Mining windfall tax came at a bad time, says Osborn
By Mwila Chansa in Kitwe
Sat 29 May 2010, 22:50 CAT
COPPERBELT Mining Agricultural and Commercial Show (CMACS) chairperson William Osborn has observed that the mining windfall tax came at a bad time and was not given the consideration it deserved before implementation.
And Vice-President George Kunda disclosed that the government has engaged all mine owners in discussions over matters that affect their operations especially with respect to the now abolished development agreements.
During the official opening of the 53rd CMACS in Kitwe on Friday, Osborn said there was need to amicably resolve the issue of windfall tax as quickly as possible to prevent any long-term damage to the economy and the mining industry in particular.
He said mining companies remained cautious and still had the ‘after taste’ of the windfall tax to contend with, which he said was introduced without any of the promised negotiation between the mines and the government and that much of the tax still remained unpaid.
“It is important too, that the government and the mining industry continue to have positive interaction that will benefit both parties,” Osborn said.
He said he understood that the government and the people of Zambia felt the need to benefit more from their mineral resources but that if there was any tax scheme to be introduced on the mining industry, such a tax must take costs into account.
[If the mines do not get taxed on their profits, they only have themselves to blame. They have been inflating their costs (so how could the government take mining costs into account) and understating their profits, to the point that they don't even declare dividends. What is most important to the people and the government is collectability of taxes. - MrK]
“It should be a tax on profits and not on gross revenue,” Osborn said. “Costs of production have continued to rise in spite of government efforts to reduce inflation. The cost of fuel, energy, transport and labour are high and often these are not considered when people can only see the high selling price of copper.”
[The cost of labour in Zambia is too high?? - MrK]
Osborn further said if a fair system of taxing the mining industry on profits could be devised on the basis of negotiation, everyone could benefit.
[Well if he wants to come up with a system of taxing profits that the mines can't cheat on by understing profits and/or inflating costs, he is free to present it. - MrK]
He said the government would realise more revenue that could be spent on improving some of the dilapidated infrastructure on the Copperbelt.
“If government invested money on the railway system in the country, this would save the mining companies an enormous amount of transport cost and in turn save the government an enormous amount of money in road maintenance,” he said.
[Switching from roads to railway is something the mines opposed, because it was cheaper for them to keep degrading the roads than to spring for a railway system. (See: 'Lumwana, Kansanshi mines reluctant to sign railway off-take agreement', by Namakau Nalumango, Friday February 29 - MrK]
Osborn observed that nearly all mine transport was done by road at present and that the system could no longer take it.
He cited what he termed the dreadful state of the Mufulira-Sabina road and the huge volume of traffic on the Kitwe-Chingola road as examples.
Osborn implored the government and councils to match up to the mining companies in terms of efforts to improve cities and towns on the Copperbelt.
He observed that the majority of mining companies were living up to their social responsibilities by helping their employees and their families including the less privileged in communities to fight health problems such as HIV and AIDS and Malaria.
[Those are local government tasks. Local government should be funded from national revenues. The mines' only social responsibility is paying taxes. - MrK]
Osborn added that it was increasingly becoming clear that the local market could no longer support the country’s agricultural growth.
He said the country needed to proactively look for export markets and focus on export-led agricultural growth.
“For this to happen, the investment climate in our country must be balanced, nurtured and made fertile for both private and public agricultural investments. We must have policies which will allow agriculture to flourish,” Osborn said.
He added that the government also needed to urgently come up with measures to lower the cost of borrowing in Zambia.
Osborn observed that the cost of farming in Zambia remained very high and as such a number of reforms were required to reduce the cost of inputs such as fuel, electricity, fertlisers and other key agricultural inputs.
He advised the government to seriously think of zero-rating all agricultural inputs for Value Added Tax (VAT) purposes in next year’s national budget.
Osborn said the just-ended decade had been extra-ordinarily challenging to Zambia’s agriculture industry and the national economy.
[This also happens to be the decade in which the mines were privatised. Something clearly reflected in the devaluation of the Kwacha. - MrK]
He said the second round effects of the global economic meltdown resulted into high and volatile petroleum prices, skyrocketing fertilizer and other agricultural input costs, plummeting agricultural commodity prices and turbulence in the agricultural marketing arena.
Osborne urged a cautious approach to the effects of climate change on agriculture.
He said Zambia needed to put in place risk management instruments to enable farmers mitigate potential climate change effects on agricultural enterprises.
Osborne also urged the government to set a higher Gross Domestic Product (GDP) growth rate to encourage people to aim higher and enjoy a greater sense of achievement when such a growth rate is attained.
[What a garbage. GPD is a measure that misrepresents economic growth, because it counts money expropriated from the Zambian economy as 'growth'. It also counts (for instance environmental cleanup) costs incurred by the Zambian government at the expense of the taxpayer as 'growth'. - MrK]
And Vice-President Kunda said the government would work together with mining companies on matters of fiscal regime, policy, legislation and regulation because both parties wanted to see a successful mining industry in Zambia.
He said the mining companies and the government needed to work together to deal with how best, most efficiently and economically to operate the mining industry.
Vice-President Kunda urged all mine operators to actively consider what they must do to make the industry the best and most favoured investment destination for miners.
He also reiterated that the government would not re-introduce the mining windfall taxes because they did not want people to lose jobs again.
He said windfall tax could destroy the mining industry.
Vice-President Kunda also called for linkages amongst industries such as mining, agriculture as well as small and medium enterprises.
Vice-President Kunda said the government planned to provide a streamlined business regime in Zambia in order to make licensing simpler, transparent and focused on legitimate regulatory purposes. He disclosed that a total of 517 business licenses affected business operations in the country.
“Clearly, these are too many and they can only serve to suffocate the business environment. Our plan as government is to eliminate 170 licenses, reclassify 57 and amalgamate 99 into 21 licenses while the rest would be retained,” Vice-President Kunda said.
He said the aim was to make the licensing regime more convenient for the business community.
Vice-President Kunda said whilst the government recognized that enacting good laws was not an end in itself, their intention was to ensure that all ministries and agencies that regulated business consistently delivered quality regulatory services in an effective and efficient manner.
Vice-President Kunda congratulated farmers for increasing maize production by 48 per cent.
He said the crop forecast survey conducted by the Central Statistical Office (CSO) and the ministry of agriculture revealed that the country had produced a total of 2,795,483 metric tonnes of maize, which indicated a 48 per cent increase.
He hoped farmers would continue recording success in the coming seasons.
And Vice-President Kunda on Friday said touring 12 stands at this year’s show in Kitwe provided him with the necessary exercise in readiness for political campaigns.
During the presidential luncheon sponsored by Lumwana Mine, Vice-President Kunda said it was a pleasure for him to be at the show for the second time.
“One of the benefits I got from this show is that I was able to tour 12 stands and that meant exercising in readiness for political campaigns,” Vice-President Kunda said amidst shouts of “chwe, chwe, chwe” by MMD cadres.
Vice-President Kunda jokingly mocked sports deputy minister Angela Cifire and Chisamba MMD member of parliament Moses Muteteka whom he said were gasping for breath during the tour of stands.
Meanwhile, Vice-President Kunda said he was impressed by the exhibitors at the show.
He said the increase in the number of exhibitors at the Copperbelt show from 70 last year to 100 this year was an indication that the Zambian economy was growing.
He said the increase in the number of exhibitors also showed that Zambians and foreign investors were gaining confidence in the Zambian economy.
However, Vice-President Kunda urged the show society to ensure that there were exhibitors from the fisheries and livestock sector at next year’s show.
He said the livestock and fisheries ministry had been created to ensure that Zambia joined countries such as Botswana in exporting beef products.
“I have started rearing cattle myself,” he said.
Vice-President Kunda also expressed delight that Zambezi Portland Cement had increased production. He observed that the construction industry was growing rapidly and cement was on demand. He also said the government had approved the East of Lumwana Multi-facility Economic Zone that would result in employment for thousands of Zambians.
“We want them to be established through industrial parks where companies can go into these zones and create employment for our people,” he said.
He also urged mining companies to engage a little bit more in corporate social responsibility. Vice-President Kunda encouraged mining companies to partner with the government through Private Public Partnerships to ensure that they gave a bit of what they were taking out of the community.
Lumwana corporate affairs director Nathan Chishimba said the show provided an opportunity for the country to focus on the positive side of the economy.
He said there was a lot of negativity and fear mongering. Chishimba urged Zambians to be hopeful as hope created the basis for exploiting opportunities in the economy.
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