Monday, March 10, 2014

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.

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 developmentā€¦"

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

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