Zambia's new mining tax regime could backfire

Significance

The new rules remove corporate tax, but hike mining royalties to 20% for open pit mines (up from 6%), and 8% for underground mines (also up from 6%). Some flexibility in the payments schedule may be permitted.

Impacts

• The collapse of the opposition MMD's support base means business lobby funding and support is likely to shift to Hakainde Hichilema's party.
• Following his declared support for the PF, Rupiah Banda's moderating influence on party policy may be limited by his outsider status.
• The IMF will be wary of confirming a fiscal consolidation programme, given the president's short tenure and his populist platform.
• Lower fiscal revenues from mining may push the government to borrow further to meet its election campaign promises.