Gemfields, which operates the Kagem emerald mine in Lufwanyama, calls on governing bodies, mining organizations, industry watchers and host governments to embrace the ‘G factor for natural resources‘.
This is a new measure promoting greater transparency regarding the level of natural resource wealth shared with the governments of host countries.
The G factor for natural resources is intended to be a simple indicator of the percentage of a natural resource company’s income that is paid to the host country government in primary and direct taxes, plus – when the host government is a shareholder – in dividends. . As such, it is an indicator of the share of natural resource wealth paid to the government of a host country.
The G factor for natural resources is expressed as a percentage and is calculated by adding the tax on mining royalties, corporation tax and dividends paid by the reporting company to the host government. The total paid is then divided by the company’s turnover during the reporting period.
The G-factor for natural resources takes its name from the “g’s” of “government”, “governance” and “good practice”, with a nod to “Gemfields”.
It could be calculated by every company whose main activity is the extraction and sale of natural resources, whether in mining, oil, gas, forestry or fishing, among others. As a result, multinational natural resource companies would publish the G factor for natural resources for each operating subsidiary engaged in the extraction and sale of natural resources.
In launching the initiative, Gemfields recognizes that no such measure is perfect and explains that the G factor for natural resources is a ‘rule of thumb’ that has wide application but is not suitable for all situations. .
Kagem and Gemfields CEO Sean Gilbertson said:
“At a time when there are significant advances in transparency and governance, and where detailed reporting on so many aspects of corporate activity is already required in the annual reports of public companies, it is surprising that practical parameters allowing a more direct overview and comparison of, the sharing of natural resource wealth still eludes us. We invite collaboration, contribution and support for the adoption of the “G factor for natural resources” as a step forward. We hope that it will be voluntarily adopted by other companies, emphasized by host countries and integrated into projects such as EITI.
There are many additional and indirect taxes that are not included in the G factor for natural resources, but which further increase the contribution made to host countries by natural resource companies. These taxes include area taxes, social security contributions, taxation of employee wages, import and export duties and VAT. The variety and variations in deposits, types and occurrences of natural resources diminish the ability to make direct comparisons between companies, the company said.
The G-factor calculations for natural resources for the Kagem Emerald Mine in Zambia, 75% owned by Gemfields and 25% by the Zambian Government’s Industrial Development Corporation, are shown below:
Kagem President Dr Sixtus Mulenga summarized as follows:
“Transparency, legitimacy and integrity are at the heart of Kagem’s operations in Zambia. We pride ourselves on our contribution to the national economy through the taxes and dividends we pay to government, the foreign exchange earnings we create and the local jobs we generate. The G factor for natural resources is an easy to understand way to measure this input and we urge other companies in the extractive sector to support this initiative as it will go a long way in showing the contribution of each mining company and, as a group, to the whole mining operation. the industrial sector contributes to the long-term sustainable economic development of the Zambian economy.