Monday, October 07, 2013

Magande opposes deferment of mineral royalties
By Chiwoyu Sinyangwe and Gift Chanda
Fri 13 Sep. 2013, 14:00 CAT

THE government cannot afford to defer mineral royalties in the current expansionary expenditure, says National Movement for Progress president Ng'andu Magande. And Magande says foreign mining companies are exaggerating the impact of the recent drop in copper prices on their operations.

Meanwhile, University of Zambia development studies lecturer Simon Manda said Zambia has room to raise more revenue from the mining sector without toiling with taxes.

Copper prices closed yesterday trading at US $7,170 a metric tonne as concerns over Syria eased and investors avoided making any bold bets ahead of a key meeting by US policy-makers next week.

Mines minister Christopher Yaluma on Monday said the government might defer mineral royalties to help mining companies hurt by dwindling international copper prices handle their loss of profitability.

But Magande, a former finance minister, said the government needed to maximise revenue collection to fund many huge unplanned expenditures announced in the last two years.

"I don't think this is the time we should be foregoing any revenues from anybody," he said.

"If we don't have enough of it revenue, we should tailor our budget to what exactly we have. They have gone ahead with these huge projects but did they forecast the revenue? Clearly after HIPC, one would want to caution the government that they don't take us on that route of heavy indebtedness again."

Magande warned that some of the infrastructure projects on the cards might not be completed as government coffers run dry.

He said increased government borrowing from commercial banks would push food prices high owing to the PF's failure to plan, distorting the macroeconomic position of the country.

"I hear the government is going to borrow US $350 million from the commercial banks to fund the salary increment of 200 per cent," he said.

"All the money the banks have, they will surrender it for the government to borrow, so there will be no money for farmers to borrow. If it will be there, it will be very expensive. So, what's going to happen to food prices next year? So you are saying we are going to keep macroeconomic policies correct but your actions are doing something else."

And Magande accused mining companies of exaggerating the impact of the recent drop in copper prices on their operations.

"For me, the current copper prices are reasonable and the mining industry must also be adjusting to accommodate for the movement in market prices," said Magande.

"They can't just be crying foul every time the price goes down by US$1. And it's only that we started taxing the mining companies on a wrong note. We were too kind to them and so, if you want to change the situation, they will go on and say you are not fair."

And Manda said while some stakeholders have observed that the mining sector can help finance the government's rising expenditure in the face of dwindling donor support, toiling with the mining tax regime all the time could have drastic consequences.

"We need to be careful not to have a situation where we maximise revenue collection at the expense of the very mining companies that are funding our budget," he said in an interview.

Manda said there was need to raise the Zambia Revenue Authority's capacity and ensure that various government institutions properly manage their spending.

The mining industry accounts for 11 per cent of the Gross Domestic Product and exports over US$3 billion worth of copper per annum, but contributes just eight per cent of total revenue.

"The PF government came into power under a populist agenda and they feel obliged to fulfil the promises they made to the people. But caution on mining taxes needs to be exercised not to kill the goose that lay the eggs," Manda said.

"People need to give the government time to dialogue with the mining companies to come up with a win-win tax system."

The government recently doubled royalties on mining to six per cent, arguing that the country does not benefit sufficiently from its mineral wealth.

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