Project Case Study
Capacity building in Zimbabwe’s mining sector
Providing mining taxation training to staff in Zimbabwe's Revenue Authority
Zimbabwe has significant deposits of gold, iron ore, coal, platinum and particularly diamonds, mainly found in the Marange diamond fields, which are set to produce 16.9 million carats in 2013 as the highest producing diamond fields in the world. The mining industry is key to Zimbabwe’s economic and social recovery, and contributed approximately 8% towards the country’s GDP in 2011.
The dollarisation of the economy in 2009 allowed the Botswana pula, South African rand, and US dollar to be used locally and reduced inflation to about 8.2% by 2012, ending hyperinflation.
Since then, investment in the mining sector has grown considerably, resulting in significant growth in mineral exports and potential government revenues, and providing thousands of jobs for a country with an estimated 95% underemployment.
This growth has led to a need for greater capacity and efficiency in Zimbabwe Revenue Authority (ZIMRA) in order to regulate the sector and enable the authority to monitor and assess revenues. As such, we were asked by the Australian government in 2011 to design and deliver training to ZIMRA staff on a range of fiscal policy and mining taxation issues including windfall taxes, thin capitalisation, ring-fencing mineral rights, loss-carry forwards and depreciation, revenue modelling and the calculation of royalties.
Additionally, our team assessed options for improving the Government’s management of the growing sector, investigating options such as third party verification, government-managed evaluation function and public auctioning. The project was undertaken as part of the ZIMRA Program (ZIMPRAP), which views taxation of the sector as a priority to raise revenues to address the high levels of poverty in the country, which stood at 72.3% in 2011, and have been exacerbated by high prices of basic commodities after the years of hyperinflation. As the sector has grown, thanks to our input, ZIMRA has been able to cope with increasing revenues, crucial to its economic recovery.
ZIMRA is an Australian Aid Project, managed by Adam Smith International (Australia), supported by the Australian Government.