Consultant blames presidency for poor mining tax policy

Consultant blames presidency for poor mining tax policy
By Mutale Kapekele
Sun 10 Apr. 2011, 03:59 CAT

A United Kingdom-based policy consultant says Zambia has failed to implement effective mining tax policy due to direct influence by the Presidency and other senior government officials.

In his thesis ‘Policy evolution in the Zambian mining sector,’ Oxford policy management consultant Dr Dan Haglund says the Presidency and government officials were too close to the mines making it difficult for them to administer tax policies.

“The ‘game’ of policy reform (in Zambia) is complicated by the direct influence that the Presidency and senior government officials carry with the mining companies – this form of neopatrimonial governance persists as an informal negotiating arena as long as there is demand for it among mining companies (most notably from the Chinese who are most familiar with state-led governance from their own experiences in China),” Dr Haglund wrote. “There are deep-rooted ideological, institutional and economic reasons why Zambia still struggles to secure equitable and sustainable benefits from foreign investment into its vast minerals deposits.”

Dr Haglund said for Zambia to benefit fully from mining revenue, there was need for greater transparency around contract award and conditions, improving capacity at the Zambia Revenue Authority, engage better-trained and better-paid environmental and safety inspectors as well as a concerted strategy to develop local manufacturing capacity.

“Mining companies are piling in to take advantage of high prices, but there is little if any matching measures to beef up regulatory capacity,” he observed. “Jobs are being created but there is little discussion as to the quality of jobs, with the result that tensions remain. Even the discussion around earmarking fiscal revenues between local community, local councils, and central government, was supported by the Chamber of Mines but failed to gain traction, unsurprisingly as this would have meant a direct transfer or mining wealth away from the MMD towards the PF-controlled local governments on the Copperbelt.”

Dr Haglund disclosed that in his research, he discovered that the Zambian government placed great emphasis on the private sector as driving economic development but played down labour standards, environmental and social impacts as well as provision of space for the state to act as guardian of mining companies.

“In general a consultative approach, is often a good idea: companies know their own business best, and know what the issues are, cost-effective ways of addressing them.” he wrote, “However, when you have a diverse group of international investors, each from different ‘institutional backgrounds’ (Chinese versus ‘western’, in particular), achieving consensus becomes difficult. To illustrate, whilst ‘western’ First Quantum engages directly with stakeholders (community groups) etc, in its pursuit of a stable operating environment, the Chinese management of Non-Ferrous China Africa do so by cultivating direct ties with the Presidency.”

He stated that this had resulted in policy stagnation.