Monday, December 16, 2013

(STICKY) Zambians should have access to mining agreements - Banda
By Gift Chanda
Fri 13 Dec. 2013, 14:00 CAT

ZAMBIANS should have access to all 'secret' mining agreements between the government and various mines to boost transparency in the extractive sector, says an industry official.

And ActionAid says the Zambian government cannot continue to ignore fresh calls for windfall tax and the need for Zambia to benefit from its mineral resources.

Zambia Extractive Industries Transparency Initiative Secretariat head, Siforiano Banda, said disclosure of existing and future mining agreements signed between the government and the mining firms was important as it would not only boost transparency, but also help beat tax evasion in the extractive sector.

Countries like Guinea have already made their agreements public by posting them online, but only after losing much of their national heritage through lopsided deals with cunning Western mining concerns.

On Monday last week, Ghana's President, John Dramani Mahama said his government would embark on a renegotiation exercise with companies, especially those in the extractive industry on new stability agreements.

In a move that could see Ghana follow Guinea's path, the head of head, said the current stability agreements which were signed for 20 years and beyond were not favourable to the government since the players would continue to receive the same amount of royalties, even if prices of such commodities are sky-rocketing on the world market.

"What Ghana is looking to do is the right thing. It is important that these agreements are reviewed and made public," Banda said, adding that the secrecy around the agreements promotes tax evasion by some mining firms in many African countries.

He explained that disclosure of the agreement was important as it would not leave Zambians guessing how the country was faring with regard to benefiting from its minerals.

According to Banda, the Zambian government in 2008 rescinded all development agreements it entered into with mining firms.
"...but there are some mining companies that have not adhered to the government directive," he said.

"It is in the interest of the public that the government discloses those companies. We also need a law to compel mining companies to disclose their tax contribution to the government because currently, it is voluntarily."

Pressure has been mounting lately on the government to ensure the country gets a fair share from its mineral resources following an overshoot in this year's national budget deficit.

Pamela Chisanga, ActionAid country representative, said with the fresh calls on windfall tax, it is apparent to many citizens that in spite of increased mineral production, Zambia was benefitting little from its mineral resources.

Zambia's 2013 copper production is forecast to exceed last year's output, which dropped to 824,976 tonnes from the previous year's 881,108 tonnes.

"Zambia currently does not have a robust mining tax structure to effectively tax the different mining operations and as such have failed to collect reasonable taxes from the mining sector," she said in an emailed response to a press query.

"The PF government promised to re-introduce the windfall tax once elected into office, but has since backpedalled on this without giving any reasonable justification why windfall tax is no longer an option. Mining companies have also failed to provide an explanation on why it is not good for Zambia to reintroduce the windfall tax as this is based on excessive profits and would not take effect below a given threshold."

She appealed to the government to re-open discussions with mining companies on the windfall tax and to allow for broader citizen engagement in the discourse.

"The government should further look at developing a robust mining structure to effectively tax the different mining operations in the country," Chisanga added.

In a new report "Walking The Talk", published on Tuesday, ActionAid observed that increased budget spending allocation to agriculture was being held back by a poor tax policy by governments.

The Zambian government spent just 6.4 per cent of its national budget on agriculture during 2009-2013, risking even greater food insecurity across the country, according to the report, which recommends that one option to combat this problem is to effectively tax and collect optimal revenue from mining companies.

"Empty words won't feed empty stomachs. The Zambian government must follow through on its promise and provide more money, ensuring it is better targeted to help the majority of Zambia's citizens, who earn their livelihood from agriculture," said Chisanga.

"To help them accomplish this, the government should revisit the current tax rates which apply to mining companies to see what opportunities exist to ensure that they make a fair contribution to the overall national budget through their tax contributions."

Although copper mining is the economic lifeblood of Zambia, some analysts argue that the country does not reap enough benefit because the mines are owned by foreign companies.

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At 6:38 PM , Blogger MrK said...

Complicated industry to monitor, supervise
By Editor
Mon 16 Dec. 2013, 14:00 CAT

If the Zambian people are to get any meaningful benefits from the exploitation of their country's mineral resources, a lot of work needs to be done on strengthening the Ministry of Mines' capacity to regulate mining activities.

As things stand today, it cannot be said that the Ministry of Mines has the organisational capacity to adequately supervise the exploitation of the country's mineral resources and ensure that it is carried out in an efficient, effective, orderly and beneficial manner.

A few weeks ago, we highlighted the conflict of interest arising from the permanent secretary in the Ministry of Mines sitting on the boards of mining transnational corporations. We pointed out that as a chief controlling officer, the permanent secretary had a fiduciary duty to the people of Zambia and ensure that mining activities are carried out in a manner that is most beneficial to them. Equally, as a director of a mining enterprise, he also has a fiduciary duty to ensure that the interests of the mining transnational corporations are maximised. The permanent secretary has a duty to keep the secrets of the Ministry of Mines from the mining corporations on whose boards he sits. Equally, the permanent secretary as a director has a duty to keep the secrets of the companies on whose board he sits secret. A director of a company is not a representative of the individual shareholder but of the company itself.

Of course, the Minister of Mines doesn't see things this way; doesn't see anything wrong with the permanent secretary representing the interests of both the government and the mining transnational corporations at the same time. We will not belabour the merits or demerits of this arrangement any further because it is a clear case of conflict of interest, that whether one accepts it or not doesn't need any more disquisition.

And this is not the only challenge facing the Ministry of Mines' regulatory role. The mines need very highly skilled and experienced government workers to monitor them. Such government workers need to have a lot of practical and theoretical knowledge about policy matters relating to the mining sector.

The Ministry of Mines need very well trained and highly experienced engineers, economists, financial experts, lawyers and other professionals who are able to interpret feasibility studies of these mining companies and other issues and point out things that require special attention. They need to have the experience to analyse and bring out the issues which are today haunting us like the declaration of losses by some mining corporations even with unprecedented high copper prices.

At the beginning of any mining project, the Ministry of Mines and the Zambia Revenue Authority need to be there so that the expertise of these two institutions complement each other. It is irresponsible of us to continue to allow a situation where a mining corporation sets up a building foundation for a smelter and presents an invoice amounting to almost US$300 million. What type of building foundation is this that costs so much? These costs are deductibles, meaning they are expenses that are deducted from their income and when they are inflated, they will sometimes exceed the income. And when this happens, no taxes are paid because the concerned mining corporations will be declaring losses.

This is the normal trend with some of these mining corporations operating in Zambia today which don't want to pay anything to government.

At 6:39 PM , Blogger MrK said...


The Zambia Revenue Authority should monitor these projects from the very beginning and determine the prevailing market prices of equipment and other consumables that are brought into the country. If all this is left to the mining houses to determine and report on their own, they will continue declaring losses and never pay taxes to the government or will pay minimal amounts because of the exaggerated costs.

The supervision of all this calls for highly qualified and experienced personnel in the Ministry of Mines, and at the Zambia Revenue Authority and Ministry of Finance in general. You cannot employ fresh university or college graduates to monitor the activities of an industry they don't fully know, they have never worked for or with. How can they be expected to understand things they have never experienced? They need to be trained by seconding them to the industry so that they get to know the operations of mines. Emphasis should be made in the critical areas that are relevant to the operations of the Zambia Revenue Authority or the Ministry of Mines. By saying this, we are not in any way implying that other auxiliary operations should be neglected. No. What we are saying is that emphasis should be placed on issues that are important in relation to the two institutions.

This issue of experience is more serious or pronounced within the Ministry of Mines. For instance, how do you employ a mining engineer or metallurgist and send them to inspect a mine when they have no practical or work experience of how a mine operates? What type of standards can such an engineer set? What regulatory role can such an engineer really play?

That they are mining engineers or metallurgists with bachelor of science degrees from the university does not in itself mean that they understand the operations of the operations of mines. Technology has advanced so much that some of the theoretical things they learn are simply for the classroom, are outdated and of no practical use anywhere. An engineer needs the practical experience to effectively execute his or her regulatory duties. What can a fresh university graduate advise policy-makers on issues relating to the mines if they have never worked there? These are some of the engineers running or managing our regulatory institutions - with no clue about what really happens in a mine.

Mining requires some practical experience and is different from lecturing, where one teaches what is written in textbooks without any practical experience. One can proceed and get a PhD without any practical experience.

We, therefore, urge the leadership of our country to mull over things and without prejudice consider the issues we are raising. If we are to get something meaningful out of the exploitation of our mineral resources, we have to increase our understanding of how best to deal with the mining corporations.

This is a complicated industry requiring a lot of experience and knowledge on the part of our policy-makers and the regulatory authorities. At the moment, this is seriously lacking. And as a result of this, the country is getting very little, if not nothing, from the exploitation of its mineral wealth by transnational mining corporations. This cannot continue. Some patriotism is needed. There is need for responsibility to the current and future generations.

If we can't get anything meaningful from the exploitation of our mineral wealth, let's leave that to the future and more competent generations to beneficially or profitably undertake.

At 4:59 PM , Blogger MrK said...

Removal of windfall tax was painful to Zambians - Mulongoti
By Kombe Mataka
Tue 17 Dec. 2013, 14:01 CAT

MIKE Mulongoti yesterday said that the decision by the Rupiah Banda regime to remove the windfall tax was painful to Zambians who had given them the mandate to rule. And Mulongoti has cautioned the PF to seriously reflect on the need for unity in the country as the year comes to an end.

Reviewing the PF's performance this year in an interview, Mulongoti, who is People's Party president and former works and supply minister, said the PF must seriously review the tax regime of the country.

"The truth of the matter on the windfall tax is there are some of our colleagues who were so determined to ensure that the windfall tax remained. It is not everybody in Cabinet (Rupiah Banda's) who supported it," Mulongoti said.

Mulongoti said he was aware that Banda had referred to him during a workshop held recently by FODEP when he spoke about the issue of the windfall tax but that he failed to mention that it was a very painful decision for many Zambians.

"Mind you, there is what we call collective responsibility; it was so embarrassing that we said, 'what are we going to tell the people because we were there and called to lead'. I can tell you it was a very painful decision. Not everyone in Cabinet supported it, but you see, we were overwhelmed by some of our colleagues who pushed that agenda for whatever reason, very vigorously. The minutes are there in Cabinet, it is not something new which has come up. We supported it fully when it was introduced and we were not convinced why it was removed."

Mulongoti said there was no moral justification for the government not to re-introduce the windfall tax.

"The benefits that came from the U$S480 million which government accrued from the introduction of windfall tax, surely who would not be happy with such money coming in the treasury?" Mulongoti wondered.

"Was there any reason to lose that money? Go to the Congo DR, they are getting maximum benefits from their minerals. Go to Zimbabwe, President Robert Mugabe says shareholding must be 50 per cent to indigenous people. It is a lie that investors will go away. Let me tell you, investors will not go away."

At 5:00 PM , Blogger MrK said...


Several quarters of the Zambian society have called for the re-introduction of the windfall tax but the government has indicated it will not consider that option.

And Mulongoti said the PF should focus on working in unity in order to consolidate political gains next year as opposed to engaging in squabbles.

"They have spent more time trying to accept that they are in government and then there was a development which was very sad, that within themselves, they started positioning themselves for the future as opposed to consolidating their gains," he said.

"Now the future cannot be assured if the current situation is failing. You can assure yourself of the future but if your performance is bad, no matter how much you plan for the future, you will short-change yourselves. PF needs to concentrate as a team to build their performance, to remain a united force and not to take away from each other or subtracting from each other's integrity."

Mulongoti observed that there was too much focus on the top position of the party by many senior members as opposed to making the party much stronger on the ground.

"Everyone seems to be eyeing the top and the top is not within sight. The people of Zambia gave them the mandate and that mandate came with a lot of expectations."

And Mulongoti said the removal of subsidies on maize and fuel was a hard decision.

"What has happened is the PF has made some decisions that are very hard, like removal of subsidies, which I feel they must reconsider because it is going to cost them. The price of staple food is going up, fuel prices have gone up and people are very unhappy about that. World-over, governments try to cushion the impact on food and at some time fuel," Mulongoti said.

"Secondly, they seem to be underestimating the anger of the people over this Constitution."


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