Thursday, February 15, 2007

Mining tax regime

Mining tax regime
By Patrick Chisanga
Thursday February 15, 2007 [02:00]

The changes announced by the finance minister in his budget address on Friday is a move in the right direction. Zambia needs to start taking more of such critical economic paths so as to develop and sustain the socio-economic status of our poor masses. Our neighbour, Tanzania, had initially given 20-year tax holiday period to mining companies operating in their country. This tax regime has been removed so as to bring forward the date these companies begin to pay their taxes.

Due to the huge earnings generated by natural resource companies as a result of high metal prices, the Tanzanian government has put their taxation at 30 per cent,whereas mineral royalties will be at 3 per cent, not so different from our case, besides as an African country we're a huge mining house on a global basis. In this respect, Barrick Gold and Resolute Mining both operating in Tanzania have had fruitful agreements in this regard.

The government should forge ahead and implement these tax regime changes. Second, the government should also focus on increasing their stake -shares- in some of these mining outfits. Through ZCCM-IH, it's possible to raise enough funds that would in turn be used to increase our equity in some of these mining ventures. Recently, ZCCM-IH managed to raise about $60 million which they subsequently pumped into the Lumwana copper venture,resulting in them having a 30 per cent stake in the project. I would suggest that, ZCCM-IH should aggressively spell out its financial intents and purposes on the international commodities market whereby it should be able to raise enough funds and increase its stake in all major mining operations in Zambia to at least 30 per cent.

Genuine investors in Zambia shouldn't run away from the principle of a tripartite symbiotic kind of benefit; that is to say the returns on any investment should benefit the investor,the government and the community in which they operate.Anything short of this is tantamount to economic genocide. Let’s think long term, one day these investors might just decide to vamoose, I mean they've done it before. Say they left in the future, ZCCM-IH would have by then had enough investment instruments which they would use to sustain the mines in the absence of a foreign mine investor.

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