Maravi

Windfall tax will be disastrous - Xingeng
By Misheck Wangwe in Luanshya
Wed 25 Dec. 2013, 14:00 CAT

IT will be a disaster for the mining sector if the government acts on calls for the reintroduction of windfall tax, says CNMC Luanshya Copper Mines chief executive officer Luo Xingeng.

But Reverend Richard M'bao has argued that reintroduction of windfall tax is inevitable and the PF government must bring to an end the manipulation of mineral resources by putting up a more effective fiscal regime.

Briefing the press in Luanshya after the annual awards ceremony for miners, Luo said windfall tax, if introduced, would scare away foreign investment in the mining sector.

He said mines like Luanshya Copper Mine's Baluba Mine had huge challenges and the company was making efforts by reinvesting in it to make it survive.

Luo said windfall tax would discourage such investment because some mines were currently surviving only through serious capital injections and were yet to record significant production.

"If Baluba Mine was a tree, we can say it almost dried. We are putting fertiliser to save it and we know we are not going to see its fruits anytime soon. So windfall tax will be disastrous if reintroduced. What Zambia needs right now are favourable policies that will encourage more investment, create jobs while helping to create wealth," Luo said.

And speaking earlier during the awards ceremony for miners, Luo said production at Baluba met huge challenges as the trackless equipment was in poor condition, the new long-hole drilling machine was extensively damaged, and defects also existed in production management.
He said all the challenges resulted in the failure to achieve the 2013 production target.

"From January to July, the unit cost of copper in concentrate reached US$7,980 per tonne, which was close to US$8,000 dollar per tonne. However, the London Metal Exchange (LME) copper price was about US$7,100 per tonne on average. From the comparison of the cost of production and the selling price, I wish you can fully understand how difficult it is for management to keep Baluba surviving," Luo said.

He said to reduce the high cost and save Baluba, the company quickly replaced the damaged drilling machine and strengthened the cost control. From August, the cost of production slightly reduced and production returned to normal.

Luo said at CLM's Muliashi Mine, after going through huge hardships, the new mining process and technology had shown great life.
He said the agitation system had surpassed the design capacity, which reduced the negative impact of the low ore grade.

Meanwhile, former chairperson of the Pastors' Forum for Eastern and Southern Africa, Reverend Richard M'bao said the poverty situation in Zambia amid rich mineral resources was a serious contradiction that must be addressed through the introduction of appropriate taxes.

Commenting on calls for the PF government to reintroduce windfall tax, Rev M'bao said it was unacceptable that Zambia had almost 70 per cent of its people living in abject poverty with very little access to basic requirements like clean water and energy.

"We can say that for many years now, the country has been yearning for appropriate taxes, the current fiscal regime for the mining sector is inadequate and Zambians deserve more that what has been offered. Zambians need windfall tax so that when super profits are made by foreign investors in the mines, those companies will not take away everything but share with the government and the people," Rev M'bao said.

"Remember when the late president Mwanawasa introduced windfall tax, benefits of that were seen by ordinary citizens. It became clear that the decision of his successor Rupiah Banda to remove windfall tax was not in the best interest of the nation, hence the need for President Michael Sata's administration to reintroduce windfall tax."

He warned that if Zambians were not careful, the country's natural resources would diminish and investors would run away, with the country having nothing to point at as benefits of having minerals.

Labels: LUO XINGENG, RICHARD M'BAO, TAXATION, WINDFALL TAX

posted by MrK @ 12:38 PM