Levy’s legacy on mining taxation needs to be restored – Chitala

Levy’s legacy on mining taxation needs to be restored – Chitala
By Chiwoyu Sinyangwe
Mon 07 Dec. 2009, 04:01 CAT

LEVY Mwanawasa’s progressive legacy on mining taxation needs to be restored, Lusaka political and economic consultant Dr Mbita Chitala has said.

Meanwhile, Chamber of Mines of Zambia (CMZ) has said Zambia is expected not to attract further investment in the mining sector despite the recent recovery in commodity prices as the country lacks investor confidence.

Copper prices last week on the London Metal Exchange reached over US $7, 100 per tonne, near the previous session's peak of $7,170, the firmest since late September 2008, promoting calls from key stakeholders for the government to restore the windfall tax to help the country tap into the ‘abnormal prices.’

However, the government has remained adamant with commerce minister Felix Mutati last week saying Zambia will not introduce new taxes for the mining sector to encourage further investments into the industry.

Dr Chitala last week said late president Mwanawasa’s decision to come up with the popular mining fiscal regime of 2008 was well thought out and should be restored.

He said the absence of the revenue estimates from the mining sector in the 2010 national budget was an indication that the country was not going to reap anything from its lifeblood.

“We need to revisit this. This legacy that Mwanawasa left us was progressive and it should be re-addressed and I am glad that we are discussing it as of today,” Chitala said.

“…when I was in government at the time when we were negotiating with the mining companies over these matters…in fact, I was the deputy minister in the office of the President to Mwanawasa, we went to great lengths to agonise ‘how do we make Zambia benefit as well from this God-given resource in terms of copper and cobalt?’”

Dr Chitala said what late president Mwanawasa did by abrogating and abolishing the Development Agreements (DAs) was an act of bravery.

“…I remember Mwanawasa said to me, ‘Mr Chitala, what we are about to do, in other countries like Chile, Allende Salvador Isabelino Gossens was overthrown on account of this,’” said Dr Chitala.

“So, what Mwanawasa did was a very brave thing that with insight…he abrogated the DAs and brought us a tax regime which was going to give us US $415 million.”

Meanwhile, CMZ general manager Frederick Bantubonse said Zambia was not expected to attract more investments into the mining sector as the current mining fiscal regime did not provide consensus between mining companies and the government.

Bantubonse said the current mining fiscal regime clearly spelt out that the government would not enter into new development agreements, a move he said made it difficult for the country to attract future investment despite the rising global commodity prices.

He said that was why Zambia only had junior mining companies and was struggling to attract global international mining firms such as Rio Tinto and BHP Billiton.
“We need to agree. But as of now, the government hasn’t said this is the situation. We need a consensus. The country is divided,” Bantubonse said.

“If we are to restore investor confidence, there has to be need to look at the laws and that we have not done that yet. 2009, there is no agreement…2008 cancelled the development agreements and there have not been any agreement.”

Bantubonse also said the government’s decision not to hike mine taxes next year was not enough as investor confidence went beyond taxation.

He also said Zambia’s mining sector still suffered from political risk.
“You still have people saying that when I come into power, I will chuck that one out…investors are very sensitive to that,” said Bantubonse.