Maravi

'Govt studying proposals'

'Govt studying proposals'
By Joan Chirwa
Friday November 30, 2007 [03:00]

Government has received with a lot of interest suggestions that development agreements with mining companies should entirely be abolished, mines and minerals development minister Dr Kalombo Mwansa has said. And a group of experts has convened in Lusaka to discuss the review of the petroleum exploration and production Act of 1985 in order for the law to be more adequate before any actual exploration and production of oil in the country could be conducted.

Dr Mwansa, in an interview yesterday, said the government was seriously studying proposals for the entire abolishment of development agreements with the mining companies because of the changing economic environment.

He was commenting on Luena independent member of parliament Charles Milupi’s suggestion that the government should not make any changes to the existing development agreements or enter into new ones since they were currently not serving any purpose.

“Yes, government entered into development agreements with the mines to facilitate the privatisation process that time when copper prices were at their lowest and the country needed investments,” Dr Mwansa said.

“But now that things have come back to normal in terms of prices and that there is no other mine to privatise, it is possible to do away with the development agreements.

We are already proposing in the revised mines and minerals Act that government should not enter into a development agreement with new mining investments because all they need to do now is transact like any other investor and pay taxes the way others are doing since the economy is doing fine and the price of copper is high.”

Dr Mwansa said a number of people share views such as those presented by Milupi regarding development agreements with the mines.

“Government is studying this matter and consulting widely to ensure that we find a lasting solution to the tax structures for the mining companies so that the country can also benefit from mineral resources,” Dr Mwansa said.

Milupi on Wednesday said Zambia’s current economic position did not require any development agreements with the mines or an improvement to the existing ones.

There have also been suggestions that the government should present a proposal to parliament to raise royalties to three per cent unlike resorting to the renegotiation table, as this is understood to be a long process.

With a boom in copper prices on the international market, the government decided to review the development agreements with the mines as well as effect an upward adjustment to royalty taxes for already existing and new mining investments.

Compared with other mineral-rich countries in Africa, Zambia’s revenue from royalties and other taxes from the mines accounted for just a smaller fraction than the profits gained by the mining companies.

Recent figures indicate that Zambia earned around K35 billion from mineral royalties during 2005/2006 at the rate of 0.6 per cent while other countries such as Chile have been netting billions of dollars from the same resource.

For example, 17 largest privately held copper mines in Chile, most of the units of large international mining firms, posted a net joint profit of US $3.03 billion (approximately K9 trillion) in the first quarter of this year and contributed about US $1.17 billion to the Chilean government.

The net profit of the 17 largest privately held copper miners in Chile was 15 per cent higher than the US $1.14 billion the same companies posted in the first quarter of 2006. Latest data indicates that Chile earned a total of US $8 billion (approximately K25 trillion - enough to finance Zambia’s annual budget which usually hovers around K12 trillion) from royalties during the 2005/2006 financial year.

During the first quarter of this year, Chile earned a total of US $270 million in copper royalties (approximately K1 trillion) and US $900 million from income taxes (approximately K3 trillion).

And Dr Mwansa said: “We realise the importance of bringing the royalty taxes paid by mining companies to a world average.”

The government proposed in this year’s budget that royalties be raised from 0.6 per cent to three per cent, although it is still renegotiating the changes with the mines before the new rate could be effected.

And during a consultative workshop on the review of the petroleum exploration and Production Act, Dr Mwansa said petroleum resources could change the economic landscape of the country by accelerating social and economic growth and development.

The review of the Act is to facilitate the exploration and production of oil in the country following revelations of positive oil and gas deposits in North-Western Province.

The government recently cancelled the tendering procedure for extensive exploration of oil and gas in the province, saying it had been advised by oil producing countries that the current law was inadequate to guarantee safe operations in the sector.

“The process of tendering will only resume once we are through with the revision of the petroleum exploration and production Act of 1985,” said Dr Mwansa.

Labels: DEVELOPMENT AGREEMENTS, KALOMBO MWANSA, MINING CONTRACTS, PETROLEUM ACT

posted by MrK @ 4:38 AM