Refusing windfall tax is an injustice - Sardanis
By Joe Kaunda and Chiwoyu Sinyangwe
Fri 12 Nov. 2010, 04:00 CAT
Andrew Sardanis has described the government’s refusal to reinstate the windfall tax regime in the mining sector as an injustice to the country. And economic consultant Bob Sichinga has advised opposition political parties to make the issue of restoring windfall tax a campaign issue in next year’s general elections.
In an interview, Sardanis who presided over negotiations during the nationalisation of the mines under the Kenneth Kaunda administration, said he was appalled to learn that government was only getting 2.6 per cent in revenue from the exports of copper that stood at US$2.9 billion despite the huge boom in metal prices.
“…in other words a total tax of only 2.6 per cent of total revenue. When the mines were bought by the current owners, the copper prices stood around US $1,500 per tonne, but the price has shot up to the current over US $8,500,” Sardanis observed.
He described the low revenue from the mining sector to the government a huge anomaly and an injustice to the country especially that the global markets were still predicting a further rise in metal prices on account of an anticipated long term shortage of copper.
“It is an injustice for the government to only collect US$ 77.6 million from copper exports valued at US$2.9 billion. And I do not see that the mines themselves in their heart of hearts would consider it an injustice to pay extra more,” he said.
And further disagreeing with finance minister Situmbeko Musokotwane’s assertions that any changes to the current tax regime in the mining sector would chase away investors, Sardanis maintained that it was time government realised that the country was losing an opportunity to benefit from the remarkably high copper prices.
“Do you honestly think they (mines) are going to close down and leave? The reality is that at the moment there is predicted a long term shortage of supply (of copper) which would mean the price is likely to rise even further. So I do not understand why there are these fears of the investors leaving,” Sardanis stated.
“They (government) ought to realise that copper is a wasting asset, it is not going to grow in the ground again.”
He expressed concern at what would be a missed opportunity for the government to pass on the benefit from the mining sector into the socioeconomic development of the country.
And Sichinga, who has described President Rupiah Banda and Dr Musokotwane as unpatriotic for opposing the reintroduction of windfall tax, has charged that despite increasing pleas for maximising revenue collections from the mining sector, the government has continued to be adamant and irresponsible.
He said it was in this vein that campaigning on the platform of increasing tax collections from the mining sector would determine how serious the opposition political parties were to the governance of this country.
The mining sector which contributes about 70 per cent of the foreign exchange earnings and about 11.2 per cent of the country’s gross domestic product only accounts for just over one per cent of the revenue collections by the Treasury.
“I am suggesting that if political parties were serious, they should make this a campaign issue,” Sichinga said.
“They should say to the people that we are failing to get development because your government is not serious about obtaining the benefits of our God-given endowment to your country. So, if I were in politics, that is exactly what I would be saying. I will be making this a campaign issue that ‘the government is irresponsible, not being patriotic and failing to do what is necessary’. Why tax you and I at 35 per cent and tax the mines almost nothing?”
Sichinga said the re-introduction of the windfall tax should be also debated in Parliament and those members of parliament (MPs) who oppose it should be exposed and de-campaigned. He charged that President Rupiah Banda and Dr Musokotwane were not patriotic to this country.
“Why would any patriotic citizen or leader stop that windfall tax? That issue is so crucial such that the civil society and ordinary citizens will continue to argue they must impose that tax,” Sichinga said.
“I am also urging Parliament to reintroduce this topic and even if they get defeated, they must ask for a division and we must know which people are supporting the government over this failed and imprudent manner of taxing the mines. They should be named during the campaigns that these are the people who refused to have taxes imposed on the mines and let them go to the Copperbelt and campaign on that basis.”
He observed that the current regime favoured getting underhand payments from the foreign mining firms at the expense of the country.
“What justification is there? What is clear is that the government wants to benefit from these mines by them giving them campaign monies and that is why they are not imposing these taxes,” he said.
“There is no other reason. We have written, we have spoken, we have made our case… Dr Musokotwane, the president and their cabinet have not given us any justifiable reason why they mine should not being paying taxes.”
Sichinga also dismissed assertions by the government that windfall tax on the mining sector would scare away investors.
He said evidence has shown that countries that were increasing taxation in the aftermath of the global economic crisis remained stable as no investor had shown any signs of movements.
Sichinga also rejected Dr Musokotwane’s insistence on the application of variable profit tax as not feasible because the government does not understand the cost structure for most mining operations.
“In our country, the mines have different costs of production but the maximum you can expect from even the ones with the lowest ore content is not to go beyond U$ 2, 000 per tonne,” he explains. “That means they are making super profits between the US $2, 000 mark and the US $8, 000.”
He further dismissed the announcement that the government would audit mining firms for tax compliance.
“They are saying they are going to carry out an audit of what has been exported. It means they don't even know what has been exported at the moment,” said Sichinga.
“Otherwise why would they be asking for an audit now? What have they been doing all along? On what basis have they been taxing the mines in terms of the exports? It frightens me that you can have a government saying that they are going to carry out an audit and yet they are arguing that the mining companies would leave Zambia if they were to impose taxes.”
He reminded the government that with windfall tax, nobody would be taxing the mines when they made losses or when the copper price fell below an agreed level.
Labels: ANDREW SARDANIS, ROBERT SICHINGA, WINDFALL TAX
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Chiluba goes for KK, LAZ vice-chairman
By Bivan Saluseki and Noel Sichalwe
Tuesday May 15, 2007 [04:00]
SECOND Republican president Frederick Chiluba has requested Dr Kenneth Kaunda not to issue unguarded statements designed to heighten emotions over his London judgment. And Chiluba has accused former president Dr Kaunda of fraud and corrupt practices as contained in businessman Andrew Sardanis' book, which according to Chiluba, discusses the loss of US $250 million in 1973 through the abrogation of mining agreements, and ZIMCO bonds issued thereafter. But Dr Kaunda said he would only respond to Chiluba's accusations tomorrow.
Meanwhile Sardanis said Chiluba had got his figures wrong and urged him to read the book again, saying, "Morality I was brought up with is that you don't kick a man when he is down. I shall make no further comment."
Reacting to Dr Kaunda's advice that he should be remorseful for stealing from Zambia, Chiluba said it was not strange that Dr. Kaunda had always joined forces that raised a smear and sustained campaign against him. Chiluba requested Dr Kaunda to read Matthew 7:1-4 which he (Chiluba) quoted and read: "Do not judge or you will be judged. For with what judgment you judge you will be judged. And with the measure you use, it will be measured to you. Why do you look at the speck in your brother's eye, but not consider the plank in your own eye? Hypocrite! First remove the speck from your own eye, and then you will see clearly to remove the speck from your brother's eye."
Chiluba said the fact that he did not publicly expose corruption allegedly involving Dr. Kaunda was not a sign of weakness but an acknowledgment of the immense responsibility he held as head of state to safeguard national interest and stability rather than perform to the gallery. He said he passed the former Presidents Benefits Act of 1993 to cater for the welfare of former heads of state, as Dr Kaunda had not prepared for his and other leaders' retirement. Chiluba said the assertions that Dr Kaunda's benefits were never given to him were a total lie as his benefits were only briefly suspended in 1996-1998 when he held partisan office as UNIP president contrary to the provision of the law.
"It is for this reason that we request Dr Kaunda not to issue unguarded statements that are merely designed to continue to heighten emotions over this judgment. It is however not strange that Dr. Kaunda has always joined forces that raise a smear and sustained campaign against me to fulfil their hideous agenda," he said.
Chiluba requested Dr. Kaunda to read Andrew Sardanis' book, which discusses the loss of US $250 million in 1973 through the abrogation of mining agreements, and the ZIMCO bonds issued thereafter. "According to this book, Dr. Kaunda played a dirty but backroom role, showed no inclination to investigate even after having been warned of the impending fraud pages 266-263, to ensure that his friend Tiny Rowland of Lonrho benefited from the early redemption of the ZIMCO bonds. In 1973, Zambia further lost another vast sum of US $100 million in the TIKA Steel Works project, TIKA standing for Tito and Kaunda, in Solwezi. All studies attribute to the beginning of the serious economic decline of Zambia to 1973. We should include among other factors these major frauds," he said.
"There are other serious acts of fraud and corruption in Dr. Kaunda's government. The Thomas Alexander Wood, commonly known as the TAW scandal, over the order and paid-for industrial trucks that were never received. The direct agents of Dr. Kaunda did this."
Chiluba said his administration recovered a sum of over US $7million from a total sum of US $14million allegedly paid by Dr Kaunda to an Italian confidence trickster. "This Italian conned the country through Dr. Kaunda when he was paid to supposedly get loans to finance development programmes since the country was reduced to discredited levels and could not get loans from accepted international institutions," he said.
Chiluba also attacked Law Association of Zambia (LAZ) vice-chairman Stephen Lungu for his statement that the judgment could be re-enforced in Zambia. But Lungu said Chiluba was expressing his opinion.
In his attacks, Chiluba said it was regrettable that Lungu had recently issued numerous statements in various media outlets including The Post that were poor in facts and seemed not to be founded in law.
"The statements have shown wanton carelessness and only go to display opportunism. It is regrettable that Mr Lungu is abusing the respected platform of LAZ to make such unpalatable and poorly researched statements. He seems to be broadly excited with his new role at LAZ," he said.
"In fact the statements border on misconduct and we hope are not the genuine reflection of LAZ council on this matter. LAZ has a statutory and unique responsibility to our country and its position on any legal matter should not serve to mislead our people but help guide citizens to form informed views."
Chiluba said the court had given defendants 28 days in which to appeal if they were not satisfied with the ruling. "Further the Court will be sitting on Friday June 8, 2007 to assess exact monies defendants are liable to pay and ascertain other costs associated with the case. Unless otherwise, we do not see how LAZ expects the Attorney General to register a judgment whose assessment has not even be done," he said.
Chiluba said he was considering the various options available to him regarding the judgment delivered by Justice Peter Smith in the London High Court. But Lungu said he still stood by his earlier statement that the London High Court judgment could still be enforced in the Zambian courts.
Lungu said LAZ position on Chiluba's liability to pay about US $41 million was based on the reflection of the London High Court judgment. "On the other things he has said about LAZ, I have no comment because he was just expressing his opinion," said Lungu.
Chiluba said his press conference sought to clarify issues relating to the judgment and its findings. He said he had not defended himself as claimed but had never been given an opportunity to do so. Chiluba said he was not given an opportunity to defend himself in Parliament when his immunity was lifted and the matters moved to court and were now before the Lusaka Magistrate Court. Chiluba rejected 'the so-called golden opportunity' given by Justice Smith to defend himself on account of jurisdiction.
He said he had not recognized that Justice Smith was the only legitimate and available forum to rebut the allegations raised by President Mwanawasa in 2002. Chiluba said he was optimistic that an ideal forum would be accorded to him to defend himself.
Judge Smith established that Chiluba and others defrauded Zambia a total of US $ 41 million through the BK Facility and Zamtrop Account in London. Judge Smith ordered Chiluba and others to pay about 85 per cent of the total sum within 14 days upon service. The London court upheld the claim by the Attorney General of Zambia and has found Dr. Chiluba and others liable and has ordered that defendants compensate or account for a total amount of approximately US $41million.
The Attorney General, can register the Judgment using the provisions contained in Foreign Judgments Reciprocal Enforcement Act. Chiluba breached his fiduciary duty owed to the country and gave dishonest assistance in the Arms Sale (B.K. Facility) and he is therefore liable to pay US $20.9 million.
According to the judgment, Chiluba caused others to act in breach of their powers and authority, that in this case, he caused (through Eric Silwamba- presidential affairs minister at the time) a Facility Agreement to be signed between James Mtonga- secretary to the treasury- on behalf of government and Raphael Soriano.
But Chiluba said as Republican president, he was not involved in the awarding of contracts and was never privy to the awarding process.
Chiluba denied that he caused any official to act in breach of their powers or authority.
He has maintained his rejection of the judgment and said it was a default judgment.
Chiluba said he had not appeared before the London court except to only contest the jurisdiction of the court.
"Zambian defendants opposed this claim and retained an English solicitor Edward Keazor to contest the jurisdiction of the London High Court in these matters and disputed the forum sought by the Attorney General of Zambia. The application was to persuade the court to reject the Attorney General's claim and order him to direct and bring such an action to the Lusaka High Court.
Justice Smith later dismissed the application and ruled that the London High Court had jurisdiction on this matter and the Attorney General was properly before his court," Chiluba said.
"The Zambian defendants sought to appeal to the Appeals Court. To grant an application to appeal, Justice Smith ordered, and gave what is called an Unless Order that the defendants enter some form of defence or assertions against the claim to enable him proceed with the trial calendar while the defendants pursued an appeal."
Chiluba said relating to the defence, he and others entered in on February 13, 2006 it was a layman's defence and was merely to satisfy the process of appeal in the Appeals Court against the jurisdiction.
He said he had not defended the substance of allegations.
Chiluba said the defendants petitioned the Lusaka High Court to compel the Attorney General to discontinue the proceedings in London on account of lack of jurisdiction and the matter had not been determined and remained before Judge Mwanamwambwa.
Chiluba claimed the judgment had stated and recognized him together with other defendants that they had not participated in the proceedings and the defence entered on February 13, 2006 did not qualify to be a legal defence as it was not supported by witness statements and participation.
Labels: ANDREW SARDANIS, CHILUBA, CORRUPTION, KENNETH KAUNDA
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Govt backs plans to introduce windfall tax
By Joan Chirwa
Tuesday May 08, 2007 [13:15]
FINANCE and national planning deputy minister Jonas Shakafuswa has said proposals for the introduction of windfall tax on mining companies were a good idea which the government could later embrace. Shakafuswa however said implementation of windfall taxes would not be done in the short term since the government had already started re-negotiating new taxes proposed in this year’s budget under the current development agreements for mining companies.
A windfall tax can be simply defined as a one-off tax levied where some unexpected increase in profits or value is made which the government or the public think is an unreasonable advantage taken at the public’s expense.
In South Africa, the minister of finance Trevor Manuel presented the 2007 budget with explicit mention of pending windfall taxes on SASOL, the petrochemical industry.
Tanzania had in the 1990s also put windfall taxes on petrol companies while the Dominican Republic did the same on tourism companies and exports.
In 1997, a windfall tax was levied in England on unexpectedly high profits made by some recently privatized utility companies such as British Gas and British Telecom.
About five billion pounds were collected and mainly designated to finance job creation schemes. Gains from these taxes could go for social benefits.
Shakafuswa invited stakeholders, especially those from the private sector to engage in discussions with officials from the Ministry of Finance regarding proposals for the introduction of windfall tax on mining companies.
“People have got good ideas. This country really needs money for its people. We need to reduce taxes for a common person and we need to improve infrastructure such as schools and hospitals through collection of revenue from our natural resources,” Shakafuswa said. “Instead of fighting over this issue, it is important for all stakeholders to come forward so that we can sit down and discuss. Our offices at the Ministry of Finance are very open for any person with brilliant ideas on how Zambia can maximise benefits from its mineral resources.”
But Shakafuswa indicated that the government had already begun negotiations on the proposed taxes on mining companies under the current development agreements, and that no fiscal alteration was feasible.
“Under the current development agreements, any fiscal alteration can not work. Any change to legislation needs to be negotiated,” Shakafuswa said. “We have started negotiating the proposed changes in taxes for mining companies and this is what we will go with for now. The issue of windfall taxes can be considered at a later stage.”
Shakafuswa said the government would want to engage in fruitful negotiations for increased mineral royalties from 0.6 per cent to three per cent.
“I wish people could look at the current development agreements,” Shakafuswa said. “The current situation is that any fiscal regime which will affect the stability of these development agreements will be null and void. We have to find better ways of collecting money for the Zambian people and not to fight with investors.”
Discussions on windfall taxes have been sparked by a proposal made by Lusaka businessman and former chief executive of the defunct Meridian Biao Bank Andrew Sardanis. Sardanis proposed that the government puts windfall taxes on mining companies in order to maximise benefits from high prices of copper on the international market.
And Trevor Simumba, an international trade expert, suggested that the government comes up with a task force to renegotiate taxes on mining companies. “The renegotiations of development agreements needs to be done in a structured way,” Simumba said. “We already have a task force on corruption in this country and I know it is possible for Zambia to establish a taskforce that can specifically be charged with a responsibility to renegotiate agreements with mining companies and find a way of getting real benefits from our resources.”
Simumba said Zambia could utilise other countries, such as Britain, that have successfully implemented windfall taxes. “We have technical people from the Ministry of Finance who can coordinate the whole issue by inviting people like Sardanis to participate in the discussions. Government can do research from private companies and it can also consult the British government since it imposed windfall taxes a few years ago on some privatized companies.
“We don’t want a situation where money just disappears and people don’t even see the benefits of having huge companies in the country.
“If countries like Algeria managed to impose windfall taxes on oil exporting companies, why can’t Zambia do the same for the mining companies?
“We need to seriously consider this issue. Very soon, Zambia will be mining uranium and we don’t want to see the situation with copper happening with uranium.
“We need to look at this issue in an objective manner. We have enough brains in Zambia that can manage to come up with a structure on windfall taxes.”
Labels: ANDREW SARDANIS, JONAS SHAKAFUSWA, MINING CONTRACTS, TAXATION, TREVOR SIMUMBA, WINDFALL TAX
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Masebo lashes out at Sardanis
By Patson Chilemba and George Chellah
Wednesday April 18, 2007 [04:00]
LOCAL government minister Sylvia Masebo has said it is unfortunate for a person of Andrew Sardanis' stature to encourage anarchy by supporting street vending. And Patriotic Front (PF) president Michael Sata bragged that he was biggest customer of street vendors. Reacting to Lusaka businessman Sardanis, who on Saturday hailed street vendors for their initiative since their trading spaces had been taken up by foreign traders, Masebo said Sardanis was not being factual because not all the vendors were on the street on account of shortage of market spaces.
"It's unfortunate that a man of his standing can encourage anarchy in the country where there are laws," Masebo said. "People are complaining that most land has been given to foreigners the way that land has been given to him. So is he saying that people should go and settle on that land because he's a foreigner and the land is big?" she asked.
Masebo urged Sardanis to comment on matters based on facts and not ignorance.
"Some of those vendors who have been removed from the markets to pave way for the construction, that is a different group and are going to be catered for. There are more that 10,000 street vendors on the streets of Lusaka and yet you find that those that were removed to pave way were only 600," she said.
And Masebo said her appeal to the vendors to vacate the streets was final. But the vendors said they would blame Masebo for any damage to their property.
A vendor Lillian Musonda said most marketeers were people of little income and that they could not afford to rent stalls at markets that were being constructed.
Another vendor Brighton Phiri said there were no market stalls at places they were ordered to move to.
And during Muvi-TV's Eyeball to Eyeball programme, Sata bragged that he was the biggest customer of street vendors. "These people are using initiative. They don't want their children to be as uneducated as them," he said.
He said his party supported street vendors because the government was not capable of providing employment. "As long as they cannot provide employment for street vendors nobody should touch them," said Sata.
Labels: ANDREW SARDANIS, MARKETEERS, SYLVIA MASEBO
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Impose profit tax on mines - Sardanis
By Carol Jilombo
Tuesday April 17, 2007 [09:19]
Businessman Andrew Sardanis has urged the government to impose windfall profit tax on the existing mines' development agreements as opposed to renegotiating them. In an interview after the launch of his book; "A Venture in Africa: The Challenges of African Business", Sardanis said the government should not waste its time trying to renegotiate the development agreements with the mines. He said renegotiations would take a long time as businesses had many ways of delaying things. Sardanis, who was the owner of the liquidated Pan African Bank, Meridien Biao, said the price of copper was currently extraordinarily high and the only way to boost the economy was to tax the mines.
He refuted concerns raised by some sectors of society that forcing the mines to renegotiate would jeopardize the relationships between the mines' management and the country. Impose profit tax on mines, says Sardanis "It won't be against the agreements, all governments do it, even Britain did," Sardanis (right) said. "With the price of copper the mines want to produce, they will accept it, we must not be behaving as if we are walking on eggs."
Sardanis said the mines should be made to face their responsibility even in the towns they operate from. "It is a disgrace, the mining townships have been allowed to disintegrate," he observed. "The miners deserve a higher emolument now that the price of copper is so high."
Sardanis also advised that as a country, Zambia should bring investors that would bring in a true development. "We have to accept investment at the levels of the mining industry but I do not see why we should call an investor someone who comes with two trucks and a pick," he said.
Sardanis said that in order to discourage such investors coming in, the business privileges accorded to them should be withdrawn. "Don't give them the privileges they have been getting, if they want to come to Zambia, they should take chances together with the local people, because some of them do not bring anything new," he said.
Sardanis earlier said, while launching the book that foreign investment should come in as an adjunct to local enterprises. He observed that foreign investors came in many guises.
Sardanis said foreign Direct investment 'gospel' was so deeply embedded in the minds of some African governments that foreign investors were given way to do whatever they want. "My fear is that, in the near term, like the colonial regimes of old, foreign investment will pursue its own goals on its own terms and remain a caste apart and like the colonial regimes it will delay the progress of local enterprises," he said.
Sardanis warned that such problems would continue until nations formalised their ideas about how to move forward.
Labels: ANDREW SARDANIS, BUSINESS, MARKETEERS, MINING, MINING CONTRACTS
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Sardanis hails street vendors for their initiative
By Carol Jilombo
Monday April 16, 2007 [04:00]
Lusaka Business man Andrew Sardanis has hailed street vendors for their initiative since their trading spaces have been taken by foreign traders, especially Chinese and Lebanese. Launching his book on Saturday; “A venture in Africa, the challenges of Arican business”, Sardanis expressed concern at how Zambians were suffering at the hands of some investors, citing the local labour force and local products as the biggest casualties.
Sardanis said foreign investors came in many guises of 'new colonizers', coat tails of the new colonisers and 'immigrant investors'.
"At the top are the new colonisers, they are almost above the law," Sardanis observed. "The foreign investment gospel is so deeply embedded in the minds of some African governments that foreign investors are given carte blanche to do pretty much what they want."
Sardanis said Zambia's development was being hampered particularly by those who come on the 'coat-tails' of new colonisers. He said such investors ignored rules that do not suit them and adjusted others for their convenience, without much resistance from governments, who he claimed had been brainwashed to accommodate the whims of foreign investors.
"In Zambia, the biggest casualties of these second-tier investors are the labour force and local products, foreign imports take preference over local products and the local industry and agriculture have to struggle as a result," Sardanis noted.
"Last September, I saw on the shelves of a foreign owned shop in Kasama, South African cucumbers, cellophane wrapped and bar coded."
He observed that many shops in Lusaka City Centre and Kamwala markets were occupied by Lebanese, Indian and Chinese small-scale traders.
Sardanis said this had stripped the Zambian traders of having a chance to own a shop as well as any market space they had before the shops were built.
"With commendable initiative they (vendors) spread their wares on Cha Cha Cha Road and Freedom Way," he said.
Sardanis said he applauded the street vendors actions.
In addition, he noted with concern that some investors, in order to avoid paying an accumulation of benefits to their workers, dismissed them every six months only to re-employ them the following day in the same positions.
Sardanis warned that opening the domestic market to foreign goods destroyed local enterprises that could not compete with imported ones.
He said he feared that in the long term, foreign investment would pursue its own goals on its terms and remain a caste apart.
And commenting on his book, Sardanis said he wrote the book with mixed emotions, as he tried to maintain his humour about himself while writing about the most painful time of his life; the collapse of the ITM group and Meridien BIAO Bank.
He said the liquidation of the defunct Meridien BIAO Zambia Bank was not handled properly.
In addition, he said the move was not necessary and was wasteful.
"I criticised the liquidation process of Meridien, it wasn't necessary, it could have carried on," Sardanis said.
He said he had a great sense of regret about the whole issue because it affected many people.
"Imagine how devastating it was for me and the people," Sardanis said.
He said he had tried to do the best for the continent with the bank.
Sardanis thanked the thousands of customers who had placed their trust in the bank and suffered as a result as well as the 23,000 employees of his business group.
The book highlights the rise and fall of the African Business Group that Sardanis founded in 1971 and led for 25 years.
Labels: ANDREW SARDANIS, MARKETEERS
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