Zambia’s President Edgar Lungu directed his Finance and Mines Ministers to change by April 8 a new tax system that companies have said would lead them to shut mines.

Lungu asked Mines Minister Christopher Yaluma and Finance Minister Alexander Chikwanda to consider options to resolve the impasse. These include negotiating interim tax deals with the individual mines most affected, modifying existing laws, deferring the new regime or temporarily reverting to the old mine tax as a new one is negotiated, he said in an emailed statement last week.

“Dialogue between my government and the mines shall continue,” said Lungu, who was elected in January. The Ministers must make recommendations to Cabinet by the April 8 deadline. Lungu did not say when any changes would come into effect.

Under a law passed in January, royalties more than tripled to 20% for some mines. This will cause 12 000 job losses and shutdowns, according to the Chamber of Mines in Africa’s second-biggest copper producer. The system will disrupt government’s objective of increasing revenues from companies including Glencore and Barrick Gold. It also threatens to cut growth in an economy Fitch Ratings forecasts will expand at the slowest pace in 13 years in 2015.

The Zambian kwacha gained the most in a month after Lungu’s announcement, advancing as much as 4.2% against the dollar.

Positive Development

Barrick Gold said in December it would put its Lumwana mine under care and maintenance, where operations are halted for potential restart later, as a result of lower copper prices and the new system that replaces income tax with higher royalties for mines.

“It’s a positive development that some action has taken place,” Jackson Sikamo, president at the Zambia Chamber of Mines, said by mobile phone from Kalalushi, in Copperbelt province. The Zambia government should reinstate the previous tax system while a new one is negotiated, he said.

Last month, Lungu formed a technical committee to resolve the dispute with companies. Under the new regime implemented in January, royalties rose from a uniform 6% to 20% for openpit operations and to 8% for underground mines. Chikwanda scrapped income tax for copper producers, calling it “illusory” because it was paid by just two companies.