THE four active mines contributed M5.1 billion to the national economy of Lesotho in the fiscal year 2022, which is a considerable economic contribution to the national budget.
May 26, 2023
3 min read
Mining contributes M5.1b to national budget
The Liqhobong Diamond Mine
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The four mines including Letšeng, Kao, Mothae, and Liqhobong contributed in the form of purchases, employee wages, taxes, and levies.
They processed a total of 12 million tonnes of kimberlite to create 461 594 carats, which they then sold for more than M5.173 billion in gross profit.
The industry's performance is optimistic and good, but it is under significant margin pressure because of market and currency volatility, high operating cost inflation, COVID-induced supply chain restrictions, and a changing global political environment.
Resources in the mines are currently located at depths that are rising, necessitating significant capital expenditures to extend the lives of some mines.
The country's ability to draw in investment capital is significantly hampered by the erratic and inconsistent legal and tax environment.
The Lesotho Chamber of Mines this week released the 2022 Lesotho Diamond Mining Industry Performance Report, which states that M3.6 billion overall was spent on the purchase of goods and services, M2.9 billion of which was spent specifically on local procurement.
The total local expenditure was 81 percent compared to foreign expenditure of 19 percent.
“The foreign spend was mostly on Original Equipment Manufacturers, procuring original parts, service and repairs by manufacturers,” the 2022 mining report revealed.
A total of M414 million was contributed through employees’ earnings. Mine employees are among the high earners contributing significantly to the economy.
Direct contribution to government fiscus through taxes and levies amounted to M1.1 billion, with royalties totaling M512 637 668 followed by dividends at M180 000 000.
Corporate Income Tax on the other hand contributed M133 100 000 while withholding Tax contributed M132 265 886.
For the 2022 fiscal year, the four mines made a contribution of M98 630 157 as PAYE as well as a Non-refundable VAT of M36 195 183 while Mining Lease Rental Fee contribution was at M7 724 502.
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The industry’s contribution to GDP grew by 30. 8 percent from M3.9 billion in 2021 to M5.1 billion in 2022.
Direct contribution to government fiscus through taxes and levies increased from M940 million in 2021 to M1.1 billion in 2022.
The Liqhobong Mine was placed under care and maintenance during the COVID-19 pandemic period and resumed operations in August 2022, boosting the contribution of the industry.
“The contribution of the industry is expected to increase in 2023 with Liqhobong Mine becoming fully operational. This depends on the prices of diamonds in the market and recovery of exceptional stones.
The diamond mining industry is a vitally important player in Lesotho’s economic linkages and growth as well as the key contributor to the nation’s GDP,” the report also stated.