Monday, December 30, 2013

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.

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.

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