PRESS RELEASE: Zimbabwe Civil Society Calls for Transparency in the Granting of Tax Incentives in the Platinum Sector


At a time when the country is extending a begging bowl to procure COVID-19 vaccines, the government of Zimbabwe (GoZ) is awarding tax holidays to extractive companies. The government recently granted a five-year tax holiday to Great Dyke Investments, a platinum mine operation. This is particularly concerning because the mining sector is a key contributor to fiscal revenue of the country, as outlined in the $12 billion mining economy roadmap and Vision 2030. Tax incentives thus equate to tax revenue forgone and a detraction from the domestic resource mobilisation agenda. Southern Africa Resource Watch (SARW) and Zimbabwe Environmental Law Association (ZELA) coordinated a special meeting for civil society working in the mining sector was convened on the 10th of February 2021 to deliberate the implications of government’s administration of mining tax incentives towards the financing of development priorities such as health, education, and public infrastructure sectors. While the discussion zeroed in on tax incentives recently given to Great Dyke Investment through Income Tax (Exemption from Income Tax) (Great Dyke Investments) Notice 2021, the conversation reflected broadly on the maladministration of tax incentives in the mining sector particularly in platinum operations. The discussions identified lack of transparency and accountability in the granting and administration of tax incentives as detrimental to national interests.

Public Registry on Beneficial Ownership Disclosure

Corruption is part of Zimbabwe’s chronic governance challenges. The 2019 Transparency International’s Corruption Perception Index (CPI) ranks Zimbabwe as number 21 most corrupt country in the world. One of the global acceptable tools to fight endemic corruption in the extractive sector is the establishment of a public registry on beneficial ownership (BO). Knowing the identities of natural persons behind the operations removes any negative perceptions relating to conflict of interest by responsible public officials in the negotiation of tax arrangements. It also unmasks the identities of rogue investors who hide behind complex structures, shell companies and Trusts, which makes due diligence easier, for instance. Notably, Zimbabwe’s new Companies and Other Business Entities Act now provides for beneficial ownership disclosure. A huge limitation is that there is no provision of a public registry on beneficial ownership. Countries like Nigeria and Zambia, for example, have embraced a public beneficial ownership registry in their laws. In 2020, the Extractive Industry Transparency Initiative (EITI) included BO in its standards on promoting good governance in the management of oil, gas, and mineral sectors.

Open Contracting-Disclosure of all information relating to mining rights applications and agreements

Section 159 of the Mines and Minerals Act impels mining companies to draft a development, operation and financing plan of the proposed mine including a feasibility study report to be submitted as part of the special mining lease application process. It is fundamental for government to publicly release such documents to the public domain to instil public confidence on the justification and rationale for awarding additional tax incentives in the middle of project development. Without transparency and access to such critical information on the circumstances warranting the tax exemption, there will continue to be distrust between government and citizens in respect to tax practices.

Weighing the costs given the socio-economic crisis?

Tax incentives are a cost to the national purse. In the case of Great Dyke Investments, the forecasted revenue forgone by government has not been publicly disclosed. In Ivory Coast, the government with the help of Open Oil, financially modelled the cost of the 5-year tax holiday that Yaoure gold mine had been awarded, where it was established that US$29 million would haemorrhage the national purse yet the mine would remain a profitable business without the tax holiday. Currently, Zimbabwe is begging for funds to secure COVID-19 vaccines. The health and education sectors are in disarray, climate change effects are ravaging agriculture while economic infrastructure is dilapidated.  Poverty and inequality are worsening. In such circumstances, the important question to ask is: Is this worth it? With such social pangs, government cannot give what it has not; tax discounts are highly insensitive and show that government is not pro-poor and is non-responsive to the current socio-economic crisis in the country.

Already, the capacity of the government to raise revenue from the extractive sector is weakened because the sector is enjoying a wide range of other mining fiscal incentives. Among other fiscal incentives, the mining sector is accessing duty concessions (i.e. rebate of duty on goods for the mining industry). There are other fiscal incentives that are enjoyed by mining companies that import goods into a Special Economic Zone. The Corporate Income Tax (CIT) rates charged in the mining sector are lower than the CIT rate charged in other industries. The government is still to realign Corporate Income Tax (CIT) rates of between 14% and 25% which are below the regional average. The CIT rates are deemed as competitive, a major worry because Zimbabwe must not take a leading position on the race to the bottom – using lower tax rates to woo investors.

Re-negotiation of ‘de-facto’ tax incentives within the Platinum sector

The platinum royalty rate which was due for review in August 2020 has not been reviewed and is still pegged at 2.5% against buoyant prices of palladium and rhodium, all part of the Platinum Group of Metals (PGMs). As a result, platinum royalty rates in Zimbabwe are deemed to be regressive as there is no direct proportional relationship between an increase of platinum revenue and royalty revenue.

Another ‘de-facto’ tax incentive is the absence of competitive bidding concerning the disposal of platinum claims repossessed by government from established platinum mines like Zimplats and Anglo-American owned Unki Mine. This is contrary to policy recommendations of the Africa Mining Vision (AMV) that seeks to strengthen mining fiscal linkages through the disposal of mining claims with high geological potential to bidders who can pay huge signature bonuses. This is in line with the tenets of Section 315 of the Constitution which makes provisions for the negotiation and performance of mining concession to ensure transparency, honesty, cost-effectiveness, and competitiveness.

Illicit Financial Flow Concerns

Investments in the mining sector are increasingly channelled via tax havens, Guernsey – Zimplats, New Jersey – Blanket Mine and Mauritius for part of the shareholders of Great Dyke Investments. Mauritius, for example, is a notorious tax haven and now a gateway for investing into Africa. Countries like Zambia have cancelled its double taxation agreement (DTA) with Mauritius. Zimbabwe must therefore urgently review its existing (DTAs) or suspend them before reviewing them to protect its tax base and stop the continued economic bleeding through IFF.

Thin capitalisation is another key risk. While the Income Tax Act commendably has a provision to safeguard against profit shifting from thin capitalisation, due to secrecy around contracts, there is a huge risk that this legal requirement can be disabled in the contracts. Thin capitalisation is when investors choose to leverage the company on debt rather than owner’s equity. The debt normally comes from a related party and the interest rates charged can be higher than normal commercial terms. This facilitates profit shifting in that finance costs are an allowable deduction for the purpose of calculating taxable income.

Public Participation in Mineral Resource Management

The bedrock of good governance is provision of space to citizens and civil society to scrutinise mining contracts, to ask hard questions and demand answers from government and mining companies.  Corruption will be curbed, poor mining agreements will be avoided, and overly generous tax incentives weeded out as undue influence from corrupt public and corporate officials can be neutralised. The benefits exceed fiscal issues, bridges can be built between citizens and government for increased public trust and confidence. However, all this cannot happen without transparency. Government must revamp its laws to include a public registry on BO; publicly report and account for tax incentives – cost benefit analysis, contract transparency and embracing open contracting; review double taxation agreements; and introduce a sliding royalty scale in the platinum sector as the case with gold.

Contact for enquiries:

Veronica Zano

SARW: Governance, Research & Policy Officer

Contact: +263 77 180 3205


Developed by:

Southern Africa Resource Watch, Zimbabwe Environmental Law Association, Tax Justice Network Africa, Transparency International Zimbabwe, Centre for Natural Resource Governance, Action Aid Zimbabwe, Women and Law in Southern Africa, African Forum and Network on Debt and Development, International Senior Lawyers Project, Zimbabwe Diamond Allied Workers Union.

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