Renegotiate mining deals
Renegotiate mining dealsBy Editor
Tuesday June 12, 2007 [04:00]
It is embarrassing that our copper mining industry in the 2005/2006 financial year made profits of over K1.5 trillion but only paid to the government loyalties of K35 billion. We say this because the minimum Zambia could have earned in this period is K175 billion. The K35 billion loyalties were based on the rate of 0.6 per cent when the global norm of loyalty tax is three per cent.
And at three per cent, Zambia could have earned K175 billion. However, this is also still too low when one compares what countries like Chile are earning from their copper industry. For instance, in the first quarter of this year, Chile has earned $900 million in income taxes from its private miners and $270 million in copper loyalty taxes.
This is in addition to Chile’s earnings from its state mining giant, Corporacion Nacional Cobre (Codelco), which posted a net profit of $1.43 billion on sales of $2.3 billion. Compare Chile’s earnings in the first quarter of this year to our paltry earnings of not more than $8 million for the entire financial year. This is surely embarrassing because Zambia is one of the largest copper producers in the world – together with Chile, Australia and Peru.
It is said that what differentiates one person from another is not necessarily what they have but what they do with what they have.
We appreciate the difficulties this government is having with renegotiating some of these deals. One actually wonders if those who negotiated these deals and other privatisations still live in this country.
In other countries, they would be sought and dealt with. One can’t do things like this to one’s country, to one’s people and get away with it. We don’t think these poor deals were a product of oversight on the part of our negotiators. We would rather believe they were deliberate and conscious. They need to explain why they did this to their country. This is not different from the plunder of Chiluba and others. The losses are gigantic. And those who are responsible for this huge loss, for this scandal are allowed to go scot-free.
This type of impunity should come to an end. There has to be prudence and adequate care in the performance of public duties. But all the time when one tries to question what those in government are doing, the response has not been favourable; it has always been very hostile. We can cite a few recent examples. When Levy Mwanawasa and George Kunda were challenged over the nolle they had granted their friend Kashiwa Bulaya, they came down on us very badly. It took a grueling one month of nasty editorial comments that were starting to threaten their hold on power for them to back down. The other issue is the London High Court litigation against Frederick Chiluba and his thieving friends.
We are uncomfortable to talk about this. But we feel there is need to talk about it so that our people can know how our leaders conduct important national affairs. George and Levy had decided to stop, they had actually stopped, the London High Court proceedings. In their own judgment, the local criminal proceedings were enough. It took a lot of courage and manoeuvring to get the London High Court proceedings completed. At one point they even wanted to penalise those who had decided to continue this case against their will. But as we all know, when the judgment came we gave them credit and they never refused it.
They are today going around the world basking in the glory of this judgment and no one has stopped them from doing so. If we don’t watch it, they will do the same with the constitution-review process.
What we are trying to say is that the Zambian people should always be vigilant and scrutinise what their representatives are doing on their behalf. It is not enough to cast our votes and after that go to slumber thinking our representatives in government will always do what we expect them to do. Yes, we should trust the people we vote for or appoint to represent us - but it should be on the basis of “trust but verify”.
It is clear that we could be earning trillions of kwacha from our copper industry if our representatives had acted prudently and in a patriotic way. Zambia needs more money from its copper industry. If this country cannot earn adequate income from its mineral resources, where can one expect it to get its income?
Nature has blessed us with minerals; she has not cursed us with minerals. It is a blessing not a curse to have minerals. Many countries have developed from mineral resources. There are still many countries in the world today that depend on their mineral wealth for survival and development. When are we going to learn to value what we have and use it to the full for the benefit of our people? The contribution our mining industry is making to the national treasury is an insult when one looks at the earnings of this industry.
At this rate we are better-off closing the mines and stopping all activities in this industry and reserve our country’s mineral resources for the future generations that may be wiser than we and could use these resources in a more beneficial way. We should not forget that mineral resources are a wasting asset, they can be depleted. We are told that recent studies have shown that only one copper mine, Konkola Deep, has a lifespan beyond 2035. If we allow trans-national corporations to mine and take off with all the proceeds, what are we going to use to develop this country?
Now even the World Bank and the International Monetary Fund, these wolves are feeling sorry for us. They are telling us to renegotiate the deals we have with these trans-national corporations with a view to increasing copper loyalty taxes. Although there are legal implications, we have no choice as a country but just to get back to the negotiating table with all mining companies and really push hard for new rates of loyalties and other taxes.
But again it would be the prudence, the honesty, the commitment and patriotism of the negotiators that will determine the outcome of such renegotiations. And the mining companies themselves should be made to realise that it’s better for them to give a bit more than they are today giving to the Zambian government or risk losing everything in a revolution that will be inevitable if things continue this way.
The nationalisations and other things happening in Latin America will be nothing but a tea party compared to the impending Armageddon that is likely to befall them if they don’t change the state of things. Greed has killed many and generosity has also saved many. The choice is theirs. This broad daylight banditry which even the world’s greatest bandits are condemning cannot be allowed to go on unabated. Our mineral resources cannot be stolen in this way, our country cannot continue to be exploited in this way.
Even the British South African Company did better than today’s mining mercenaries whom we are glorifying as investors. These are not investors, they are robbers, bandits who should be stopped from continuing to rob us. They are merciless, they have no hearts. We say this because if they were merciful and had hearts, they wouldn’t need anyone to tell them that they are giving Zambia a very raw deal and would change on their own; it wouldn’t be a problem for them to accept to renegotiate these deals.
But the Zambian people should not leave their fate totally in the hands of the Minister of Finance, of Mines and other negotiators. It is time civil society took up the challenge to force these bandits to give back to Caesar what belongs to Caesar or at least to give Caesar a fair deal. Those who do not want to renegotiate their contracts, civil society should make it impossible for them to continue mining. Our government needs all the support for the renegotiation of all mining agreements to ensure that mineral loyalties and other taxes are raised to reasonable and acceptable levels.
The labour movement needs to play a leading role in this struggle. Those who will refuse to renegotiate their deals should be made to feel the might of our trade unions and civil society pressure. After all, we were not parties to their deals and we are free and we should be free to do our thing. We make a clarion call to all our people to stand up and protect their country’s mineral wealth from being stolen by so-called investors.
What we need is a serious change in policy direction from the short-term to long-term measures if Zambia is to really benefit from its copper deposits. Many lives could be improved if earnings from the country’s rich copper deposits were increased and the issue of mining tax needs to be revisited.
We may not have done a conclusive comparison study of Zambia and other copper producing countries like Chile in terms of earnings from copper, but the facts are there to speak for themselves on what makes these other countries different from Zambia.
Labels: DEVELOPMENT AGREEMENTS, EDITORIAL, MINING CONTRACTS
posted by MrK @ 3:58 AM
1 Comments:
1) A minor, minor issue - it is royalty tax, not loyalty tax, as is clearly stated in Joan Chirwa's article.
2) Corporacion Nacional Cobre (Codelco), which posted a net profit of $1.43 billion on sales of $2.3 billion.
Now this is extremely interesting. 1.43 billion is exactly 62% of 2.3 billion. Equinox announced that it too made 60% profits on turnover. This seems to be the profit margin in the industry.
It also infers that if Zambia exports $3 billion in copper and cobalt, that the mining companies are making $1.8 billion in profits.
The only way Zambia can maximize it's benefits from it's mining sector, is for the state to own the minerals outright.
3) This is not different from the plunder of Chiluba and others. The losses are gigantic.
Absolutely. Which is why the legality of these deals must be investigated with great urgency and vigour. Everybody must understand how bad these 'deals' are.
4) It is clear that we could be earning trillions of kwacha from our copper industry
Actually with annual profits of 1.8 billion, that would be quadrillions of Kwatcha. :)
5) But again it would be the prudence, the honesty, the commitment and patriotism of the negotiators that will determine the outcome of such renegotiations.
I would add the guts and the killer instinct. Which has been incredibly lacking in any MMD candidate.
6) But the Zambian people should not leave their fate totally in the hands of the Minister of Finance, of Mines and other negotiators. It is time civil society took up the challenge to force these bandits to give back to Caesar what belongs to Caesar or at least to give Caesar a fair deal.
And that is what it is all about. I would go even further, and say that this issue cannot be left to any of the politicians, because they too are too timid on the mines. Once the people know that a big part of their poverty comes from the fact that the mining companies are walking away with nearly $2 billion US dollars every year (the same as the entire Zambian government budget, including 'donor aid'), people are not going to accept these high taxes. They are not going to accept these incredibly high interest rates that stop them from setting up or expanding their businesses.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home