2 November 2012
Mozambique is one of the largest producers of aluminium, beryllium and tantalum, whereas the Zambian economy is heavily dependent on copper and cobalt. Both countries have huge investment opportunities for mining companies however, before doing business in either country; there are a number of key legal issues which businesses must be aware of. Mining rights
Under the Mining Law (Law No. 14/2002, of 26 June 2002), mining rights are to be issued on a first come, first served basis. A company which spots a mining opportunity in Mozambique should therefore act quickly.
The five types of titles/permits which can be obtained are: reconnaissance licence, exploration licence, mining concession, mining certificate and mining pass. The most important of these for medium and large scale projects are the exploration licenses (for the exploration phase) and the mining concessions (for the mining/production phase). Exploration licences are granted for five years and can be renewed for a further five years, while mining concessions are granted for up to 25 years and may be extended by a further 25 years. The Mozambican government however is concerned about concessions being awarded without subsequent activity taking place and one reform proposal recently put forward is that mining concessions should be revoked where there is no activity, and their holders restricted from receiving further licences. Another reform proposal is for the state to have a share in companies which are granted mining concessions. At the time of writing, the mining legislation in Mozambique was under review and so it remains to be seen whether the above proposals will be implemented. Zambia:
Under the Mines and Minerals Development Act, No. 7 of 2008, the seven types of mining rights which can be obtained are: prospecting licence, large-scale mining licence, large-scale gemstone licence, prospecting permit, small-scale mining licence, small-scale gemstone licence and artisan's mining right. One protectionist measure taken by the government has been to reserve prospecting permits, small-scale mining licences, small-scale gemstone licences and artisan's mining rights for Zambian citizens or Zambian citizen owned companies (50.1% ownership) only. Large foreign mining companies can however take comfort from the fact that they are permitted to apply for the two licences most likely to be relevant to their operations – the prospecting and large-scale mining licences. Taxes
In Mozambique, VAT is payable at 17% and corporate income tax is payable at 32%. In addition, a royalty is payable on a scale ranging from 3% to 10% based on the value of the mineral extracted and there are also taxes associated with holding a reconnaissance license, exploration licence, mining concession and mining certificate, which are payable per km2 of land.
Mozambique's Minister of Mineral Resources has expressed the need to tax capital gains resulting from the transfer of mineral concessions. The Mozambican state reportedly earned nothing from the sale of the shares in Riversdale Mining to Rio Tinto, though it is believed that a major factor in Riversdale's share price rise was the coal concession it had in Mozambique's Tete province. Zambia:
In Zambia, VAT is payable at 16% (although exports are VAT exempt) and corporation tax is payable at 30%. VAT registration is compulsory for companies with turnover exceeding K200 million per annum. There is also a mineral royalty on base metals at 6% on gross value of the mineral extracted as well as a variable profit tax of up to 15% on taxable income that is above 8% of gross income, withholding tax of 15% and presumptive tax at 3% on businesses with turnover of up to K200 million per annum.
Mining companies in Zambia until now have benefitted from a generous 100% capital allowance. This is a form of tax relief to reflect the fact that mining companies have to wait a while before they start to see returns on their investments. Zambia's Finance Minister however has very recently in his 2013 budget announced a cut in the mining sector capital allowance from 100% to 25% which effectively means that mining companies will be taxed earlier. A commonly held view is that this will remove the incentive for mining companies to invest in new long-term mining projects. Health and safety and labour issues
Health, safety and labour issues are mainly regulated by the Labour Law (Law No. 23/2007, of 1 August 2007) and the Regulations on Health and Safety for Mining Activity. The Ministry of Labour is the main regulator. As a general rule, foreign employees working in Mozambique must do so under a Mozambican law employment contract either with a Mozambican company or the Mozambican branch of a foreign company. A quota on expatriate employees applies, unless the Ministry of Labour permits otherwise. Zambia:
Some of the relevant health, safety and labour laws are the Mines and Minerals Development Act 2008, the Workers Compensation Act 1999, the Employment Act, the Industrial and Labour Relations Act and the Public Health Act. Companies which undertake large-scale mining in the country are legally obliged to employ and train citizens of Zambia and the employment of foreign employees has to be justified before such employees are granted immigration permits. Environmental issues
Mining environmental issues in Mozambique are mainly regulated by the Environmental Law (Law No. 20/97, of 1 October 1997), the Environmental Regulations for Mining Activities and the Basic Rules and Directives for Environmental Management. Operations may fall under three levels of activity - the higher the level, the stricter the environmental requirements.
The environmental regulator is the Ministry for Coordination of Environmental Affairs. Zambia:
Mining environmental issues in Zambia are mainly regulated by the Environmental Management Act 2011, the Occupational Health and Safety Act 2010 and the Mines and Minerals (Environmental Protection Fund) Regulations 1998.
The main environmental regulators are the Zambia Environmental Management Agency, the Ministry and the Occupational Health and Safety Institute. Resolving disputes
Litigation tends to be slow and expensive and so should be avoided if possible. Arbitration is a good alternative and as Mozambique is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "Convention"), enforcement of a private arbitral award can usually only be denied under the limited grounds provided for in the Convention. Further, arbitral awards made in other contracting states will benefit in Mozambique from the more favourable recognition and enforcement regime in the Convention. Zambia:
Foreign arbitration awards relating to domestic disputes are freely enforceable in Zambia subject to public policy considerations. Further information
Further information on mining in Mozambique is available from The National Directorate for Mining, Mozambique and in Zambia, is available from the Ministry website