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Govt started re-negotiating mining agreements last week - Mwale

Govt started re-negotiating mining agreements last week - Mwale
By Chibaula Silwamba
Friday November 23, 2007 [03:00]

MINES deputy minister Maxwell Mwale has said the government started re-negotiating development agreements with mining companies last week. And University of Zambia (UNZA) Development Studies lecturer Dr Fred Mtesa urged the government negotiators to ensure that the taxes and mineral royalties are increased to global standards. In an interview last Friday, Mwale said the renegotiations were expected to be concluded this year in readiness for implementation next year. He said the renegotiations were taking place in Livingstone but could not give more details on the mining companies, which the government negotiators had so far met.

“The renegotiation of development agreements started this last week,” Mwale confirmed.

Mwale said renegotiations were a legal processes and the government was cautious not to abrogate any legal provisions for fear of being taken to court, which might result in paying heavy penalties.

Mines and mineral resources minister Dr Kalombo Mwansa could not give details on the renegotiations but said the Secretary to the Treasury Evans Chibiliti and his team had done a lot of work on the matter.

“The Ministry of Finance is the one dealing with that matter because these are tax issues. Mr Chibiliti can give you more information on this because he is the one who has been chairing the preparatory meetings. Speak to Mr Chibiliti as soon as you can because the country needs to be informed of what we are doing,” Dr Mwansa said. “Take interest in these issues, they are very important and of national interest.”

But Chibiliti’s secretary said he was not in the office. And Dr Mtesa said the government must look at how other countries such as Botswana and Chile were benefiting from mineral resources so that they apply similar tax measures when renegotiating the development agreements.

“Most mining companies were given a stability period of between 15 to 20 years and they were given a lot of waivers on tax. But it’s possible to try and relook at the stability period and service life or life span of the mines to change the tax waivers,” said Dr Mtesa. “They should also look at the mineral royalties so that it conforms to the global standard which is about three percent.”

And UNZA School of Mines lecturer Dr Mathias Mpande urged the Zambian government to emulate the Tanzanian government’s setting up of an independent committee to review mining agreements. He further urged the government to include local professionals in the renegotiation process and not exclusively depend on foreign consultants.

“We expect the government to have confidence in the Zambian professionals to pioneer the negotiation,” Dr Mpande said. “Getting foreign consultants is the biggest sellout because it’s the same consultants who advised government to privatise those mines.”

Dr Mpande observed that the major pitfalls in the development agreements were that they excluded windfall tax clause and provided long periods of tax exemption.

“They agreed that they are not going to be taxed for a long time – for 20 years. That is completely wrong,” he said. “The other problem is that there was no price participation clause or windfall tax, which means when the prices increase, the government benefits from the profits.”

Labels: DEVELOPMENT AGREEMENTS, FRED MTESA, MAXWELL MWALE, MINING CONTRACTS

posted by MrK @ 12:34 PM