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Govt is condemning citizens to perpetual poverty - Chirwa

Govt is condemning citizens to perpetual poverty - Chirwa
By Joe Kaunda
Thu 18 Nov. 2010, 04:01 CAT

PROFESSOR Clive Chirwa says the government is condemning citizens to perpetual poverty by refusing to reintroduce windfall taxes for the mining sector despite high copper prices. And Prof Chirwa has described as nauseating, the humiliations Zambians are facing in terms of social welfare, the lack of jobs and poor governance by those in office.

Breaking the long silence to comment on the state of nation, Prof Chirwa, the UK based University of Bolton’s head of Automotive and Aerospace Research Group, expressed concern at the state and management of the economy which he attributed to what he termed an economically incompetent Rupiah Banda led administration.

Prof Chirwa said despite the praises on economic performance, the economy had gone to the dogs and the situation was not being helped by amateurish national budgeting by the finance minister (Dr Situmbeko Musokotwane), which had left Zambians more desperate on the social and economic front.

“You will think they are grade nine projects in home accounting. Even a grade nine will know that you cannot give your money away, only for you to go and borrow at high rates,” Prof Chirwa said in reference to the government’s failure to effectively collect revenue from the mining sector.

“This is unbalanced accounting and inept beyond comprehension on the part of the finance ministry. The government is so economically incompetent that it lacks the vision to see the big picture. They cannot understand that copper is our "Holy Bread". Without us capitalising fully from its proceeds, we as people will always remain poor.”

Prof Chirwa urged the reinstatement of the windfall tax and re-calibration of all the taxes relating to natural resources, which were too low in comparison to Zambia’s competitors.

He said the government’s failure to take advantage of the high copper prices on the world market had turned the country into a laughing stock.

“It has become a joke in the West that foolish Zambians will give you everything you ask for while they humiliate themselves by walking naked. This quote is from a so-called good investor in Zambia,” he charged.

“I have heard numerous rubbish from the government that if they increase the taxes, they will deter investors coming to Zambia. This is nonsense and a sign of lack of ability as they do not grasp the world climate on the economy.”

Prof Chirwa explained that according to the World Bank, IMF, the African Development Bank and many fiscal specialists in the world, Zambia was strangling itself and would be dead shortly going by its pace to please the “unpleaseable”.

He reminded the government that the world copper market was buoyant and would remain so for a long time, as the copper demand was 15 per cent higher than supply.

“So the prices will keep high and going up. The newcomers will be many, perhaps we, ourselves under ZCCM-IH can join or takeover and approach the mining sector as a business this time. If somebody tells you the investors will pack up and go from Zambia, they are either making false statements or they simply do not understand the word economics especially as it relates to supply and demand of copper in the open-market,” he observed.

He said Zambians needed to be in the driving seat, planting the seeds of prosperity through the engines of mining and value addition for the country to progress.

“Nobody will do it for us. Before, we gave everything to the British and now it is the so called "new investors". Good investors with a heart will accept tax of eight per cent on royalty and 25 per cent on windfall. I will bring in another local tax for local communities of two per cent on mineral rights that goes directly to the development of the Copperbelt and other areas. For investors, these are peanuts, but mean a lot to us Zambians. We are rich on paper but still run a kitchen economy. Why?” Prof Chirwa asked.

He said he was astonished at the way Zambians had been hung dry with encouragement from the current government despite their desperate situation.

“This is humiliation beyond comprehension. In short it goes like this. During the period of four years (2002–2006), Zambia collected in its coffers only about US$70 million from total copper sales of US$3 billion. The low revenues from copper sales are said to be partly related to development agreements which prescribed tax concessions for periods ranging from ten to 15 years, and a reduction in mineral royalty taxes from the statutory three to 0.6 per cent,” Prof Chirwa explained, quoting a report by the World Affairs Online.

“This, as, the report puts it is the lowest royalty collection in the world. Let us look at the two big players, Konkola Copper Mines and First Quantum Minerals. When Zambia was collecting in its national treasury the miserable US$70 million, KCM made a net profit of US$206.3 million and FQM made US$152.8 million. This means Zambia was collecting about US$17.5 million per year from its core business. This is sickening, especially when the government goes to borrow more than US$500 million from IMF for social activities, when it can take money from these investors in proper taxes.”

To prove his point, Prof Chirwa highlighted Chinese investment in the mining sector of US$400 million in operations during the 2008 to 2009. During the same period, their productivity increased by more than 20 per cent with total revenue on sales US$3.6 billion, which translates to 18 per cent up from the previous year.

“From this colossal revenue with huge profits only 0.7 per cent came to Zambia. How can you run a country in this manner?” Prof Chirwa asked. “This is betrayal and it has just gone too far and must be stopped.”

Prof Chirwa’s comments come in the wake of President Rupiah Banda and finance minister, Dr Situmbeko Musokotwane’s insistence that windfall taxes would not be reinstated as this would chase away investors in the mining sector.

This is despite the rise in copper prices to over US$8,500 per tonne. The windfall tax was suspended when copper prices dipped to less than US$2,500 per tonne.

Labels: CLIVE CHIRWA, MINING, NEOLIBERALISM, WINDFALL TAX

posted by MrK @ 5:42 PM