Monday, December 30, 2013

KCM seek to meet Sata
By Staff Reporters
Wed 06 Nov. 2013, 14:01 CAT

KONKOLA Copper Mines (KCM) is seeking to meet President Michael Sata to explain it's plans to cut over 1,500 jobs at Nchanga underground. And Ngandu Magande says President Sata's warning to KCM to revoke the mining licence is a wake up call to other mining companies. Meanwhile, MMD president Nevers Mumba says there is no leader that will want to see people get on the streets without jobs.

In an interview, Joy Sata, KCM corporate affairs manager, said the firm had fully read President Sata's statement and was currently seeking an appointment to explain its position on the matter.

"Our position is that we have read the Presidents' statement and we shall endeavour to engage him over this matter," Sata said in an interview.

"For now, I am not sure we can say anything more than that and that remains our position for now."

And commenting on President Sata's statement that KCM was blackmailing the government, Magande said President Sata's statement might have been as a result of lack of cohesion and consultation in the Ministry of Mines.

"It's only KCM who have said this and other mines could be doing the same way. Let the mines minister listen to KCM if there is indeed need to lay off people or employing them elsewhere. That's where the government comes in and asks other mines to take them on. That's the role of government," Magande said.

Magande said the government should continue to dialogue with KCM.

He said the director of mines and the minister should have adequately informed President Sata on what was obtaining on the ground.

Magande said there was no way mining companies would avoid new technologies in their operations.

"On purely technical level, all industries' technology will always be there whether we like it or not. It's there to help us to do business easier and cheaper," Magande said.

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

"There is no leader that is going to want to see people disinfranchised and get on the streets without jobs. When KCM finds itself in this position, I think they should reduce their rhetoric in the media and seek urgently for an opportunity to talk with government and be able to put on the table their challenge and reach an agreement of some sort. They should meet with the unions in the spirit of explaining to them where they are. And out of that type of consensus, I think the result is going to be favourable to all parties involved," Mumba said.

"...I think they should be level headed, this is what is involved in investment, there are ups and downs. Sometimes you have to give a little in order to gain later."

Mumba, however, said the position that the government had taken was wrong saying confrontational methods were not the best way of resolving industrial matters.

Mumba said the government must understand that Zambia was a private sector driven economy and as such the government should engage the mining owners into dialogue and find a win-win solution.

"This is also for them to continue paying taxes to our government. We do not agree with this confrontational shouting from an anthill, either from State House or from the Ministry of Finance demanding that we will revoke your licence unless you keep the people on the jobs. It is not as simple as that, I think it is government's responsibility to push for dialogue. This is not the first time this is happening in Zambia. Under the MMD we had a situation where the mines wanted to lay off workers because the copper prices went down, but I do not remember it being done through arrogance or using political power to shout at the investors," he said.

Mumba said what worked for the MMD was dialogue and engagement with the private sector.

He said the statements from President Sata that KCM should 'go to hell', should never be made public.

"If he wants to make those statements, he can make them under the cover of the boardroom where the government engages private sector. Unless the talks break down, there is a dispute then may be out of responsibility to inform the nation, then they can make such statements," he said.

Alliance for Better Zambia president Frank Bwalya said President Sata should adopt a better approach in dealing with KCM.

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

"We do as a party condemn the attempt by KCM to lay off people because it is not justified. This is a very serious issue concerning an investor that employs a lot of people in our country and I think that the President could've avoided making such a statement to revoke their licence. What he should've done is assign people who are already working in government such as the responsible minister Mines, Minister of Labour and a few other government officials to engage KCM and find a better solution than just threatening to revoke," said Bwalya .

He appealed to the mining firm to respond favourably to the threat made by the President.

"The mining companies operating in the country and all investors have to understand that the President is carrying the lives of people on his shoulders and that he has citizens to protect. They should not be scared; they should respond favourably to the threat and do the right thing. We need a win-win situation," said Bwalya.

And Mineworkers Union of Zambia (MUZ) president Nkole Chishimba said in an interview that the threat was 100 per cent justified and was a 'welcome move' by the President.

"The company is not cooperating with any other stakeholders. When they wanted to retrench 2,000 people, we intervened as a union, the government also came in, and though they appeared to have stopped, they started scheming other things like tampering with conditions of service. All those things put together, KCM is not appearing to have any meaningful dialogue with anyone. He the President is 100 per cent justified, because that is what we were also asking him to do. There must be a rationale behind the President having said that threat to revoke. If we say what are the implications, then it is like we are very hesitant and we are allowing KCM to continue the impunities in which they are doing things'' said Chishimba.

Meanwhile, KCM has sued the Zambia Revenue Authority following its June 19 tax audit-triggered decision to charge and levy Valued Added Tax against the mining giant's export sales for the period January 2011 to March 2013 amounting to over K3.2 billion.

And Konkola Copper Mines Plc has further sued the Zambia Revenue Authority over its October 7 decision purporting to unilaterally standard-rate the mining firm's sales contained in its Valued Added Tax return for the months of July, August 2013 and subsequent months.

In its originating notice of motion filed in the Lusaka High Court principal registry on October 31, Konkola Copper Mines Plc KCM's application is for an order of certiorari, mandamus, prohibition and declarations challenging the ZRA's decisions to arbitrarily apply Value Added Tax (VAT) at the standard rate of 16 per cent on its export sales of copper cathodes instead of applying the zero per cent rate for export sales as provided for by the Laws of Zambia.

KCM also wants the High Court to quash both decisions which it has attributed to the ZRA Commissioner General Berlin Msiska and that the court should also compel ZRA to accept the evidence of proof of export documents availed to it by KCM and further restrain it from enforcing the provisions of Rule 18 of the Value Added Tax General Rules, Gazette Notice Number 191 of 1995.

KCM's desired order of prohibition seeks another restraint on the ZRA against enforcing an amended Value Added Tax General Rules as published in the Gazette Notice number 26 of 2013 of January 11, insofar as it purports to provide that it is a requirement that a certificate of importation into the country of destination is a condition precedent to prove export of goods for zero-rating purpose.

In KCM's affidavit in support of an ex-parte summons for leave to apply for judicial review and signed by its Chingola-based business controller Joel Chitambala, the Vedanta Resources-owned mining company described itself as a tax-compliant mining concern carrying on major mining operations at Nchanga, Konkola, Nampundwe and Nkana.

"On the 9th day of April, 2013, the applicant received a letter from the respondent dated the 15th day of March, 2013 informing them that they intended to undertake a specialised Valued Added Tax audit with respect to export sales," Chitambala stated. "On the 7th day of June, 2013, the respondent authored a letter addressed to the applicant informing them that their audit had revealed that the applicant had not complied with the provisions of Rule 18 of the Value Added Tax General Regulations Amendment Rules, 2013."

Chitambala outlined that according to the ZRA's findings, KCM failed to provide import documents bearing certificate of importation into the country of destination and receiving payments for exports through a foreign bank account based in the United Kingdom and not in a bank account based in Zambia.

"On the 10th day of June, 2013, the applicant responded to the respondent's purported audit findings," Chitambala submitted. "To the applicant's surprise, the respondent on the 7th day of October, 2013, proceeded to issue a global letter stating that the applicant's Valued Added Tax returns for the month of July, August 2013 and subsequent months would be adjusted to standard rate the export sales unless proof of export was availed to the respondent."

Chitambala described the decision by ZRA as an illegality, impossibility and unreasonable in the sense that KCM had evidence of proof of export beyond shadow of doubt.

"The applicant produces and sells various copper products. That approximately 95 per cent of the total copper produced by the applicant is exported to international markets, while the remaining five per cent is sold locally to Zambia Metal Fabricators Limited," the affidavit read.

Chitambala argued that these international metal traders were actually international middlemen that purchase these products from KCM for the purpose of reselling to the final consumer and in accordance with international norms and trade practices.

"In the circumstances, it is impossible to expect the applicant to be aware of the final destination of the copper products and as such the applicant cannot be expected to be in a position to render a certificate of importation into the country of destination," Chitambala stated.

"Once the international metal traders have sold the copper products on high seas to third parties, who remain undisclosed to the applicant the ultimate final destination of the copper products changes."

KCM has further described the ZRA's decision against it as baffling in the midst of the evidence availed to it and if the assessment amounting to K3,243,393,362.94 was sustained and the decision to standard-rate future export sales was also sustained, it would seriously affect the operations of the mining firm and result in irreparable damage.

"The applicant's financial situation is already strained by the fallen copper prices," Chitambala stated. "The Value Added Tax being demanded by the Applicant forms a significant portion of the applicant's working capital used to pay critical suppliers, service providers and employees."

KCM are being represented by Eric Silwamba, Jalasi and Linyama Legal Practitioners of Lusaka.

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