levied on a company’s profits, signifies that both investors and the State did well in 2021, which was just recompense for the great uncertainties that COVID-19 introduced in 2020.

First Quantum had already disclosed these contributions in May 2022, through its annual ‘Tax Transparency and Contributions to Government’ Report. The FQM report discloses all public contributions, such as social investments and public infrastructure, and not just payments made to the State.

However, the publication of the ZEITI data is the first time that these company-level contributions have been comparable to overall industry figures. Furthermore, subsequent independent corroboration from ZEITI reinforces the credibility of FQM’s own reporting, which is generally released earlier, and within months of the year-end. FQM’s 2022 report is due to be released within the next few weeks.

FQM Country Manager Dr Godwin Beene said the mining company prided itself on the significant contribution it had made to the nation’s finances during the year and reiterated the importance of transparency initiatives like ZEITI in educating public debate.

“Due to our economic dependence on mining, we tend to have a very emotive public debate on mining’s fiscal contribution to the country,” he said. “Often, the facts are obscured by the politicization of reporting on the mining sector which can lead to misleading or often inaccurate reporting of data.

“The great utility of ZEITI’s annual reports is that they are an independently verified set of facts that gives the public a transparent view of mining taxation – both what has been paid on the one side, and received on the other – and provides reassurance that the nation is recouping a very substantial return from the mining of its national resources.”

The ZEITI report also found that the mining industry contributed significantly to Zambia’s economy in other ways, such as through employment, skills development and infrastructure investment. The industry directly employed over 100,000 people in 2021, and indirectly supported an estimated 500,000 jobs. The mining industry also invested over ZMW 1 billion (USD 60 million) in skills development and training in 2021, and over ZMW 2 billion (USD 120 million) in infrastructure projects.

The ZEITI report is a valuable resource for the public, providing them with independent and reliable information about the mining industry in Zambia. The report helps to ensure that the mining industry is held accountable for its contribution to the country, and that the government is using mining revenues effectively to benefit all Zambians.

RELATED ARTICLES

Most Popular