Monday, October 28, 2013

(STICKY) First Quantum dealings
By Editor
Mon 28 Oct. 2013, 14:00 CAT

COMMENT - Also see: Magande questions removal of duty on copper concentrates, By Chiwoyu Sinyangwe, Mon 28 Oct. 2013, 14:01 CAT

It is solliciting corruption, when it is legally possible for a minister is able to grant individual corporations tax exemption. The law must apply to all companies and all individuals at all time. It must not be possible fora company to approach a minister, and walk away with a tax exemption. Also, the Development Agreements were secretive and should all be scrapped for that rason alone. I say - nationalize the criminal enterprise. - MrK

The way our government is handling issues pertaining to First Quantum Minerals raises a number of issues and concerns. It is either those government officials responsible for the government's dealings and decisions concerning First Quantum Minerals are very corrupt and are receiving kick-backs or they are very incompetent.

First Quantum Mining has sued the Zambian government in the United Kingdom courts for allegedly abrogating the Bwana Mkubwa Development Agreement. The matter is now under arbitration and the Zambian government has filed in a plea to the claim by First Quantum Mining, who consequently submitted a counter claim based on the government's defence on September 25, 2013.

This same company, this same First Quantum Minerals that has sued the Zambian government, continues to receive benefits from our government and to be defended in all sorts of ways by some of the leading elements of our government. How is this possible?

On October 4, 2013, our government issued Statutory Instrument number 89 to waive export duty and allow First Quantum Minerals to export concentrates. This is difficult to understand for a government that wants to go and borrow hundreds of millions or billions of dollars on the international money markets. What is the purpose of us borrowing such huge amounts of money when we are allowing legitimate export duties not to be collected from First Quantum Minerals?

And why should First Quantum Minerals be exporting concentrates at a time when we have adequate refining capacity? Who can say they really know the other minerals other than copper that those concentrates contain? Again, there is something seriously amiss here; there is something stinking here. Is this a product of oversight, incompetence or outright corruption?

Whatever some may say or claim, it will not be wrong for anyone to conclude that Statutory Instrument number 89 was exclusively procured for First Quantum Minerals, which has stockpiled concentrates and does not want to export them because they will have to pay 10 per cent export duty on them.

First Quantum Minerals claims that there is no capacity in Zambia to treat concentrates. But this is contrary to what the smelter owners are saying. This is simply a strategy for avoiding to pay the correct tax to the Zambian government. And the Zambian government has allowed this to happen. Instead of collecting this duty, the government is opting to allow First Quantum Minerals to keep this money and burden the Zambian taxpayer with further national debt by going to borrow.

We have been advised by the international community, including the World Bank and International Monetary Fund, to collect more revenue from our mining activities. But what do we hear from our leaders responsible for these things? They are always defending the mining investors; they speak like they are directors of these mining companies. They seem to be more concerned about the profits of the mining companies than the benefits accruing to the Zambian people. Why? Again we ask: is it because of incompetence or it's simply a matter of corruption?

It is clear that the government is making the Zambian taxpayers subsidise the operations of First Quantum Minerals in this country.
When one critically analyses all that is happening, it is clear that the Zambian government is actually paying for the investment that First Quantum Minerals is putting in Kalumbila and other projects at Kansanshi. For what? Is it because someone in government is incompetent or is getting kick-backs from First Quantum Minerals?

And these people have no shame. They even went as far as trying to mobilise that clean man, that honest man, that apostle of our liberation struggle, Dr Kenneth Kaunda, to defend these clearly unjust and unfair dealings of First Quantum Minerals. Of course, Dr Kaunda, if he was told the truth, would never have agreed in any way to defend the interests of a company that is engaging in such unfair and unjust dealings against the Zambian people. There has been a strong lobby for First Quantum Minerals to have its permits, title deeds, Zambia Environmental Management Agency clearance to be processed quickly.

Regardless of the lawsuits that First Quantum Minerals has initiated against the Zambian government, whatever this company needs, it is still getting from our government. How is this possible?

First Quantum Minerals is claiming US$30 million from the Zambian government. The company has also stated that in the coming few months, it will be suing the government for US$2 billion for allegedly abrogating the Kansanshi Development Agreement. Surely, is this a company whose interests our apostle, our government should be made to defend and promote? There is definitely something wrong with those in government who are handling these issues. As we have already stated, it's either they have been bribed by First Quantum Minerals or they are extremely incompetent and not fit to hold the positions they hold in our government.

It is important for the Zambian people and their leaders to know what type of company First Quantum Minerals truly is. First Quantum Minerals is trying to portray itself as a very good investor when it is not. These dealings we are commenting on cannot be said to be acts of a very good investor. They actually project the very opposite.

The question is: should we continue as a nation to grant benefits to such a company? Should our government continue to allow such a company to operate in Zambia? Why should our government continue to be so nice, so kind, so generous to a company that is suing the Zambian state for over US$2 billion?

This behaviour is not new or strange to First Quantum Minerals. We shouldn't forget that this is the same company, the same First Quantum Minerals, that was kicked out of Congo because of similar behaviour or conduct.

We urge the Zambian government to be very transparent over matters pertaining to First Quantum Minerals. Given what is going on, it may be necessary for the Attorney General of the Republic to make known to the Zambian people these legal suits that their government is having with First Quantum Minerals. It is important for the Zambian people to have a direct say on these issues because those who are handling these matters on their behalf seem to be compromised; they continue to give incentives to First Quantum Minerals, ignoring its lawsuits against the Zambian people.

There should be no incentives or other benefits extended to First Quantum Minerals by the Zambian government until it withdraws its lawsuits against the Zambian people.

Why should the Zambian government give First Quantum Minerals title deeds to 600 square kilometres of land in North Western Province when the same company is demanding over US$2 billion from the Zambian people?

It is clear that there is some arm-twisting here, some blackmail here. But why should the Zambian government accept to be arm-twisted, to be blackmailed by First Quantum Minerals in this way? If there are Zambian government officials who have eaten First Quantum Minerals' money, promising to deliver all these things to them come what may, then let them give to First Quantum Minerals that which belongs to them and let the Zambian people hold on to what is theirs because they were not a party to those deals.

It's clear that right now, First Quantum Minerals thinks it is calling the shots. Yes, First Quantum Minerals may be calling the shots now. But for how long? This type of behaviour, conduct or deals cannot be sustained over the long term. It is such things that lead to nationalisations.

They can be told to park their equipment and go. And in saying this, we are not in any way advocating anarchy. We believe in the rule of law. But what is happening borders on corruption and not legitimate business dealings. And the law punishes such conduct and practices.

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38 Comments:

At 1:24 PM , Blogger MrK said...

COMMENT - KCM is 87% owned by Swiss based champion tax evader Glencore International AG. - MrK

KCM playing with fire over PAYE, warns Shamenda
By Abel Mboozi
Mon 28 Oct. 2013, 14:01 CAT

LABOUR minister Fackson Shamenda says the government has officially written Konkola Copper Mines (KCM), directing the mining company to offset the difference in Pay As You Earn (PAYE) due to the Zambia Revenue Authority.

Shamenda said in an interview yesterday that on Friday, he met KCM management and the union at his office, where the mining company was reprimanded for its 'incompetence' over the non-remittance of PAYE for its workers to ZRA over years.

"KCM is playing with fire; the company cannot blame workers for a mistake which has taken five years. Its incompetence should not be blamed on workers. I have officially written to management at the company, reaffirming my directive, which has to be followed to the latter," Shamenda said.

He said failure on the part of KCM to follow the government directive would spell severe consequences on the mining company.


A tax audit conducted at KCM recently had established that the mining company underpaid PAYE tax for its workers for the financial years 2006, 2007, 2010 and 2011 due to a 'payroll system error'.

Following the audit, KCM decided to effect deductions from its employees effective October to offset the defaulted amount for PAYE owed to ZRA.

To that effect, Shamenda last week directed that KCM should not effect any deductions from employees in form of tax arrears because it was not their fault.

Shamenda said it was not the employees' responsibility to ensure that correct tax is deducted.

In June this year, KCM had asked the government for time to pay back an overdue K136.8 million or US$25.8 million debt it owes the ZRA.

The company asked the government to give it time to pay, citing high costs of production in the industry even as copper prices remained buoyant but Shamenda said the mines had an obligation to pay tax to the ZRA as prescribed by the law.

The Mine Workers Union of Zambia had even sought the intervention of the court through an injunction to stop KCM from effecting the deductions but later withdrew the matter following Shamenda's directive that the deductions should not be effected.

 
At 2:01 PM , Blogger MrK said...

Lunatics 1, Sound Minds 0

Prominent people on the Windfall Tax, before the elections. And start prosecuting the former MMD Finance Minister, who kept talking about 'future profits', when he knew very well the extent of tax evasion, including the underdeclaration of profits by the mining corporations.

Chikwanda to blame for Si 89 - Mpande
By Abel Mboozi, Gift Chanda and Chiwoyu Sinyangwe
Wed 30 Oct. 2013, 14:01 CAT

THE government will lose income from Kansanshi following the revocation of the Statutory Instrument permitting export of copper ores and concentrates tax-free, says finance minister Alexander Chikwanda.

Meanwhile, Dr Mathias Mpande says Statutory Instrument 89 which allowed mining firms to export concentrates tax-free squarely rests on Chikwanda.

President Michael Sata on Monday directed that SI 89, which suspended 10 per cent export duty on copper ores and concentrates for one year, be reversed.

Chikwanda yesterday appeared before the expanded parliamentary committee on estimates in the company of Secretary to the Treasury Fredson Yamba and finance permanent secretary in charge of budgeting Pamela Chibonga.

Chikwanda said the Ministry of Finance had realigned Statutory Instrument 89 in line with President Sata's directive that it be revoked although the move would result in revenue losses.

This was in response to Monze UPND member of parliament Jack Mwiimbu, who asked Chikwanda to be categorical on whether SI 89 had been revoked in line with President Sata's directive.

Mwiimbu wondered what would happen to stockpiled mineral concentrates since the Chamber of Mines of Zambia last week said Zambia had no capacity to process concentrates as they needed to be commingled to be processed in the three existing smelters in the country.

In response, Chikwanda said: "Honourable Mwiimbu is correct; we have realigned the SI which should have been in force up to next year September. It's a complex issue on concentrates because Kansanshi Mine is building a smelter to process but it will take a year or more to complete and so there will be no income as concentrates will not be processed locally."

Meanwhile, chairperson of the committee, Highvie Hamududu, assured the minister of Parliament's support on such a move once brought to the House.

Chikwanda said the government was aware of such an anomaly where Zambians were not benefiting from their mineral wealth.

Members of the committee also wondered whether the government could consider reintroducing windfall tax, which was a sure way of maximising profits from the mining sector.

 
At 2:02 PM , Blogger MrK said...

Chikwanda, in response, said there was extensive fraudulence in the mining sector, where players were quick in declaring losses even when they had made huge profits.

He said the government could no longer ignore concerns by majority Zambians that the nation was being 'robbed' of its mineral wealth by investors.

"Mines are not renewable like agriculture, and so we need our citizens to benefit more from this sector. We need to come up with a tax that will compel mining houses to pay whether they have made profit or not; that's their own business," Chikwanda said.

"We are reinforced with your views as a Committee. We shall subject this to MPs and we hope it shall be supported. We feel now we have been put under scrutiny over mine taxation.

A member of the committee Kapembwa Simbao said the taxation structure for the mining sector in Zambia favoured mining houses who tended to manipulate profit figures.

Lukulu West MMD member of parliament Dr Christopher Kalila said it was gratifying that Chikwanda and the government were taking ownership of the mines by imposing taxation that would benefit Zambia.

And Dr Mpande, who is also chief Mpande of the Mambwe people of Mbala, said senior ZRA officials were sacrificed over the responsibility that should have been solely absorbed by Chikwanda.

Revoking SI 89, which Chikwanda signed on October 4, President Sata admonished Zambia Revenue Authority commissioner general Berlin Msiska and commissioner of customs Dingani Banda for allegedly advising the finance minister wrongly.

SI 89 reversed the November 2011 decision of the PF government to impose a 10 per cent export duty on copper ores and concentrates.
Commenting on the matter, chief Mpande, a mineral economist and former dean of the School of Mines at the University of Zambia, said Chikwanda misinformed President Sata to believe ZRA misled him into signing the Statutory Instrument.

Chief Mpande, a former deputy minister of mines, was also a lead consultant for the establishment of the Audit Unit for large scale mining at the ZRA.

He is currently a board member of the Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), a parastatal which holds shareholding in mining companies on behalf of the government.


Chief Mpande said SI 89 was solely the work of Chikwanda.

"I don't think there was meaningful discussion by the minister with anybody else at Bank of Zambia, ZRA or Ministry of Mines because they could not have supported that legitimately," Dr Mpande said.

"But you know, the Minister of Finance has become so powerful that he can do anything he thinks. He is borrowing money whenever he needs and yet he is allowing concentrates to go at zero tax. I think the minister is lying when he says he acted on advice of ZRA because I know Zambia Revenue Authority sufficiently and fundamentally."

 
At 2:02 PM , Blogger MrK said...

Continued...

Dr Mpande said senior ZRA officials were sacrificed over responsibility that should have been solely absorbed by Chikwanda.

"I know the Commissioner General Msiska and just last week, he was telling the Parliamentary Committee on estimates that mining sector was not contributing sufficiently to the Treasury and his vision is to raise revenues from the mining sector," he said.

"Msiska is probably the best person you would ever have at ZRA because he is very qualified and experienced. He was employed by International Monetary Fund (IMF) to be in charge of and help IMF improve taxation in Africa. That's how highly rated he is and he was based in Mauritius, which is the foremost advanced financial country in Africa. The PF brought him Msiska back at ZRA to improve revenue collection and improve the expertise, honesty and integrity. So, the minister cannot do that SI with the support of Msiska. So, the minister is not telling the whole truth."

Dr Mpande said if Chikwanda's decision had not been reversed by the President, it would have hurt the country's economy and also aided mining firms to avoid paying taxes to Zambia.

"We are just abetting the dishonesty of the mining companies if we allow them to export concentrates without penalties," he said. "In fact, for me, we should not just impose export duty but we should completely ban the export of ores and concentrates."

Dr Mpande accused Chikwanda of putting the interests of mining firms first at the expense of the country.

"Between the President and the minister, you can tell who is working in the interest of the country," chief Mpande said. "The President did broader consultation and has broader knowledge…it's not the so-called economic education. You don't have to have a degree in finance which the minister says he has. You just need to be sensible; it's about being nationalistic and patriotic. So, you tell him Chikwanda that chief Mpande is in full support of the President's decision."

Chief Mpande also said Chikwanda was pursuing interests of the foreign mining firms at the expense of Zambia.

Dr Mpande also dismissed the arguments that Zambia lacked sufficient refining capacity for copper, accusing mining firms of wanting to siphon minerals out of Zambia by hiding them in concentrates.

He said concentrates were less than 30 per cent processed copper while 70 per cent comprised other minerals that would be exported without taxation or verification.

"If there is no capacity, then they should build their own smelters," chief Mpande said. "After all, Kansanshi is a very rich company. They are exporting more gold than copper. The refinery only costs about US$400 million but at Kansanshi, FQM is making billions of US dollars. So, if there is no capacity to refine their copper, let them reduce their mining. If they are mining but they are not paying tax and not increasing employment, why should they be allowed to do what is wrong to the country economically and financially?"

He said it was not sensible to allow export of concentrates at a time most key mining operations were mechanising and cutting back on employment levels.

"Since we are not benefitting from increased employment because of technological changes, we need employment in our refineries," said Dr Mpande.

"Now people want to export raw materials and the minister thinks he can encourage that? Even those so-called copper concentrates, they comprise cobalt, gold, and many other minerals. So, I don't know the wisdom of the Minister of Finance to encourage that type of exports. It's harmful to the economy and to our fragile infrastructure because raw minerals are sometimes 50 tonnes heavier and then you are exporting them on the roads."

 
At 2:56 PM , Blogger MrK said...

SI 89 cannot be defended
By Editor
Thu 31 Oct. 2013, 14:00 CAT

IT will require the courage and tenacity of Michael Sata to deal with the mines and enable our people to get a fair deal. Mining corporations are too powerful and manipulative. They are able to get whatever they want and when they want it. Very few African governments are able to stand up to them.

Mining corporations buy some of our best brains and most influential citizens and make them their agents, representatives, advisors or consultants. These are the ones who lobby for them. In some cases, they even pay ministers of government to protect and promote their interests.

It is therefore not surprising that when the interests of mining corporations are threatened in any small way, the first ones to speak for them, to defend them are our very own best people - our best mining experts, economists, lawyers and so on and so forth. Even some politicians start to speak as if they are representatives of mining transnational corporations and not the people; they speak as if they are directors or chairmen of the board of directors of these corporations. There is no doubt many of our people, experts live off these mining companies and they are ready to sell or sacrifice the interests of our country and our poor people for the allowances or salaries they receive from these corporations.

And this explains why our entire Ministry of Finance could sign such a clearly questionable Statutory Instrument giving First Quantum Mining and others the right to export unprocessed minerals with duties waived. For the peanuts they are receiving as allowances, salaries or kickbacks, they are ready to make their own country lose such gigantic amounts of revenue.

We are told that our Minister of Finance just signed that Statutory Instrument without fully understanding it on the recommendations of the Zambia Revenue Authority. If this was the case, then those responsible at the Zambia Revenue Authority need to be made accountable and pay for their dishonesty, deception. But the minister will also have to explain his negligence. We say this because it is negligence to sign such an important Statutory Instrument without reading it or understanding what it is about. If this is the way our Ministry of Finance works, then there is a serious problem in that ministry. We doubt this.

We don't think what happened was a product of oversight. We believe that these actions were not a product of oversight nor were they unconscious, but rather that they were deliberate and conscious. All those involved in this issue simply allowed themselves to be blinded by personal interests and benefit. If one is honest, truly honest, one can't enter into such a deal. Michael is not an economist or a tax expert. But that does not inhibit him to see that something here is wrong, something here is not right. Anyone who is honest will not fail to see that something here is amiss. Let's forget about economic, business or tax jargon. Let's talk straight language that everyone understands.

And when something is wrong, it is wrong no matter what language or jargon we use. It is not about bombastic words, it is simply about things being right or wrong. And what was done was wrong and Michael was correct to correct it.

We have to be self-critical and unassuming. Let's examine everything we do, checking to see whether it is correct or not, whether or not we have let ourselves be carried away. It is not about who produced that Statutory Instrument and signed it. It is simply about it being wrong, and reeking with corruption in every pore.

 
At 2:57 PM , Blogger MrK said...

Continued 1...

We all know that taxing mining transnational corporations has not been easy for our poor countries in Africa. In most cases, mining companies have resolutely opposed the progressive, fair and just tax reforms our governments have come up with, threatening to invoke "stabilisation" clauses written into the agreements they negotiated with our governments in the 1990s.

We have not forgotten how the mining transnational corporations behaved when our government sought to renegotiate its royalty rate on copper exports. They opposed the measure despite a four-fold increase in the price of copper between 2000 and 2011, and the very low effective tax rates that they were paying.

But opposing balanced tax reforms is not in the best interests of the mining corporations themselves. Our governments need a fair stake in mining revenues to invest in the infrastructure that the mining transnational corporations themselves require. Our governments also need the revenues to share mining gains with citizens who might otherwise see mining activities as benefitting only a privileged few foreign investors and the national elite - a perception that is unlikely to foster a stable environment for investment.

We know that the mining corporations will always argue that there is nothing illegal they are doing and that they are not evading tax but are simply engaging in tax avoidance, which is legal and permissible. But we also know that tax avoidance is a matter of major global concern today. Governments - and societies - can only function if the individuals and companies who benefit from wealth generation, public investment and public goods share in the cost of financing. In Europe, there is increasing public anger directed towards highly visible multi-billion dollar corporations that minimise their tax liabilities through sophisticated but aggressive "tax planning".

Our poor countries are highly vulnerable to aggressive tax planning and sometimes even tax evasion facilitated by the extensive use of offshore companies, the high levels of intra-company trade and the commercial secrecy surrounding foreign investment activity. Our governments lack the human, financial and technical resources needed to secure tax compliance, and the commercial market intelligence needed to assess company tax liabilities. As a result, we are losing significant revenue streams.

Our transnational mining corporations can minimise tax repayments in several ways. Some are legal, some are illegal, and some are in the grey area between the two; and all are difficult to detect.

In 2008, the Zambia Revenue Authority engaged an international tax accounting team to audit selected mining companies, including Mopani Copper Mines. The main shareholder in Mopani Copper Mines is Glencore, the world's largest commodity trading company, which holds a controlling stake through Carlisa Investments - a company based in the British Virgin Islands owned in turn by Glencore Finance (Bermuda). The audit report noted that Mopani Copper Mine was selling copper to Glencore, which is registered in the town of Zug, Switzerland, at prices far below those on the international markets - a practice that the team identified as plausible evidence of transfer pricing.

Glencore executives strenuously denied wrongdoing. However, the European Investment Bank, which had extended a loan to Mopani Copper Mine, expressed "serious concerns about Glencore's governance".

Attempting to estimate the overall losses associated with mispricing has been described as an exercise in night vision. One of the most detailed analytical studies, carried out by Global Financial Integrity, put the average annual loss to Africa between 2008 and 2010 at US$38 billion. To place this figure in context, it was slightly higher than the flow of development assistance to the region over the same period. Put differently, Africa could double aid by eliminating mispricing. Another US$25 billion is said to be lost through other illicit outflows.

 
At 2:57 PM , Blogger MrK said...

Continued 2...

In saying all this, we are not in any way attempting to paint anyone black. We are simply trying to state that which needs to be stated in the clearest and most honest way possible. If we could be ripped off in this way, what more when we start to allow mining corporations to export "soil", as Michael intelligently and simply put it!

When we allow these mining corporations to export "soil", instead of processed minerals, it is impossible for us to know exactly what is being taken out of the country in terms of mineral content and quality.

This is the most reckless way for a country to give away its income, its revenues. Yes, we are desperate for money. But this desperation shouldn't drive us to do silly things like these.

Michael's anger over this issue is understandable. Any responsible leader of one's people would feel and act the same. It is not Michael's action that is going to make this country lose money. It was the action of the Ministry of Finance that was going to make this country lose gigantic sums of money. Michael's intervention, contrary to what is being said, is not going to lose us money, it is going to help us save money as a country.

Clearly, these issues need eternal vigilance and an incorruptible spirit. And only those who are incorruptible, those with a strong public spirit should be brought somewhere near these activities.

Again, what spirit moves us to make these criticisms? Do we do this to bring about a change of opinion, to create an unfavourable opinion in regard to those citizens serving at the Ministry of Finance and the Zambia Revenue Authority? No, never. On the contrary, we do not wanting to expose so many good public servants at the Ministry of Finance and the Zambia Revenue Authority to blame and to the scorn which bad decisions will expose them. And this is because such bad decisions bring discredit and tend to spread. And they tend to make the masses regard all those serving in these institutions as bad people.

We make this criticism simply to overcome these bad decisions so that our government and those who run it free themselves from the consequences of such bad decisions.

We believe that our public servants, including our politicians, serve the cause of the people to the extent to which they work well, to the extent to which they are sincere, to the extent to which they are honest, to the extent to which they eradicate lying from their work, and to the extent to which they eliminate deceit in their work.

 
At 8:49 PM , Blogger MrK said...

CORRECTION to comment 1.

Koncola Copper Mine is not owned by Glencore, but by Vedanta Resources. It is Mopani Mine that is 73% owned by Glencore International AG.

 
At 2:59 PM , Blogger MrK said...

Now that they no longer have the always weak excuse that 'investors will bring jobs', even their own neoliberal excuses for not taxing the mines are falling away. From the Lusaka Times:

(LUSAKATIMES) President Sata threatens to revoke KCM’s licence
Time Posted: November 4, 2013 1:56 pm

President Sata addresses a Cabinet meeting on the issue of KCM laying off 1500 workers

President Michael Sata has threatened to revoke Konkola Copper Mines mining licence if the mining giant proceeds with its plans to lay off 1,500 workers.

President Sata said his government will not allow KCM to fire even one miner.He said he will revoke the licence for KCM if the mining firm dares government with its plans.

President Sata was speaking at State House Monday morning when he opened a cabinet meeting.

President Sata has since warned KCM Chief Executive Officer Kishore Kumar against exploiting Zambians.He said the PF government is aware that KCM wants to use blackmail following the revocation of SI 89.

“These mining companies want to be exporting Copper concentrates to avoid paying taxes. Mr Shamenda, please go and tell Mr Kumar that we will take away his licence if he lays off even one worker, then we will take away his licence from him, that’s the easy way of we laying him off,” President Sata said.

President Sata also directed Finance Minister Alexander Chikwanda to increase revenue collection from mining sector.

According to KCM, the move is in line with its continued restructuring of operations.

The company said it was moving towards mechanisation and automation in view of the decreased copper grades at some of its mines.

Company chief executive officer Kishore Kumar announced the development yesterday in Kitwe, adding that the process of laying off the 1, 529 employees had since commenced.

 
At 4:23 PM , Blogger MrK said...

(LUSAKATIMES) Mineworkers Union of Zambia wants KCM mining license revoked
Time Posted: November 5, 2013 7:08 am

Vice President Guy Scot listening to KCM Chief Executive Officer Jeyakumar Janakaraj during a tour at Nchanga Smelter in Chingola

FILE: Vice President Guy Scot listening to KCM Chief Executive Officer Jeyakumar Janakaraj during a tour at Nchanga Smelter in Chingola

THE Mineworkers Union of Zambia (MUZ) has called on Government to find another equity partner for Konkola Copper Mines (KCM)’s mining operations in the country.

MUZ president Nkole Chishimba said Government should go ahead and revoke the mining license for KCM and with or without the laying off of workers by the mining-giant.

He said this was in view of the unclear roadmap by KCM management which had adopted tactics of blackmailing government.

Mr Chishimba who was reacting to President Michael Sata’s call on KCM not to go ahead with its intention of downsizing labour said the announcement by the Head of State to revoke the mining license should the company lay off a single employee was welcome.

“We are thankful that the president has taken that move of considering revoking KCM’s mining license should the company downsize labour.

“We welcome that move and in fact, Government must still consider our call of finding another equity partner for KCM and this is because of unclear roadmap by the company,” Mr Chishimba said.

The union leader said from the way KCM had been conducting itself in the recent past and cited earlier attempts by KCM in June this year to lay off 2000 miners, it was clear that the company’s operations in the country had ceased to be certain.

Mr Chishimba said it was MUZ’s fear that if blocked from executing its intended action of laying off workers, KCM would only end up subjecting employees to poor conditions of service.

“This is why we are saying Government must take keen interest in the operations of KCM by finding another equity partner for that mine,” Mr Chishimba said.

 
At 5:03 PM , Blogger MrK said...

SI 89 cannot be justified - Mtesa
By Gift Chanda
Wed 06 Nov. 2013, 14:00 CAT

THERE is absolutely no justification in allowing mining firms to export copper concentrates tax-free 49 years after Zambia's independence, says Ambassador Love Mtesa.

Commenting on the revoked Statutory Instrument (SI) 89 which finance minister Alexander Chikwanda signed on October 4, Mutesa said the instrument was detrimental to the economic development of Zambia.
On Monday last week, President Michael Sata reversed SI 89, which was to be in force up to September 30, 2014.

The SI was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.

"The cancellation of SI 89 by President Sata is something that is very commendable to many of us in the country," Mtesa, a former Consumer Trust Unit Trust (CUTS) international Zambia chairperson, said.

"The mines need to be pointed in the direction of utilising refineries in the country so that they add value to what they produce."

After revocation, the SI 89 has since been replaced with SI 99, which has reinstated the 10 per cent export duty on copper concentrates and ores, which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.

Read more...

 
At 5:03 PM , Blogger MrK said...


Can SI 89 really be justified?
By Editor
Wed 06 Nov. 2013, 14:00 CAT

The Minister of Finance, Alexander Chikwanda, has tried very hard to justify Statutory Instrument 89 that allowed First Quantum Minerals to export copper concentrates without paying the 10 per cent duty generally required by law.

Chikwanda has clearly been at pains trying to justify or explain what cannot be justified or explained. Chikwanda has usually been a very articulate and clear man. But in this case, he has not come out as articulate and as clear as he usually does.

This is an indication that he is trying to justify or explain that which cannot be justified or explained. There is nothing inherently complicated about this whole arrangement. The issue is being made to appear complex simply because those involved in this whole arrangement are not ready to tell the truth, do not want the truth to come out.

It is this attempt not to tell the truth that is aking a simple issue appear complex. This is not about jargon; it is an issue of simple truth. And the truth seems to lie near what commerce deputy minister Miles Sampa said: "All they want is zero tax. Even the stockpiling of raw minerals is a deliberate move aimed at avoiding paying tax."

The stockpiling of concentrates by First Quantum Minerals should not be exaggerated and made to appear as though all mines are stockpiling concentrates.

It is being done by Kansanshi Mine and this practice started sometime back. While other mines are processing their copper using local smelters, Kansanshi Mine decided to stockpile. Chibuluma, Non Ferrous Corporation Africa, China Non-ferrous Mining Corporation, Lumwana have been processing their copper locally and do not have concentrates piled up.

And a visit to Chambishi Copper Smelter will reveal that they are able to process the Kansanshi Mine concentrates contrary to the technical blending arguments being bandied around.

And moreover, the issue of processing capacity would not have arisen if Kansanshi Mine had not been stockpiling and was sending their concentrates for processing like other mines had been doing. The issue of stockpiling now arises because of the huge amounts of concentrates that First Quantum Minerals has accumulated over the years.

First Quantum Minerals, as Sampa correctly observes, chose to strategically stockpile their concentrates and then talk of insufficient capacity in order to arm-twist the government. The Minister of Finance fell for it but the President didn't - he saw through it.

The Chinese smelter at Chambishi is able to treat all kinds of concentrates. The mines, including Kansanshi Mine, are all still producing and selling the finished products and therefore, we are able to get mineral royalty from the sale of what is being produced.

Yes, mineral royalty is dependent on the time it takes to process and sell the copper, but the Minister of Finance has to bear in mind that these mining corporations are in business and cannot afford to delay the processing and selling of their products.

 
At 5:04 PM , Blogger MrK said...

Continued...

Kansanshi Mine can afford the delays because it is making huge profits from the sale of the copper it produces from leaching operations - concentrates which do not need to pass through a smelter and the gold it produces. So, we are getting mineral royalties from these products.

Now the question is: should we accept to get peanuts or nothing by allowing the export of concentrates without slapping duty on them when we know that we can get more if value is added to the concentrates? The companies are saying the concentrates are 70 per cent dirt. Uhmmmmm, who can afford to transport 70 per cent dirt over so many kilometers to the South African smelters and still make a profit? If this was so, then the whole arrangement doesn't seem to make business sense. So, this cannot be true. The truth lies elsewhere.

And the Minister of Finance should clarify whether the affected projected revenues he has been talking about were made on concentrates or the copper cathode because Kansanshi Mine doesn't export concentrates. Otherwise, the projected revenue should have taken into consideration the 10 per cent duty if the concentrates were to be exported. So why should we lose out if we have already made revenue projections in order to please First Quantum Minerals?

Clearly, it's better to wait and collect the right taxes than get peanuts from it. Isn't this what we have always been talking about? If they do not want to process at the other smelters, their concentrates can wait until they have finished constructing their own smelter.

Clearly, what First Quantum Minerals is trying to do is not right and the President was very right to stop it. If you do no wrong, no wrong will ever come to you. Do not plough the ground to plant seeds of injustice; you can reap a bigger harvest than you expect. It is not good to underrate the intelligence of others.

The problems First Quantum Minerals is today facing in this country are self-created, and nobody should feel sorry for them or try to justify the unjustifiable business practices. It is said that nobody feels sorry for snake charmers who get bitten.

And our advice to all those involved in this arrangement is: "Admit when you are wrong, and you will avoid embarrassment" (Sirach 20:3). When people are telling the truth, what they say always makes sense, but when they attempt to tell lies, they are always contradicting themselves.

And nothing that comes from injustice will last, but the effects of honesty and justice will remain forever. Clearly, First Quantum Minerals and those supporting them are trying to dribble the Zambian people, cheat them out of their revenue. But things don't work like this. If one tries to deceive others, cheat others, they will one day wake up to it and react. Simon Kapwepwe once remarked: "Umunobe nga akupita pamusula, naiwe kumupita pamusula."

And what you get by dishonesty, you may enjoy like the finest food, but sooner or later, it will be like a mouthful of sand. The wicked bring on themselves the suffering they try to cause good people.

 
At 4:56 PM , Blogger MrK said...

Chitala urges opposition to support Sata on KCM
By Allan Mulenga, Noel Iyombwa and Abigail Chaponda in Ndola
Thu 07 Nov. 2013, 14:01 CAT

MORE than 70 workers have received letters of termination of employment from Konkola Copper Mines (KCM). On Monday, President Michael Sata warned KCM not to lay off workers and warned that he would revoke KCM's mining licence if the mine dared to lay off even one miner.

According to letters of termination to some employees at Konkola shaft number one that had been sent earlier before President Sata's warning, made available to The Post, and signed by Eve Banda KCM manager for human capital and management(HCM) at Konkola, the mine advised that the affected employees (76 in total) should see respective HCM business partner for exit formalities.

One of the letters dated September 19, 2013 and addressed to Kazarous Kanengoki mine number 2004348 stated that either party may terminate the agreement by giving the other party 30 days written notice.

"Reference is made to the termination of contract clause in the offer of fixed term contract of employment with KCM which is either party may terminate this agreement by giving the other party 30 days written notice. Accordingly we wish to advise that your contract of employment will be terminated effective October 19, 2013.Your last working shift will therefore be on the same date. In accordance with the terms and conditions of your contract, terminal benefits will be calculated as follows; wages worked for, gratuity at 11 per cent, accrued leave pay and Christmas bonus," one the several the letters given to one of the workers.

President Sata had said KCM chief executive officer Kishor Kumar would be sorted out if he wanted to blackmail government.

Speaking ahead of a Cabinet meeting, President Sata said KCM wanted to blackmail the government after it stopped the company exporting copper concentrates.

Kumar last Friday announced plans to carry out outplacement of 1,529 employees as the mining giant pursued a mechanisation programme for all its operations.

And Dr Mbita Chitala has advised opposition political parties leaders to avoid politicising President Sata's stance on the proposed layoff of over 1,500 workers at Konkola Copper Mines.

So far, key opposition leaders such as MMD's Nevers Mumba, National Movement for Progress' Ngandu Magande and Alliance for Better Zambia's Frank Bwalya have spoken on KCM's intention to cut over 1,500 jobs at Nchanga underground. Others like UPND have been quiet.

Mumba urged KCM to reduce their rhetoric in the media and seek for talks with the government.

Magande said President Sata's warning to KCM to revoke the mining licence was a wake up call to other mining companies.

Bwalya said the threat to revoke the licence could create instability in the mining industry.

And in an interview yesterday, Dr Chitala, who is Zambia Research Foundation director, urged politicians to come together and safeguard the interests of the nation.

"This is not partisan at all. It is the national issue where all political parties should agree on how we could use what God gave us to end our poverty and underdevelopment. This is where all the politicians unite until they defeat the enemy and continue with politics after that is done," he said.

 
At 4:58 PM , Blogger MrK said...

Continued 1...

"It will be sad and unforgivable that we who are in charge of our country, we leave nothing other than environmentally hazardous holes, where copper have been taken away to other countries which are smarter than us."

Dr Chitala advised the government through ZCCM Investment Holdings, to increase shareholding capacities in all mining firms.

"These development agreements these mining firms were supposed to offload to list on the stock exchange to enable Zambians to buy, none of them have done that. By this time we should have more than 30 per cent in shares all the mines, but there is nothing like that. We need to increase our ownership of the mines, but nothing is happening. Right now the shares vary, three per cent, some are 20 per cent, some five per cent, some 10 per cent and so on," he said.

"It is not much. We need to increase our shareholding in these companies and also allow shares as we agreed to be quoted on the stock exchange. My suggestion will be the minimum of 30 per cent shares from every mine should be floated so that our middle class can also be participating in development porgrammes."

Dr Chitala said the government should start buying back the shares to get controlling interests in the industry.

"We have a challenge as a country now that we must adopt programmes anchored on nationalism where we can use these minerals to contribute to economic development of Zambia. The time to advance nationalism has come again. We have ZCCM IH as the government which has shares in all these mining companies," he said.

"They must start buying back the shares so that we are able to get controlling interests in the industry. Furthermore, they must use their powers as directors of these mines to safeguard the interests of our country. The minister of finance has got a golden share, we have never heard it being used to safeguard our interests as a country."

Dr Chitala said the government should ensure that Zambians benefit from the availability of natural resources.

"Our country is blessed with copper and cobalt where we get more than 80 per cent of export earnings. And in the same way Angola has oil, Arab nations have oil, Botswana has diamond, even us God gave us copper and cobalt and we should not even be sorry about it. We should use these resources to tackle poverty and underdevelopment. If we do not use these resources wisely, we shall remain poor. It is only copper that can enable Zambia quickly accumulate surpluses and allows us as a country to fight poverty and underdevelopment," said Dr Chitala.
"Copper is a waste asset, meaning within 60 years it will be gone and the multi-national corporations mining our copper will go back to their countries, leaving us with environmentally hazardous holes on the ground to our children."

Meanwhile, Australian Ambassador to Zambia Matthew Neuhaus has advised politicians in Zambia not to undermine the mining industry because doing so may not be good for the economic development of the nation.

During a visit to Northern Technical College (NORTEC) in Ndola on Wednesday, Ambassador Neuhaus said undermining the mining industry is not good for Zambians and institutions like NORTEC which produce the skills absorbed by the mining industry.

 
At 4:58 PM , Blogger MrK said...

Continued 2...

"There is a populous of some sort of politicians who want to undermine the mining industry sector, that is not good for Zambia and the people of Zambia and institutions like yourself (NORTEC) who produce the skills for Zambia and growing prosperity of Zambia," he said.

Ambassador Neuhaus however, described the economic outlook for Zambia as fantastic saying his country would stand by Zambia in its continued development.

"As long as Zambia continues to take the path it has taken over the decade, it will be indeed the star of Africa. Your GDP is two times more than Zimbabwe, your economic growth is fantastic, obviously, it's important that those policies continue," he said.

Ambassador Neuhaus said he was impressed with First Quantum Minerals (FQM) for adding value to its cathodes and that the mine was doing well in the area of value addition technologies.

"I was impressed when I went to Kansanshi mine to see the value addition that they have done to the cathodes. I must say that it is short sighted of those who object to exporting some of the existing copper until the smelter is there, you need cash flows to be able to develop further, so if your aim is value addition, you have to build from where you are and then encourage the technology that is there," he said.

He said FQM was able to do well because the mine was always looking at technical things.

"So I think there has been some ill-informed debate in some of the press of late here, but we will stand by Zambia for continuing development of the country and we want to help them. We want Zambia to be running the industries; it should be Zambian entrepreneurs into the future who will be putting together the capital," he said.

Ambassador Neuhaus further said it was important to maintain investor friendly approaches because it was Zambians who are benefiting.

He, however, said the new Australian government knows that a lot of development assistance has been wasted in the past and that the country wanted to focus on helping Zambia in areas like Aid for Trade.

Ambassador Neuhaus said Australia's focus was not on trade zones which get special privileges and deny the rest of the country development, adding that the whole country should be a trade zone.

He said trade zones were an excuse for one or two people to make money for themselves adding that Australia did not need the concept of trade zones that the country had been hearing about.

"Our focus is on supporting institutions like NORTEC and supporting companies that are building towns in remote areas like what the mines are doing and spreading the wealth throughout the country; we don't want to see it (wealth) sitting in Lusaka, we want to see it across the country, we want to see those areas that are producing the Copper and other minerals to diversify too; we want to see those areas benefiting as well," said Ambassador Neuhaus.

 
At 4:59 PM , Blogger MrK said...

Don't think Zambians are fools!
By Editor
Thu 07 Nov. 2013, 14:00 CAT

Foreign investors should not think that Zambian people and their leadersare fools. Some of the things foreign investors do raise questions about their respect for the Zambian people and their leaders. It doesn't mean that if some of our people and our leaders are on their payroll, then all the Zambian people are compromised and are incapable of seeing through their schemes and voicing their concerns.

We say this in the light of the conduct of First Quantum Minerals Operations. With regard to their Kashimi Mines, this mine has not been in operation for the last three years. Therefore, their licence was due to be revoked. What do they do? In July, they wrote to the Ministry of Mines, asking for the licence to be transferred.

The permanent secretary in the Ministry of Mines, who is also a director of First Quantum Minerals Operations, put in a request that the transfer be done quickly so that they don't lose the licence. The conduct of the permanent secretary in this matter is highly questionable.

It is not difficult to see what their hidden agenda is. First Quantum Minerals Operations is today suing the Zambian government with respect to Bwana Mkubwa Mine, which is a non-operational mine, to get a ruling that they can then apply to their cash cows - Kansanshi and Sentinel.

First Quantum Minerals Operations is afraid to sue the Zambian government directly under Kansanshi as the development agreement for that mine comes to an end in 2015. And they have only paid US$500,000 in taxes for that mine. So if First Quantum Minerals Operations sues under Kansanshi and they win, all the Zambian government will be liable for is US$500,000, which they can easily recoup after 2015 by hitting them with the same tax rates as other corporate entities. In this case, they will stand to lose even more.

In regard to Sentinel mine, it is shocking that First Quantum Minerals Operations can sue the Zambian government and while doing so, this same company is asking this same government for favours - they are asking the Zambian government to relocate people.

Their main interest in all this is Sentinel mine - their most prized possession. This calls for increased vigilance on the part of the Zambian people and their leaders. And there is need to demand utmost transparency from the government in its dealings and agreements made in regard to this development. The Zambian people should understand every agreement made, unlike in the past where these development agreements were kept under lock and key.

And it's clear that First Quantum Minerals Operations are far from being clean in their operations as they try to claim. The tax arrangements of First Quantum Minerals Operations deserve scrutiny.

It may be necessary to investigate how they have been using the duty-free facility for the importation of new equipment. For instance, is it permissible for them to use new equipment imported duty-free for Kalumbila operations in Kansanshi Mine and transferring the old Kansanshi equipment to Kalumbila? Similarly, is it acceptable for them to import duty-free equipment for Bwana Mkubwa and use that same equipment for Kansanshi Mine and use the resulting capital allowances to reduce taxable income from contract mining? Is it right for First Quantum Minerals Operations to use the Bwana Mkubwa mining agreement to get tax breaks for Kansanshi Mine, which is regulated by a different development agreement? These are questions that deserve honest answers from First Quantum Minerals Operations and from the Zambian government, especially the ministries of mines and finance.

 
At 4:59 PM , Blogger MrK said...

Continued...

It is clear that some mining corporations are not acting with honesty; they are not sincere in their dealings with our government.

It cannot be denied that these corporations have very deep pockets and as a result of this, they can buy their way into anything. They can even buy some weak souls to defend their wrongdoings. We therefore need the help of the international community if we are to harness our mining resources for human development. We need the help of the international community to create a global environment that fosters great transparency in the operations of mining transnational corporations.

Far more than increased aid, what we need is strengthened international co-operation to help us secure a fair share of the wealth from our mineral resources now beingdrained out through unfair and sometimes illegal practices.Tax evasion is a global problem that requires multilateral solutions. We cannot combat this type of tax evasion on our own because the systems that allow transnational corporations to under-report tax liabilities operate across borders.

The extensive use of tax havens, shell companies and multi-layered company structures operating across tax jurisdiction creates an impenetrable barrier of secrecy.

We know that tax authorities in all regions struggle to prevent the erosion of their tax bases, but we struggle more than most. That is partly because of the restricted human, technical and financial resources available to revenue administrations.

But this is also because the transnational corporations involved in our mining sector are highly integrated and make extensive use of offshore centres and tax havens with limited disclosure requirements. These are ideal conditions for tax evasion through mispricing.

 
At 2:05 PM , Blogger MrK said...

(LUSAKATIMES) Government deports KCM CEO Kishore Kumar
Time Posted: November 8, 2013 1:54 pm

Konkola Copper Mine (KCM) Chief Executive officer Kishore Kumar has been deported. Reports reaching QFM News indicate that Mr Kumar has been deported for defying President Michael Sata’s directive for the mining company not to layoff a single worker, after KCM went ahead to lay off 76 workers.

When contacted for a comment, Immigration Department public relations officer Namati Nshinka, told QFM that Mr Kumar left the country yesterday on his own without giving further details. Mr Kumar had recently announced that KCM would lay off over 1,500 workers as they seek to mechanise their operations.

This announcement prompted President Sata to warn the mining giant not to dare lay off any worker or risk having its mining license revoked.

And MMD president Nevers Mumba has accused President Michael Sata of abusing his office by deporting the KCM chief executive officer.

Dr Mumba says issues such as the one involving KCM cannot be resolved by deporting people.

“We did not want to come out strong but at the same time investors must realised that effort of growing Zambia and distributing of its wealthy needs to be harmonised, I think there have been some careless talks by some investors,” said the Vice President.

He says the best way is for government to sit down with KCM management and union representatives and find the way forward.

Dr Mumba says such heavy-handed tactics may result in the loss of even more jobs.

And vice president Guy Scott when asked in parliament today what immediate measures government would take against KCM for going against the presidential directive said he expected tough measures to be taken.

The Vice President has said Government will soon take appropriate action on the firing of 76 workers at Konkola Copper Mine as reported in the media on Thursday.

The Vice President said this in Parliament during the Vice President Question and Answer time when responding to MMD Chadiza Member of Parliament (MP) if PF Government was failing to bring law and order in the country following the firing of 76 KCM workers despite the President warning that no single worker should be dismissed.

“The matter was reported yesterday and we have not yet made any appropriate decision, by if the Member asks this in two week time I will give you an appropriate answer because we would have made a decision,” Dr Scott said.

MMD Mafinga MP Catherine Namugala also questioned the Vice President if he does not think castigating investors in public was going to scare away potential investors and make Zambia undesirable investment destination.

In his response Dr Scott told the House that governance was a balancing act and that Government had the right to protect the people of Zambia in as much as it also had the right to protect investors.

He said Government cannot abandon workers when it thinks management was being unreasonable.

“We did not want to come out strong but at the same time investors must realised that effort of growing Zambia and distributing of its wealthy needs to be harmonised, I think there have been some careless talks by some investors,” said the Vice President.

 
At 6:18 PM , Blogger MrK said...


On the conflict of interest of the Permanent Secretary sitting on the board of one or more of the mining companies, rather than just ZCCM-IH.

TEO questions role of mines PS on FQMO board
By Misheck Wangwe in Kitwe and Stuart Lisulo in Lusaka
Fri 08 Nov. 2013, 14:00 CAT

Why should the mines PS sit on FQMO board?
By Editor
Fri 08 Nov. 2013, 14:00 CAT

IT is difficult to understand why the permanent secretary in the Ministry of Mines should be sitting on the boards of First Quantum Minerals Operations, Konkola Copper Mines or indeed on the board of any mining corporation.

The Ministry of Mines is the controlling authority, the overseer, the regulator of all mining activities in this country. And the permanent secretary of the Ministry of Mines is at the helm of these mining regulating responsibilities.

How can there be no conflict of interest if in the morning, the permanent secretary in the Ministry of Mines is sitting as a director in a board meeting of a mining company planning the mining operations of that company, and in the afternoon is chairing another meeting at the ministry to regulate those same activities? This is not making sense.

We know that the Zambian government, through ZCCM-Investment Holdings, is a minority shareholder in the Zambian operations of most of these mining corporations. But this in itself does not warrant the permanent secretary in the Ministry of Mines to sit on the boards of such corporations. The most the permanent secretary can do is to sit on the board of ZCCM-Investment Holdings, since this is an investing company majority owned by the Zambian government and is not directly involved in mining operations.

Imagine what would happen if, similarly, the governor of the Bank of Zambia - a government institution tasked with the responsibility of regulating the operations of banks in the country - was allowed to sit on the board of Zanaco and Indo-Zambia Bank simply because the Zambian government hold some shares in those banks! What a type of regulation would the governor carry out in connection with these two banks?

There is clearly a breach of fiduciary duty here. The permanent secretary in the Ministry of Mines has a duty to the Zambian government to act in its best interests and he also has a duty as a director of First Quantum Minerals to act in the best interests of its shareholders. Therefore, in this case, there is a conflict of interest. Whose best interests is the permanent secretary in the Ministry of Mines serving?

We should not forget that Frederick Chiluba was successfully sued in the United Kingdom court for the breach of fiduciary duty.

What does the permanent secretary in the Ministry of Mines say when that board he sits on starts to talk about government policy? And now that First Quantum Minerals Operations has sued the government, what does he say to First Quantum when he sits on their board meetings? And what advice does the permanent secretary give to the government concerning these matters? This is like a lawyer representing the plaintiff and the defendant at the same time! Is this acceptable? Is this ethical? Is this right? And this is the government officer who the government should depend on when it comes to its differences, legal or otherwise, with First Quantum Minerals.

 
At 6:19 PM , Blogger MrK said...

Continued...

In reality, or in truth, the permanent secretary in the Ministry of Mines who is also a director of First Quantum Minerals, is regulating his own company. Is this right? Is this acceptable? Is this the way things should be done?

This opens up one to corruption and abuse of one's office for personal gain. We know that there are good allowances being paid to the directors of these mining corporations. But surely, should government interests be traded on the altar of sitting allowances and other perks accruing to directors of mining corporations?

There is no doubt that the permanent secretary in the Ministry of Mines is serving the interests of First Quantum Minerals Operations and other mining operations better than those of the government. There are certainly government policy decisions that the permanent secretary is more likely to push in favour of the mining corporations than the government. The mining corporations know government policy even before it is announced. But does the government really know what these corporations are plotting in their boardrooms?

It is surprising that the permanent secretary in the Ministry of Mines can sit on the board of a company that is suing government for such gigantic sums of money. And it's not difficult to guess what happens when it comes to licences! Can the permanent secretary deny a company on whose board he sits a licence? Moreover, it is the collective duty of directors to assist the company to get its licences, favourable taxes and other things from government. How possible is it with one hand, the permanent secretary gives concessions to a mining corporation on whose board he sits and with the other hand, he is demanding a fair return for the government from these same mining corporations? Things are not tying up here. There is something seriously amiss here. This whole arrangement stinks of corruption and abuse of office.

In defence of this arrangement, we are told it has been there since Frederick Chiluba's regime, this is the way things have been for a long time. So simply because a wrong thing has been there for a long time, then it should continue forever and ever - with no redemption? This is warped reasoning. We know what type of regime Chiluba led! It was a corrupt one. So the corruption of the Chiluba regime should be continued even under this government that has vowed to stamp out corruption?

No one can deny the fact that the government needs representation on the boards of the mining corporations it has stakes in. But the individuals the government appoints as directors to these companies should not come from the Ministry of Mines, a regulatory institution. There is nothing wrong with ZCCM-Investment Holdings appointing some of its directors or any other individual to represent the government interest on the boards of mining corporations it has stakes in.

There is no good reason for the permanent secretary in the Ministry of Mines to continue sitting on the boards of these mining corporations other than greed and corruption. This is undermining the interests of government and it needs to be put to an end.

 
At 4:06 PM , Blogger MrK said...

Rate of govt borrowing is alarming - Haabazoka
By Misheck Wangwe in Kitwe and Stuart Lisulo in Lusaka
Mon 02 Dec. 2013, 14:00 CAT

THE rate at which the PF government is borrowing and the manner it is managing external debt is very worrying and alarming, says Dr Lubinda Haabazoka.

And Dr Haabazoka says the introduction of windfall tax is inevitable in Zambia because appropriate mine taxes should be the major source of national financial sustainability. Meanwhile, Professor Oliver Saasa has advised the government to invest more in understanding its capacity to servicing debt.

Commenting on the decision by Parliament to pass a motion to give the finance minister powers to raise Zambia's debt ceiling from K20 billion to K35 billion, Dr Haabazoka, a Copperbelt-based economist who is also a lecturer of business studies at the Copperbelt University, said the government must begin to demonstrate fiscal discipline to avoid external borrowing.

He said the government's rush to get loans and debts being acquired through capital markets was an economic hazard.

"We can borrow as a country but we should not exceed certain limits, otherwise we will be pushing the debt burden to the future generation. Borrowing, even just for consumption when you have an expanded government, a civil service that is also bloated, then monies will just be servicing the existence of the government," Dr Haabazoka said.

"Let us first look at fiscal discipline, let us look at ways of maximising tax collection and then find ways of spending these scarce resources and cut costs in terms of government expenditure. The rate at which we are accumulating debt has doubled, it's very alarming and it is rumoured that in the next five years, the government will borrow US$5 billion dollars and that's very unsustainable."

Dr Haabazoka said developed countries like Japan were also overburdened by debt but the advantage was that their debt was domestically sourced.
He said the biggest problem was that the Zambian government was getting debt externally.

"If we are not careful as a country, we will find ourselves in a situation where the budget allocation to vital sectors will be competing with interests that come with debt repayment. We have to be careful," Dr Haabazoka said.

 
At 4:06 PM , Blogger MrK said...

Continued...

And Dr Haabazoka said the mines could not in any way suffer because of windfall tax, adding that by definition, the government would only tax excess profits.

He said mineral resources belonged to Zambians and windfall tax must be introduced so that mining investors would not always pocket everything once they get excessive profits.

"Windfall tax is a prerequisite for financial self-sustainability. When you look at the period of the late president Levy Mwanawasa when we had windfall tax, the country was doing well because we had resources and we embarked on large infrastructure development projects. Today, the mines are not paying enough taxes. Look at their contribution to GDP (Gross Domestic Product), it's very low and it does not represent a true picture of how much the mines were getting," said Dr Haabazoka.

He said there was need to enhance transparency in the way mining firms were declaring expenses and profits so that the government could collect appropriate taxes.

And Prof Saasa, who is chancellor of Mulungushi University and a managing consultant, said debt sustainability analysis was not necessarily 'objective'.

"Our debt sustainability analysis does not bring sufficient comfort to feel comfortable that we can continue borrowing. A debt sustainability analysis is required and we are not actually doing this with sufficient comfort, and government was the first to acknowledge that," Prof Saasa said.

He said there was need for the government to circulate the debt sustainability analysis in the public domain to allow for wider consultation.

"When these analyses are prepared, they should be put into the public domain so that people have an opportunity to look at them and guide government and become part and parcel of information sharing. They are subjective documents done by human beings and I am glad government conducted the analysis, but to share that information is equally important because that would have informed government that we can actually still extend it to K35 billion" he said.

"I am not so sure whether our parliamentarians were well versed in terms of the implications; probably, it was more of a vote according to whether one was PF or the opposition. The debt sustainability analysis should have been one of the documents that all parliamentarians should have been exposed to and simplified in a way so that by the time they go and vote in Parliament, they should feel comfortable that this document has indicated that for the next 5 or 10 years, the executive is allowed to go beyond the threshold, then the voting will be based on the facts rather than party affiliation."

 
At 6:44 AM , Blogger MrK said...

The Post Newspapers Zambia
Mucheleka, Namugala want windfall tax re-introduced
By Abel Mboozi on Friday 29 November 2013, 14:00:00 CAT

LUBASENSHI Independent member of parliament, Patrick Mucheleka and his MMD Mafinga counterpart, Catherine Namugala, have called on the government to re-introduce windfall tax on the mines.

In their separate debates in Parliament on Wednesday, the two backbenchers said it was wrong for the government to incur a huge external debt when it could raise more money from the mines.

Levy Mwanawasa's government in 2008 introduced a windfall tax on copper at 25 per cent owing to the sector's low contribution to government revenue which still stands at less than two per cent.

According to then finance minister Ng'andu Magande, the government expected to earn at least US $415 million annually from the windfall tax as mining companies accounted for over 80 per cent of the country's export earnings.

However, Rupiah Banda's government in 2010 scrapped the tax amid calls from civil society and opposition political parties to have it maintained.

And the Patriotic Front, during its campaigns, promised to re-introduce the tax, but finance minister Alexander Chikwanda last year categorically indicated that the windfall tax would not be brought back and called those calling for its re-introduction 'lunatics'.

The House on Wednesday voted for a motion moved by Chikwanda that, in terms of section three of the Loans and Guarantees (Authorisation) Act 366 of the Laws of Zambia, Parliament authorises him to increase by statutory instrument the amount outstanding at any given time on external loans from K20 billion to K35 billion.

In his debate on the motion, Mucheleka warned that posterity would judge the nation harshly with the burden it was placing on future generations through the huge external debt.

"The mining sector appears to be the only option to avoid over borrowing because what is coming out from this sector is not enough," he said. "It is very sad that the PF government campaigned on the premise to come and restore the windfall tax, but that has not happened."

Mucheleka said it was sad that only eight per cent of revenue coming out of the mines was what remained in Zambia.

"People are pretending as if they are irritated by what is happening. You all know where the tax avoidance is coming from; you all know the under-pricing that is taking place in the mining sector and you know what you are supposed to do, but you are not doing it," he said.

"This is why the perception out there is that there are some people who seem to be benefitting from what is going on in the mines and that is unacceptable."

He said the UNIP government took 27 years to leave the external debt at U$7 billion when it left power while the MMD left it at U$500 million after the debt write-off.

 
At 6:44 AM , Blogger MrK said...

Continued...

"When PF came into power, external debt was U$1 billion or so, but in the third year of this government, we are talking of getting back to U$7 billion within three years. It's not a prudent way of managing the economy," he said.

Namugala when opposing the move to increase excise duty on airtime from five to ten per cent said the government should not overburden the poor by such a move, but should introduce windfall tax.

"It is bad economics to tax the poor, because we all know that the poor people are in the majority. So, when you tax them, you are reducing their capacity to spend on their goods and services, what the minister is saying is that when a person in Mafinga spends K10 on airtime, they are going to speak for a shorter period of time than they did before," he said.

Namugala said increasing excise duty on airtime would make it more expensive for the people who need to communicate using cell-phones.

"We have time and again asked the government to introduce windfall tax, if you need to raise revenue, tax those that are creating massive wealth in this country," she said.

"Tax the mines because we all know that when they create wealth, this wealth goes out of this country, we all know that when a poor person creates wealth in Zambia, they will use it to increase productive capacity of our economy."

Namugala said it was high time Chikwanda faced the truth about the need to tax the mining companies to enable Zambia raise her revenue base.

 
At 5:18 PM , Blogger MrK said...

Mucheleka counsels govt on windfall tax
By Kabanda Chulu
Thu 05 Dec. 2013, 14:00 CAT

GOVERNMENT should not continue betraying Zambians by refusing to bring back the windfall tax which is an easier way of collecting revenue from the mines, says Lubansenshi Independent MP Patrick Mucheleka.

Reacting to mines minister Christopher Yaluma that government has no immediate intentions to revise the mining taxation regime to bring back windfall taxes, Mucheleka yesterday advised government to take full responsibility by seizing the opportunity to reap maximum benefits from the extractive industries whose contents were a wasting asset.

On Tuesday, mining expert Dr Mathias Mpande said it was worrying that the country was only benefitting two per cent of revenue from the mines that only pay tax based on profits they felt comfortable to declare.

Dr Mpande said the country faces a leadership crisis in dealing with problems in the mining sector and that countries with good mining policies benefitted much from their minerals, citing Botswana's 50-50 shareholding as an intelligent way of sharing benefits from mineral resources.

"It is unfortunate and sad for the Zambian people that such sentiments are coming from a minister. In today's edition of the Post, there is a story quoting Ghanaian President John Mahama that Ghana will embark on a renegotiation exercise with companies especially those in the extractive industry on new stability agreements. This shows that Ghanaians have realized that the mines are making abnormal profits at the expense of local people," Mucheleka said.

"What is so special about mining companies investing in Zambia when everyone else is revising agreements to benefit from the super profits?"

He explained that some people, including government ministers, who were against windfall taxes do not understand how the system works.

"Mining companies will still make realistic profits because the windfall tax will only be triggered at certain price thresholds, besides it is a less complex way of collecting revenue whether ZRA has capacity or not, the country will still get something," Mucheleka said.

 
At 5:19 PM , Blogger MrK said...

Continued...


"Most of these mining companies are doing all sorts of things to avoid tax payments; they are also involved in tax evasion, tax avoidance and transfer pricing but with the windfall tax system in place, we shall capture correct revenue when the prices are triggered."

He said government had no choice but to do the right thing by bringing back windfall taxes.

"Government is borrowing money to build infrastructure, water facilities, and roads in areas where the mines are based. The mines are taking everything away yet government is subsidising the mines, for example, why should we continue talking about Chingola-Solwezi road which is in a dilapidated state but is used to transport copper ores for the mine?" asked Mucheleka.

"These same mines are subjecting our people to work under laborious and poor conditions, even their corporate social responsibility is poor because they usually donate a mini bus, sponsor a televised football match, they can do more but it is up to government to save people who are feeling the pinch."

Several people, including civil society and opposition parties, have called for the reintroduction of windfall taxes to increase revenue from the mines whose contribution to the national treasury is a paltry two per cent of GDP.

Recently, finance minister Alexander Chikwanda called those calling for reintroduction of windfall tax 'lunatics.'

In 2008, under Levy Mwanawasa, government introduced a windfall tax on base metals at a minimum rate of 25 percent with a revenue projection of at least US$ 415 million per annum.

For copper, the windfall tax was put at 25 percent at a price of US$ 2.50 per pound but below US$ 3.00 per pound, 50 percent for the next 50 cents increase in price and 75 percent above $3.50 per pound.

 
At 5:20 PM , Blogger MrK said...

At the mercy of investors
By Editor
Thu 05 Dec. 2013, 14:00 CAT

The growth of the investment in mines instead of bringing more revenue to the government is imposing additional challenges on it. There are many costs the government has to directly incur to enable the mines operate efficiently. For instance, the government has to ensure that there is adequate investment in roads, railways and other communication networks.

Adequate investment also has to be made in meeting the power needs of mining. We are told on high authority that the power that the mines use is subsidised by the rest of us. And we have been doing this for the last two decades.

We are told mineral production has increased over the last two decades. But one factor in our national life remained with us all through the last two decades or so, and is with us still, and that at the bottom of the social scale there is a mass of poverty and misery equal, if not worse, in magnitude to that which obtained two decades ago.

We have been reminded by many experts and institutions that we are not getting much revenue from mining, and efforts should be made to collect more taxes from the mining companies. The World Bank has told us to do that. The International Monetary Fund has advised us to do so. Many mining and economic experts have advised us to find ways of increasing our revenue from the mines. Our very own mining expert, Dr Mathias Mpande, is also today advising us to do the same. But those in government, for reasons best known to themselves, find it extremely difficult and unacceptable to increase revenue collections from mining undertakings. They find it easier to go and borrow money and increase the national debt. This is difficult to understand. This needs to be explained.

We submit that the true test of progress in mining is not measured by the amounts of money transnational mining corporations are investing and the tonnes of minerals they are producing, but the elevation of a people as a whole through increased government revenues from mining.

The Zambian people know to their cost the danger which comes from allowing transnational corporations to make super profits at their own expense. We all know that there is something seriously wrong with the way we are dealing with investors in the mining sector. We seem to be treating them like eggs. We have public officers who speak for the transnational mining corporations and not for the people they are elected or appointed to serve.

Yes, we appreciate the need to attract foreign investment in our mining sector. But it shouldn't be investment for the sake of investment; it should be beneficial investment.

As Dr Mpande has correctly observed, we have countries in this region, the SADC region, that are benefitting from the exploitation of their mineral wealth. And Botswana is a good example of that. Most, if not all, of the mining operations in Botswana are joint ventures between the government of that country and private foreign investors on a fifty-fifty basis. In this way, what the government foregoes in taxation, it receives in dividends. And in this way, it is easier for the government of Botswana to keep mining taxes relatively low because the government is the shareholder and as such, a dividend recipient.

But still taxes are paid. And therefore, the benefits accruing to the people of Botswana from their country's mineral wealth is relatively much higher. In our case, most of the mines are predominantly owned by foreign enterprises. What we lose in taxes, we don't gain it in any other way. The tax we lose here is the tax they end up paying in their home country. After that, we go to those same countries trying to borrow money that could have been ours if we had prudent tax and investment policies.

 
At 5:20 PM , Blogger MrK said...

Continued...


It's difficult to believe that these policies are designed by our own people against their own country. The current policies are not different from those we had during the colonial era. Probably even the colonial government collected more revenue from mining than we are doing today. Why should this be the case? There are only two possible answers: incompetence or corruption. If it is a question of incompetence, who is incompetent in this whole chain of decision making? Is it the politicians? Is it the technocrats who are advising and assisting them in policy formulation and implementation?

If it is corruption, who is corrupt in this scheme of things? Is it the politician who is receiving kickbacks from mining corporations to come up with fiscal policies that benefit them? Or is it the technocrat who has been corrupted?

Whatever the situation, there are some of our people who are benefitting from this chaos. But the true test of progress in a nation is not the accumulation of wealth in the hands of a few people receiving bribes, commissions or kickbacks, but the elevation of a people as a whole.

The Zambian people know to their cost the danger which comes from allowing public officers to grow rich and permitting them to use their influence to silence opposition to their harmful policies and practices, to degrade our national life, and to bring reproach and shame upon our people, in order that a few unscrupulous scoundrels might be able to add to their ill-gotten gains.

Dr Mpande says that countries with good mining policies benefit much from their minerals. This cannot be disputed. We are not benefitting much from our mineral resources because of our poor or bad policies. Again, this cannot be disputed. If it is in dispute, why are we not benefitting much from our mineral resources? Why is everyone telling us to change our policies about collecting more revenue from the mines? Are all these experts and institutions urging us to collect more revenue from the mines wrong? And Dr Mpande correctly concludes:

"That's why almost all the countries that are intelligent, Botswana is basing its taxation on sharing benefits from the mineral resources. If you use that route, then you had better become a partner in the production, cutting, marketing of the diamonds. It is capturing 75 per cent of diamond revenue into Botswana and that revenue is being used for development…"

Truly, we are "purely at the mercy of investors, who are declaring profits they themselves determine". For how long should things continue this way?

 
At 9:50 PM , Blogger MrK said...

*** COMMENT - More lies from the mines. The mines would collapse because the Windfall Tax would make them 120% of profits? On the other hand, if FQM's cash costs are higher than $2,50 per lbs (below which the windfall tax is 0%), I would like to see them prove it, because the Cash Cost per lbs at KCM is $1,00 (which would leave the next $1,50 of profit completely untaxed). Cash Cost at Katanga Mining is $1,69 per pound. But FQM claims that their Cash Costs are over $2,50 per pound? Let them prove it.
And another thing - the last time the IMF 'advised' Edith Nawakwi that Zambia should privatise ZCCM because 'copper prices would not rise in her lifetime' (they were about $2000 per tonne at the time, later they rose to $10,000 per tonne), they were dead wrong. When do they pay for being wrong? When will people stop listening to the IMF's 'advice'? - MrK ***


Chikwanda rejects 'street dictation'
By Gift Chanda, Chiwoyu Sinyangwe and Kabanda Chulu
Sat 21 Dec. 2013, 14:01 CAT

FINANCE minister Alexander Chikwanda says government programmes, including reintroduction of the mining windfall tax, cannot be dictated by the feelings coming from the streets.
When asked what the government's position was on renewed calls to re-introduce the windfall taxes, Chikwanda yesterday said people were right to complain that the country was not getting its fair share from the mining sector.

"However, the government has its own programme," Chikwanda told journalists.

"We can't just have our programmes dictated by the feeling on the street, enlightened or unenlightened."

He said the government had its own plans to revise the mining taxation, taking into account the interests of the country as well as ensuring that the mines operate viably.

"The government in this situation is like a dairy farmer; if you want milk from a cow, you don't do things which will kill the cow because you will have no milk. You would want to invest in your cow or cows..., up the nutritional requirements, so that you can get more milk and possibly over an extended lactation period," he said.

"So the government has to do a serious balancing act. We can't just wake up and slap, say, 20 per cent or 30 per cent royalty tax on a little mine which in no time will go under; and if you are a mine like KCM - you employ 20,000 people, you put people on the street."

He said the government had a responsibility to ensure that jobs in the mining sector are secured.
"The assurance, however, I can give the people of Zambia is that the government is alive to the issues relating to tax in the mining industry.

In 2008, under Levy Mwanawasa, the government introduced a windfall tax on base metals at a minimum rate of 25 per cent with a revenue projection of at least US$415 million per annum.
For copper, the windfall tax was pegged at 25 per cent at a price of US$2.50 per pound but below US$3.00 per pound, 50 per cent for the next 50 cents increase in price and 75 per cent above US$3.50 per pound.

But Rupiah Banda's government removed the windfall tax, claiming that it was 'hurting' the mining investments. And following the election of the PF into government, pressure from the civil society mounted for the re-introduction of the windfall tax. However, Chikwanda in 2011 said those calling for the re-introduction of the windfall tax were 'lunatics'.

 
At 9:51 PM , Blogger MrK said...

Continued 1...

And the International Monetary Fund (IMF) says there is need for better enforcement of existing taxing laws for the mining sector.

IMF resident representative for Zambia Tobias Rasmussen said there was also need to maintain policy consistence and stable investment environment in the mining sector.

"The tax regime for the mining sector is fairly standard for the industry," Rasmussen told journalists yesterday. "What is needed is better enforcement of the existing legislation. So, we would advise you go that route than changing legislation."

Rasmussen said the contribution of the mining sector to the overall local economy of Zambia was projected to rise as mining companies ramp up output and new mining projects come on stream.
"We are projecting that there will be an increase in mining revenues in the coming years," said Rasmussen.

"The two important reasons for this is that there will be increased production and some significant expansion underway which will increase production levels and that will also enhance the taxes to government. So, that is the way to approach the need for higher revenues is that area."

Meanwhile, mining industry experts have advised the government to devise an effective taxation policy that would ensure that a fair share of mineral wealth is distributed to local people.
And Chamber of Mines representative Kingsley Chinkuli says reintroduction of the windfall tax regime will be detrimental to the mining sector.

During a discussion on mining taxes hosted by the Economics Association of Zambia in Lusaka, economist Professor Oliver Saasa said the mines were a key component in the development of Zambia and people expected it to play a bigger role beyond the current scenario.

"But the mines are relatively lower players in the economy. While we may accuse the mines of failing to contribute sufficiently, we have also failed to establish effective structures, for instance, Ministry of Mines, Bank of Zambia, Central Statistics and ZRA have different figures and if our tax revenue collection is based on profits, then government should have accurate figures," said Prof Saasa.

"Our capacity is very weak and we have not done well to strengthen institutions that should monitor and get realistic revenue. Even with the windfall taxes, very few paid. Most of them resisted but since we lack capacity, even when we realise that we have been shortchanged, we still lack capacity to change things, so we need to put our house in order to get a fair share."
Financial expert Gilbert Chinyama said there was need to have research-based debates relating to economic governance of the country.

"Research organisations and other think-tanks should carry out studies and make their findings available for people to make informed comments on matters of the economy including the issues of windfall taxes," he said.

University of Zambia School of Mines lecturer Mathew Mpande said there were many forms of taxing the mines.

"There should be a balance between what the mines want and what the community wants but the current system which is being applied to the tax the mines is profit based and this is prone to abuse through tax avoidance, evasion and transfer pricing," said Dr Mpande.

 
At 9:51 PM , Blogger MrK said...

Continued 2...

"In India, they apply the expenditure based. I think it is very fair and Zambia should also tax the mines through this system. For example, when you look at the trucks that haul copper concentrates from Kansanshi to the smelters in Chingola, you realise that these are modern fleets of trucks, so tax the mines based on the expenditure they are making."

And Gen Chinkuli, who is also First Quantum Minerals country manager, said mines would collapse if the windfall tax was brought back.

"Mere attacks based on ignorance will not help the situation. The windfall tax is not the answer. If re-introduced, overall taxes for the mines will stand at 120 per cent, so meaningful consultation is needed to come up with a win-win situation," he said.

"FQM currently pays mineral royalty at six per cent on revenue, 30 per cent profit tax and 30 per cent variable tax also on profits. These are very high tax rates and if more taxes were to be added, then the mines will collapse."

 
At 9:53 PM , Blogger MrK said...

Haabazoka urges Chikwanda not to dismiss windfall tax
By Kabanda Chulu
Sun 22 Dec. 2013, 14:01 CAT

DR Lubinda Haabazoka has urged finance minsiter Alexander chikwanda not to dismiss windfall tax. Disagreeing with Chikwanda's stance on windfall tax, Haabazoka said the government should not reject ideas on mining taxation because all citizens have a common goal to see national economic development.

Speaking to journalists on Friday, Chikwanda said the government's programmes, including the reintroduction of the mining windfall taxes, could not be dictated by the feelings coming from the streets.

When asked what the government's position was on renewed calls to re-introduce the windfall taxes, Chikwanda said people were right to complain that the country was not getting its fair share from the mining sector, but that the government, however, had its own programme.

"We can't just have our programmes dictated by the feeling on the street, enlightened or unenlightened," he said.

Chikwanda said the government had its own plans to revise the mining taxation, taking into account the interests of the country as well as ensuring that the mines operate viably.

"The government in this situation is like a dairy farmer; if you want milk from a cow, you don't do things which will kill the cow because you will have no milk. You would want to invest in your cow or cows..., up the nutritional requirements, so that you can get more milk and possibly over an extended lactation period," he said.

"So the government has to do a serious balancing act. We can't just wake up and slap, say, 20 per cent or 30 per cent royalty tax on a little mine which in no time will go under; and if you are a mine like KCM - you employ 20,000 people, you put people on the street...The assurance, however, I can give the people of Zambia is that the government is alive to the issues relating to tax in the mining industry.

But Dr Haabazoka, the Copperbelt University academician, said everyone was entitled to their own opinions.

"I disagree with the minister on windfall tax because there is nothing wrong for people to call for windfall tax and government should not reject ideas because all of us have one common goal to see national economic development, whether one is for windfall tax or not," he said.
"Windfall tax is key in maximising revenue collection from the mines since it will tax super profits and if the mines make losses, then there will be nothing to tax but as we explore this route, we should also bring sanity to the mining sector by addressing the way profits are calculated, exports are declared and how production is monitored.

This way, we shall get meaningful results. Also government should understand the cost structures of the mines as they come up with taxation policies because operations at KCM can be different from that obtaining at Muliashi in Luanshya."

In 2008, under Levy Mwanawasa, the government introduced a windfall tax on base metals at a minimum rate of 25 per cent with a revenue projection of at least US$415 million per annum.

For copper, the windfall tax was pegged at 25 per cent at a price of US$2.50 per pound but below US$3.00 per pound, 50 per cent for the next 50 cents increase in price and 75 per cent above US$3.50 per pound.

 
At 9:53 PM , Blogger MrK said...

But Rupiah Banda's government removed the windfall tax, claiming that it was 'hurting' the mining investments. And following the election of the PF into government, pressure from the civil society mounted for the re-introduction of the windfall tax. However, Chikwanda in 2011 said those calling for the re-introduction of the windfall tax were 'lunatics'.

And on the International Monetary Fund (IMF) which raised concern over rising fiscal imbalances and lower reserve coverage, Dr Haabazoka, who is head of account and finance department in the School of Business at Copperbelt University, said the statement was timely and the government should move towards increasing reserves.

"The call by the IMF is valid, we need to build reserves by broadening the resource mobilisation, and actually, the culture of savings should not just be encouraged at homes but also at national level, we shouldn't just build two or three months import cover that is used on consumption," Dr Habazoka said.

"We shall have problems if not addressed because debt servicing is done in foreign currency, hence we need to create a stabilisation fund that can cushion unfavourable swings in copper prices or negative impacts in the global economy."

He also commended Chikwanda for proposing the wage freeze.

"Government is over-stretched and cannot afford to offer huge increments, especially that most public service workers got more than 100 per cent and these increments were not tallied to production but to removing imbalances and harmonisation of salaries; so the wage freeze will also help government to plan," said Dr Habazoka.

"And despite the proposed recruitment freeze on those directly on government pay roll, it doesn't mean government will not create employment but this will be done through the various infrastructure projects being undertaken countrywide."

 
At 5:19 PM , Blogger MrK said...

UNZAWU calls for windfall taxes
By By Edwin Mbulo in Livingstone
Wed 01 Jan. 2014, 14:00 CAT

UNIVERSITY of Zambia and Allied Workers' Union has joined calls for the reintroduction of windfall tax on mines. Union president George Katapazi said Zambians are not benefiting much from the mines and the reintroduction of the windfall tax would change the tide.

Katapazi in an interview said the government was doing well on infrastructure development but that this was not backed by a broad revenue base.

Finance minister Alexander Chikwanda last week said the government cannot be dictated to by feelings coming from the streets on the issue of windfall tax. His comments followed widespread calls for the reintroduction of the windfall tax which was scrapped by Rupiah Banda's government in 2009.

The windfall tax, introduced in 2008 by Levy Mwanawasa's government, sought to raise not less than US$415 million annually during periods of high copper prices on the international market.

For copper, the windfall tax was pegged at 25 per cent at a price of US$2.50 per pound, but below US$3.00 per pound; 50 per cent for the next 50 cents increase in price and 75 per cent when prices are about US$3.50 per pound. Katapazi said with an increased revenue base through the reintroduction of the windfall tax, the government would be able to embark on other developmental projects apart from those already started.

"What the government has embarked on is great in terms of infrastructure development such as the roads, stadiums, schools, clinics, administrative offices for new districts and hospitals, but it needs a broad revenue base for new developmental projects," said Katapazi.

 
At 2:51 PM , Blogger MrK said...

Support from Malawi?

(NYASATIMES) Dassu tips Malawi on ‘windfall tax’ as Mutharika encourages FDI
August 13, 2014
Thom Chiumia -Nyasa Times

Malawian UK based governance activist Ahmed Dassu has tipped Minister of Finance Goodall Gondwe to consider introducing ‘windfall tax’ collected from the two sectors of the economy, which has benefited most from government budgets – the successful bidders of contracts to supply the government going back to 1994 and the mining companies which exploit the country’s mineral resources.

Dassu told Nyasa Times in an exclusive interview in London in reaction to reports that government is looking towards implementing punitive tax measures in a bid to close the 2014/2015 huge budget deficit gaps emanating from the decision by its partners not to support the national fiscal plan.

Dassu shares notes with Mutharika in VIP bus at Kamuzu International Airport: File photo

“Malawi continues to face immense challenges as a result of the donors withholding aid to Malawi. We should all be concerned,” pointed out Dassu.

He, however, said increasing taxation will not be an ideal situation.

“ I think it would be punishing to increase the burden of taxation on the ordinary working Malawian, including the civil servant, police and defence personnel,” said Dassu.

He campaigned for a windfall tax “focusing on the sector where no less than $6 billion of public funds have been shrunk since 1994 first – the supply of pharmaceuticals and FISP fertilizer, it is the same companies in one guise or other who benefited.”

Dassu argued that local suppliers were contracted by successive governments to generate liquidity in the economy to develop the country’s commercial and industrial sector and create employment opportunities.

But noted that “sadly Malawi has not seen the benefit from awarding contracts to these local enterprises, with the sole exception of an indigenous Malawian business enterprise which has expanded into other fields of businesses thereby creating employment.”

 
At 2:52 PM , Blogger MrK said...

Continued...

And as for the mining sector, Dassu pointed out that Malawi’s antiquated mining laws which enabled generous incentives to be provided to Paladin for uranium mining in Karonga “ demonstrate that our government has been overly generous to the mining sector.”

He noted: “The fees for Exclusive Prospecting Licenses, Mining Licenses and taxes / royalties on minerals mined, are not in line with the amounts charged in other countries including Zambia and Zimbabwe.

“Therefore a one off windfall tax on these two sectors should be seriously considered. Based on the value of contracts and minerals mined and sold.”

He said the windfall tax will be “the most prudent, most fair and most painless way of minimizing the deficient in the Budget instead of imposing additional burdens on the working Malawian.”
Recently, Gondwe announced that the 2014/2015 budget is expected to be pegged at K743 Billion (US$1 790 361 446) but admitted that the budget is likely to face challenges in several sectors due to a likely huge deficit.

Major donors are tenaciously gripping to their budget support to Malawi resulting into government facing a huge fiscal gap as resource envelop falls significantly short of the planned expenditures.

Malawi needs adequate domestic revenue to finance critical expenditure on social services such as health and education and narrow the budget deficit—a situation when government spending is greater than tax revenues—in the process.

Meanwhile, President Peter Mutharika has called upon Malawians and those working in government to “attract foreign investors” saying the opportunities are out there waiting to be tapped.

Mutharika told a news conference in the capital Lilongwe on Tuesday that his government will strive to create an enabling investment climate that will in turn attract Foreign Direct Investment (FDI).

 
At 3:41 PM , Blogger MrK said...

Chikwanda is double-dealing
Edited by Joseph Mwenda | Updated: 18 Aug,2014 ,13:08:43

FR Richard Luonde has accused finance minister Alexander Chikwanda of double-dealing the Zambian government with the mines and of eating with both hands. And Fr Luonde has challenged Chikwanda to deny that he has interests in supplying to the mines in Zambia. He said Chikwanda is protecting the interests of the mines in Zambia because he is a supplier to the industry.

“Chikwanda is double dealing us with the mines and is eating with two hands. We expected him to say ‘since I have business interests in the mines, let me stay away from politics’ or better still, relinquish his business connections with the mines. But he has continued to eat with both hands. He is enjoying a ministerial salary with so many benefits and allowances and also wants to eat from the mining sector through supplying,” Fr Luonde charged.

He said Chikwanda should not be allowed to superintend over the financial affairs of the country when he had vested interests in the mining sector.

Fr Luonde said Chikwanda’s decision to help the mining companies in reclaiming Value Added Tax (VAT) refunds from the government was clearly meant to impress his business partners in the sector to which he was supplying.

“It is, therefore, not shocking that Chikwanda whom the Zambian people have entrusted with the responsibility of collecting revenue from the mines is helping the same companies to milk the government by proposing a US$600 million payment to the industry in tax refunds. This is because he doesn’t have the interests of the Zambian people at heart,” Fr Luonde charged.

He wondered what kind of National Budget proposal citizens should expect from Chikwanda if he was directly influencing the mining policy while also benefiting from the country’s major economic sector.
And Fr Luonde urged Chikwanda to stop threatening to sue people who point out irregularities in the way he was managing national resources.

“He should stop threatening to sue people who are saying that his position regarding the mining sector is untenable. Where is his ethical morality in this matter? Let him be brave and tell the Zambian tax payers why they should not demand his resignation as finance minister,” he said.

Fr Luonde said Chikwanda’s conflict of interest borders on criminality.

“His involvement with the mines is tantamount to fraud, I am therefore asking Mr Chikwanda to deny if any of what I am saying is not true,” challenged Fr Luonde.

 

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