Supreme Court delivers blow to Zimra in $7 million chrome royalties dispute 

HARARE – The Supreme Court has delivered detailed reasons for a judgment issued in March which upheld a landmark High Court ruling exonerating ferrochrome producer ZIMASCO from paying millions in disputed mining royalties, dealing a blow to the Zimbabwe Revenue Authority (Zimra) in a case with major implications for the mining sector.

In a March 27 ruling, the apex court dismissed Zimra’s appeal against a 2023 decision that chrome ore concentrates and ferrochrome were not subject to royalties between 2019 and 2022.

The judgement, whose reasons were released this week, shields ZIMASCO from liability for reassessed royalties amounting to ZWL$604 million and US$7 million, while clarifying the limits of the taxman’s reach in mining taxation.

The dispute traces back to a 2022 audit in which Zimra accused ZIMASCO of underpaying royalties on its exports of chrome products. The tax authority argued that royalties should have been calculated on the gross invoice value, including logistics costs, rather than the “ex-works” price declared by ZIMASCO.

More critically, Zimra insisted that both chrome concentrates and ferrochrome—an alloy produced by smelting chromite ore—fell within the scope of mineral royalties under the Mines and Minerals Act. It issued a revised assessment covering the period January 2019 to September 2022, triggering the legal battle.

ZIMASCO, represented by Advocate Thabani Mpofu, pushed back, filing for a declaratory order at the High Court. The ferrochrome producer argued that, at the time, royalties were only chargeable on raw minerals, not on “mineral-bearing products” such as processed alloys. The company further maintained that ferrochrome, being man-made, could not be classified as a “mineral” under the law.

The High Court sided with ZIMASCO, finding that no royalty rate had been prescribed for mineral-bearing products before January 1, 2022, when parliament amended the Finance Act to expressly extend royalties to such products.

Zimra escalated the matter to the Supreme Court, arguing that royalties should always have applied to mineral-bearing products. Its legal team, led by Simplicio Bhebhe, urged the court to adopt a “purposive” reading of the law, warning that exempting processed products like ferrochrome from royalties would lead to an “absurdity.”

But the three-judge panel—Justices Chinembiri Bhunu, George Chiweshe and Joseph Musakwa—was unmoved. In its newly released reasons, the court reaffirmed a cardinal principle of tax law: no tax or royalty can be imposed without clear statutory authority.

“Any ambiguity or silence in the legislation must be resolved in favour of the taxpayer rather than the taxing authority,” wrote Justice Musakwa.

The judges said between 2019 and 2022, the Finance Act’s royalty schedule listed rates for “minerals” only. Mineral-bearing products such as chrome concentrates and ferrochrome were conspicuously absent. Without a prescribed rate, there could be no enforceable obligation.

In a significant finding for the mining industry, the court also ruled on the status of ferrochrome itself.

Evidence before the court showed that ferrochrome is produced by smelting chromite ore in furnaces with reductants and fluxes, yielding an alloy not found in nature. The court accepted this, holding that ferrochrome does not fall within the Mines and Minerals Act’s definition of a “mineral,” which must occur naturally and result from geological processes.

“Where a mineral is processed to the extent that it is converted into an alloy not found in the earth’s crust, it no longer retains its character as a mineral,” the judgement noted, citing earlier case law.

Adding complexity to the case was the government’s subsequent attempt to close the gap. In 2021, parliament enacted Finance Act No. 7, introducing Section 37B to impose royalties on mineral-bearing products effective January 1, 2022.

In 2024, a further amendment retrospectively broadened the definition of “mineral” to include mineral-bearing products, backdated to 2010.

Zimra tried to lean on the 2024 amendment to argue that liability should apply to past years. But the Supreme Court dismissed the argument, ruling that retrospective definitions could not substitute for the absence of a fixed royalty rate in the law during the relevant period.

The judgment represents a major victory for ZIMASCO—and potentially for other miners who exported processed mineral products before 2022.

By affirming that royalties must rest on explicit statutory rates, the court reinforced taxpayer protections against what it called “arbitrary or expansive interpretations” by revenue authorities.

The ruling is a high-profile setback for Zimra that not only wipes out a multimillion-dollar claim but may embolden other mining firms to challenge royalty assessments for past periods.

With royalties on mineral-bearing products now firmly entrenched in law since 2022, the judgement does not exempt miners from current obligations.