Economist expresses skepticism about findings in govt audit of mines
By Chiwoyu Sinyangwe
Wed 21 July 2010, 15:00 CAT
GOVERNMENT’S plan to conduct a special audit of the mining sector to determine their earnings and punish erring firms found cheating will yield nothing, United Kingdom-based economist Chola Mukanga.
Reacting to an announcement by finance minister Dr Situmbeko Musokotwane that the government plans to conduct an audit of mining companies to determine their earnings and punish companies found cheating over declaration of profits, Mukanga doubted if any single company would be found at fault.
“I don't think this audit will yield anything because multi-national companies are experts in this area and I doubt if any single company would be found at fault,” Mukanga said.
“Even if Dr Musokotwane were to find any mining company at fault, I doubt he has the ability nor the will to punish anyone. These cases take years to go through courts and the threat to mining companies is just not credible. Let us not forget that there's still the little problem of the windfall revenue which mining companies have refused to pay. Now if a company can owe tax revenues to government and fails to pay, what hope is there that a government can actually punish it for complicated accounting processes?”
Mukanga accused the government of favouring foreign firms at the expense of local enterprises.
“Can you imagine if an ordinary Zambian refused to pay his tax? Let us also not forget that this is the same Executive Branch that has failed to take the report of the Auditor General seriously. People, let us be serious and start looking at issues with objective assessment,” he said.
And Mukanga dismissed an assertion by Dr Musokotwane that the abolished windfall tax was punitive to mining firms.
Mukanga said Dr Musokotwane was entangling himself in too many issues he would not handle instead of working to resolve the problems regarding taxing the country’s mainstay.
“Who said the point of imposing windfall tax was about punishing offenders? The reason for the windfall tax is to benefit Zambians period and ensure some guarantee of revenue when prices are above a certain threshold,” said Mukanga.
“The issue of cheating only becomes relevant when Dr Musokotwane argues that the profit variable tax does the same job. That is when all well-meaning Zambians rightly question that logic given the underlying incentive for mining companies to cheat. Do you see how our finance minister Musokotwane is getting the very elementary policy questions confused? He is inventing a problem that is not central to the original argument, and then he proceeds to argue with himself. This is poor analytical thinking.”
Labels: CHOLA MUKANGA, SITUMBEKO MUSOKOTWANE, WINDFALL TAX
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Mutati, Musokotwane contradict each other over ZAMTEL
By Fridah Zinyama and Chiwoyu Sinyangwe
Thu 17 June 2010, 08:00 CAT
FINANCE minister Dr Situmbeko Musokotwane yesterday maintained that there has never been a time when the valuation report on a privatised company has been released before a sale.
Dr Musokotwane said
the government will resolve internally issue of conflicting statements over the release of RP Capital valuation report, a day after commerce minister Felix Mutati pledged that the much sought after report will be unveiled in Parliament this monthend.
And United Kingdom-based Zambian economist Chola Mukanga has observed that Zambians risk being shackled into perpetual suffering similar to the mining Development Agreements for as long as the RP Capital valuation report on Zamtel remains in secrecy.
In what would be seen as succumbing to growing pressure for the government to make available the US $12.8 million RP Capital evaluation report on Zamtel, Mutati promised on Tuesday that the valuation results of the net asset value of recently privatised Zamtel would be made public at the end of this month when parliament resumes sitting.
But in interview yesterday, Dr Musokotwane stood by his earlier statement last week that valuation results for privatised companies are never made public. Dr Musokotwane said the issue of conflicting positions with Mutati would be resolved internally rather than in the media.
Dr Musokotwane maintained that in the country’s privatisation process, there has never been a time when the valuation report was released before a sale.
“This is because bidders might end up bidding around the price that is indicated in the valuation report,” Dr Musokotwane said.
He insisted that Zambia would have lost out if the valuation results were made public because the bidders would have not offered a higher price as they would have been bidding around the net asset value of Zamtel as revealed by the RP Capital findings report.
Dr Musokotwane explained that against that background, the valuation report was never released.
At the beginning of the controversial sale last year, former communications minister and one of the architects, Dora Siliya promised that the valuation report on the net asset value of Zamtel was going to be made public for the Zambians to realise that the giant telecommunication was not “sold for a song” unlike what happened to the ZCCM privatisation process under former president Frederick Chiluba when parastatal companies were sold without valuation.
And in his letter to Dr Musokotwane, copied to Mutati and Zambia Development Agency (ZDA) director general Andrew Chipwende, Mukanga requested the immediate and unconditional release of RP Capital Valuation Report that underpinned the recent sale of Zamtel to a Libyan Lap Green company.
“My request is based on a simple principle that the assets of this country belong to all Zambians. As such we have the legal and constitutional right to see this report,” Mukanga stated.
“We are best placed to assess and judge whether the sale of Zamtel was based on reasonable and credible advice from RP Capital.”
Mukanga stated that the secrecy was being been used to cover alleged dishonest activities as alleged corrupt activities in the mining privatisation process have gone uninvestigated.
“You also need no reminder that Zambians have for a long time suffered due to the secrecy that underpinned the mining Development Agreements,” he stated. “Then like now, the government withheld vital information which only became public after NGOs Non-Government Organisations and academics got hold of the reports and bemoaned the cruel details contained therein.
Up to this day, the government of Zambia has never held a single enquiry into the alleged corruption that took place. You have an historic opportunity to show you are politicians of the future and not those that should belong to the political museum. You can start by releasing this valuable report.”
Mukanga stated that Zamtel was a public institution owned by ordinary Zambians and any decision made concerning it affected everybody.
“You as members of government are servants of our mothers and children. You are not our masters - but our servants,” stated Mukanga. “This is not a party political issue, it is common sense. I urge you to stand-up and be counted.
Release the valuation report and let Zambians see the truth for themselves.”
Former Development Bank of Zambia (DBZ) managing director Dr Bwalya Ng’andu said the RP valuation report would have made a difference to the Zambian people had it been released before government finalised the partial privatisation of Zamtel.
Another UK-based Zambian economist, Patrick Mulenga said Zambia would regret the privatisation of Zamtel in future. Mulenga said the Zambian government had ignored sensible advice and privatised Zamtel when the whole world knew that telecoms and Information Telecommunications were the growth industries of the future.
“If the Zambian government was truly committed to diversification from copper, the key was to maximise revenues from the mines through improved taxation, through the windfall tax or higher royalties which could have been used to recapitalise Zamtel after first splitting it into two units, namely a mobile service provider and a fixed line/gateway provider.
Unfortunately your leaders are more interested in the benefits to themselves not to the country,” Mulenga said. “This is one privatisation that the country will surely regret.”
Labels: CHOLA MUKANGA, CORRUPTION, FELIX MUTATI, PRIVATISATION, RP CAPITAL PARTNERS, SITUMBEKO MUSOKOTWANE, TRANSPARANCY, ZAMTEL
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COMMENT - This is an excellent Socratic treatment of the pro's and con's of a re-introduction of the Windfall Tax, and why the Zambian economy is not benefiting from it's main economic activity - copper mining. Please comment on this article at the original page on
the Zambian-Economist blog.
Eight reasons for rejecting higher mining taxes..
by Chola Mukanga
Saturday, 22 May 2010Today, we turn the tables and present the most cogent arguments that could be made, if I was hired as a “spin doctor” for Rupiah Banda and help argue against relatively higher taxation than at present (It is taken for granted in the post below that higher taxation would mostly likely involve restoration of the Mwanawasa mining fiscal regime, with windfall taxation at its heart). I offer eight reasons that can be put forward for rejecting higher mining taxes - offering both the central argument to substantiate the reason and then the counter-argument (response). Effort has been made to be impartial but also succinct. One can write an essay on each of the arguments, but for ease of access I have tried to summarise them. I’ll leave it to the reader to expand on them and decide whether the “argument” is stronger than the “response”. By nature of the "title" and this introduction, I have shifted the burden of proof onto those seeking change.
Reason 1 : High taxes would reduce competitiveness
Argument: Increasing mining taxes when other countries are not changing their tax systems, with the exception of Australia, would make Zambia uncompetitive in this important area. Zambia is a small country and we are not exactly renowed as an attractive place to invest. on It is because of the mining revival that we are now having investment in excess of $3bn annually. We have also seen that countries that have imposed windfall taxes have lived to regret. For example Mongolia once raised its mining taxes only to find itself in a quagmire with investment drying up! We must also remember that low taxation is the bedrock of attracting foreign direct investment (FDI). It is therefore critical that we see mining in the overall context of Zambia’s successful FDI policy. No one doubts that low taxation is critical component to that.
Response: The argument is based false premises for several reasons.
First, Zambia’s taxation threshold has enormous scope for increasing taxes without harming competitiveness. Zambia has one of the lowest tax regimes in the world. Prior to 2008, the effective tax rate stood at around 32%, with the Levy Patrick Mwanawasa (LPM) changes it was intended to rise to 47%. LPM put it best : "with these new measures, the Zambian tax regime still remains competitive and moves Zambia into the media position in international comparisons at 47% effective tax rate. The effective tax will not adversely affect the companies' viability as their returns will remain well within the international norms". In short Zambia was to tax more than Tanzania but less than resource rich nations Botswana, Mozambique and Angola. It is therefore wrong to suggest that reintroducing the windfall tax for example would significant damage it’s competitiveness.
Secondly, there’s no concrete evidence that FDI is driven by lower taxes per se. Although tax competition is used usually to justify the level of tax, it is clear from literature that the key driver of foreign direct investment tends to be political stability, cheap / diverse labour and, most importantly, prevailing global economic forces. Zambia’s mining industry is booming because the prices of commodities are high and will continue to be high for some time, aside from few fluctuations because of the long term global imbalance between demand and supply. Of equal importance is that the investors are confident of the political ambiance in the country.
Third, the argument is structurally predicated on the idea that growth in mining must necessarily be driven by external investment – this need not be the case. Many economists believe that although FDI has a role to play in development, what matter is the structural transformation of the production side of the economy. To do that requires government investment in technologies and other supporting industries, which won’t happen without access to mining revenue. Indeed, without government revenue there can be no tangible and accelerated diversification.
Finally, there’s a broader point also to be made – the current low mining taxes may be attracting “wrong investors”. Many of the investors Zambia has attracted in the mining industry have been nothing short of short term vultures (term used is "infestors"), whose primary interest is to come into the country to siphon resources on the cheap and vacate premises when the going gets tough. Poorly designed incentives coupled with a friendly regulatory structure continues to undermine Zambia. A strong starting point in rectifying these problems is appropriate and fair taxation.
Reason 2 : High windfall tax would harm exploration
Argument: The biggest challenge for Zambia is to discover and exploit the vast minerals we have. To do that we need exploration, this is a costly and uncertain exercise. It is undertaken only if there’s a strong possibility of finding something and being able to earn a return on it. Relatively higher taxes, especially in the form of revenue windfall systems, are a disincentive to exploration. As a country we are in a hurry to develop and achieve middle income status by 2030. We must incentivise investors to undertaken exploration activities because that would guarantee a better future for our children. Allowing foreign mining firms to continue operating under existing conditions would guarantee the opening up of more copper mines, which would in turn create more employment for Zambians. Not only that government would collect more taxes through personal income tax and land tax the councils collect from the mining firms, while the tourism and services sectors would also benefit from wider catalytic impacts.
Response: There are three problems with this argument. First, it treats mining taxation in very general fashion. We must distinguish the principle from the application. It is not true that any mining taxation reform would lead to lower exploration activity. Different incentive or taxation structures can be developed that would allow the people to benefit from current mining activities while incentivising future exploration. Secondly, it predicated on a highly uncertain future. The investments that would be disincentivised, if the argument is to believed, are those taking place from 2020 and beyond. However, given the current configuration of the taxation system, as we have seen in Lumwana’s case, no significant revenue would begin to accrue from any such unknown investment until 2025 and beyond. In short this is an argument about an unknown and distant future. Finally, the argument again presupposes that only foreign firms can do “exploration activities”. There’s a strong case for government to assume a greater role in exploration activies to narrow the information loss between investors and government. This would also help reduce the sort of problems we have seen where Lumwana has huge uranium deposits off the back of a copper investment. More exploratory and geological exploration would put the Zambian people in the driving seat of their resources.
Reason 3 : Higher mining taxes will compromise safety and harm environment
Argument: Increased taxation will not have the desired social effect because it mainly leads to mining companies pushing the costs on workers and local communities. Principally mining safety and environmental damage would get worse as foreign firms seek to maintain their profits. Indeed the service conditions of workers may also be affected. We would be robbing Peter to simply pay Paul! The worker and the local community must come first. Higher taxation would not make things easier for these groups. Quite the contrary it will make it worse!
Response: There’s some truth in that argument. Increasing taxation will always create perverse incentives for mining companies. However, this is not an argument against increasing taxation per se. Rather it is an argument for why taxation must be part of a broader strategy that takes safety and environment into account. Indeed such a strategy much also bring into line how any windfall revenues are managed to empower local people and avoid the “Dutch disease”. Its therefore simply wrong to suggest again that higher taxation per se would be the source of these potential difficulties. We can have both high revenue and a good environment if careful thought was given to these issues.
Reason 4 : The profit variable tax does the same job as windfall tax
Argument: People who argue constantly for the windfall tax have a poor grasp of taxation issues or basic economics. It is quite obvious to everyone that the removal of the windfall tax will not lead to loss of government revenue as the variable tax still captures any windfall gain that may arise in the mining sector. Infact it is better because it ensures that mining companies are not being driven out of business by explicit accounting for cost of investment.
Response: This argument demonstrates complete ignorance of the common wisdom of tax collection. Although many would agree that theoretically the profit variable tax can go some way in capturing the necessary revenue from higher copper prices, a windfall tax is easier to implement. It is also easier for the public to check how much revenue government is getting in its coffers. With a profit variable tax it is an accountant's job! Multi national corporations love profit variable taxes because it is easy for them to hide their profits through inflated costs and so forth. Simply put, the mining companies have smarter accountants than the Government. This is why the mining companies pushed for removal of the windfall tax. They knew they'll pay very little. It is also the reason why all the donor partners have concluded the status quo is not desirable, with some calling it "depressing”. Simpler taxation mechanisms are key to improving collection.
Reason 5: The “certainty principle” favours the status quo
Argument: The long-term outlook for copper mining in Zambia is still very uncertain following the period of government led ownership prior to liberalisation. . Investors don't have sufficient confidence that government is committed towards an open investment policy. Constantly changing the fiscal regime whether for good reasons or not does not inspire investor confidence. What we need is certainty and stability that reduces the risks to long term investment. Having undertake reforms in 2008 and 2009, we need a period of calmness to settle things down. We perhaps can come back to this issue in 2015 or beyond. We must learn from successful countries like Chile, Australia and Canada who don’t arbitrary change their mining taxation regimes.
Response: The point regarding certainty is perfectly valid, but it misses the more fundamental question – what drives certainty? Certainty is derived from ensuring that you have a mining settlement that has the full buy-in of all Zambians. Otherwise, every government that comes along will constantly alter its mining policies. This calls for a Zambian solution, not an MMD or PF or UPND solution. The approach to mining policy must therefore be necessarily consultative and transparent. It is not just about the level of taxation but "how" you get these stable mining policies The mining companies need to realize it’s in their long term interests to push for transparency - deals made under the table are not sustainable. The approach should be consultative and transparent. These are the foundation of “rule of law”. At present there’s no rule of law in this area because government has acted without the people’s consent. It should also be noted that the suggestion that other countries are not changing their taxation regimes is blatantly wrong as can be found here.
Reason 6: ZCCM-IH is doing its job – its about empowerment not revenue
Argument: It is disingenuous to claim that Zambia does not benefit from mining because we are also owners of these mining companies! ZCCM –IH is a state owned venture and it owns 20% plus shares in joint venture with foreign mining corporations e.g. FQM’s Kansanshi and Vendata’s Konkola . Therefore as the transnational companies soar in their mining profits ZCCM-IH gains significant windfall. A "them Vs us" approach does not therefore quite reflect reality on the ground, where ZCCM - IH is a big player with assets over $1bn. When you attack mining companies, just remember you are also an owner of those investments! For example, recently we saw huge dividends of around $18m to the Zambian people by KCM.
Response: It is true that ZCCM-IH does have interests in many of these companies, but it hardly possesses a controlling interest stake in any of the key joint investments. More worryingly it’s been clear for a while that ZCCM –IH has not been receiving meaningful dividends from its jointly owned projects. The $18m hardly qualifies as "huge". A fact which led to rumours last year that government was planning to convert these financial liabilities into equity, thereaby raising substantially its stake in the mines. That the government recognised this possibility is a clear testament that the ZCCM-IH model has not worked. Indeed, what seems to concern many people is that ZCCM - IH is not "empowering" ordinary Zambans. If ZCCM-IH was owned by ordinary Zambians a potential argument can be constructed that some money does filter back to ordinary Zambians via the "theoretical dividends". ZCCM-IH is currently listed in Lusaka (alongside London, and Euronext Stock Exchanges), with the government owning 87.6% shareholding, with the remaining 12.4% held by private equity holders largely abroad. Unfortunately the whole venture is not very transparent! According to foreign private equity holders in ZCCM-IH the company has never published its financial report for nearly 4 years! Its inventories are also not formalised! Remarkable for a listed company! It is hardly the sort of company one wants to appeal to as the reason for not increasing mining taxation. On the contrary, it beggars belief that many Zambians do not even realise that ZCCM-IH is a huge part of the reason Zambia is not benefiting from its vast reserves of copper.
Reason 7 : We are already benefiting through employment
Argument: Investment in Zambia has grown significantly, as much as $5bn has been invested in the mines. Without the current fiscal regime Zambia would never have the sort of investment it has had. Indeed part of the reason why Lumwana was built was due to the favourable regime, For 25 years, Zambia had no new mines opening, now we see plenty of new ventures being proposed under the visionary policies of the MMD led government over the two decades. Significant jobs have been created from new investment opportunities. Zambia may not be benefit as much as we all would like from mining taxes but it is benefiting significantly from new jobs. As His Excellency President Rupiah Banda has helpfully reminded us "we must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result”. We have seen that employment has risen from 22,000 jobs in 2000 to 48,000 jobs in the mining sector because of new investments. Any appraisal of Zambia's mining policies must account for the huge benefits we have got from this extraordinary ramp up in job creation. Our approach must be to continue allowing more money to come into the economy to create jobs.
Response: The argument as formulated is misleading for three reasons. First, without doubt Zambia has significantly increased foreign direct investment to the mining sector. But the fundamental question again is what has driven this investment? As the response to Reason 1 suggested its broader issues related to political stability, cheap / diverse labour and, most importantly, prevailing global economic forces. Secondly, the employment argument is easily rejected because the counter-factual is all wrong. The so called jobs created by the MMD led government of the last two decades are essentially the jobs they destroyed through the disastrous privatisation project of the early 1990s. But suppose we can allow the argument that these are new jobs how far does the argument go? Not very far because the real central question of course relate to the “quality of jobs”. The argument regarding job creation treats jobs as homogeneous and an end in themselves. The goal of government is to provide a conducive environment where individuals can create value adding jobs and thereby foster wealth creation. Pointing to jobs built on casualisation is not wealth creation.
Reason 8. We have corporate social responsibility!
Argument: There are many companies doing very good social responsibility projects. For example First Quantum Minerals has done much rehabilitating roads in Ndola. Similar Konkola Copper Mines is working to empower the Luano Community in Chingola through an innovative goat draft project - an interesting alternative to microfinance. Lumwana recently pledged to spend K4bn on the local area, including plans to launch a multi-million Kwacha programme to diversify its local economy in Solwezi away from dependence on mining. These are great initiatives that should be supported through lower taxation.
Response: Corporate Social Responsibility (CSR) is a positive undertaking but it is at best a distortionary second best scenario. The ideal scenario is that government should tax mineral resources sufficiently in a way that profits local people and does not impact negatively on the environment and safety of workers. The government is currently not pursuing the ideal and therefore our efforts should be directed at ensuring it does. The more serious problem with the argument is that it ignores the real manace of CSR. Such initiatives, though spun as “social projects” are essentially "bribes" to keep local people quiet. Firms do not engage in "social responsibility", they practice "shareholder responsibility". The projects mentioned in the argument should therefore be rightly seen as a small price that mining companies have decided to pay local people in Ndola and Solwezi lest they become agitated at the lack of development in the area and demand the Government to do more to tax the mine (which would be bad news for the shareholders).
I have set out the above arguments and responses for three reasons.
First, I wanted to bring all the arguments / counter-arguments together in one place for ease of reference.
Secondly, I believe both sides have reasonable arguments to make and what we need is actually dialogue rather than speaking past each other.
Thirdly, often in economic analysis it’s not black or white – the question is how one weighs up the pros and cons. If this post helps people approach other issues in similar manner, then we would have progressed how debate ought to be had. I trust that readers will find these arguments and responses useful.
More importantly, it is hoped that I have tried to make the best possible "argument" and the best possible "response". Where a "reason" appears to be missing, this should be cited and it can be added provided it is distinct from the above eight reasons. If its not added, I will respond explaining why I don't think that particular reason is distinct.
Labels: CHOLA MUKANGA, NEOLIBERALISM, WINDFALL TAX, ZCCM-IH
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"The Curse of Copper". We explore all questions surrounding Zambia's mining industry, development agreements, and setting "an optimal mining policy" for Zambia.
As well as the challenges of diversification, and linking that to automatic infrastructure delivery.
Interview with Chola Mukanga of
The Zambian Economist blog.
Labels: CHOLA MUKANGA, COPPER, POLLUTION, PRIVATISATION
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Proposition 3: The plight of our mining workers is deplorable
Proposition One acknowledged that Zambia as a whole has seen little benefit from its vast mineral wealth. Proposition Two demonstrated that the picture looks worse when we focus on mining communities. We learnt that
the overall impact on these mining towns is effectively negative given the huge uncompensated environmental and infrastructural carnage that foreign mining companies are wreaking in our nation.
Under proposition three, we close the circle of impacts by focusing on the deplorable plight of our mining workers. But prior to that we must first deal with the 'why does it matter' question. Invariably, when talk of the poor deal that mining workers have been handed rears up, someone always contends that "it's better than nothing". Mining companies are creating jobs which these miners would never have had. Proposition Two briefly challenged that assertion. Here the focus is why we should care about how mining companies treat workers for moral, social and economic reasons.
Human beings are endowed with moral worth as bestowed on us by the Creator. It is this "bestowed worth" that causes each of us to care about how others are treated whether those individuals are being paid to do that vocation or not. We care that in that job they are treated right by their employer. We can extend this argument in two ways. First, the government has through legislation bestowed rights and responsibilities for both mining employers and employees. When investors violate these responsibilities through negligence, as citizens we expect the government to take corrective action. Secondly, the current plight of mining workers may well be the fault of the Zambian government and by extension the Zambian people who put the government there. The bungled privatisation process of the 1990s left many of our workers impoverished and without protection before new investors.
In recent years of course the mining companies treatment of its workers has brought significant damage to our international reputation. Zambia has often been cast as a country exploited by foreign investors and its people as either extremely ignorant of how to secure a win-win situation or exploited by those in power in collusion with mining investors. Like most extremes the truth probably lies in between somewhere, but in the modern age of the Internet and fast spreading information, such damage to our reputation are hard to rebuild. There's no long term advantage in being cast as a nation that bows its knees to any new investor at the expense of its people.
The other dimension is social cohesion. Where workers are being treated poorly, it wont be long before strikes and demonstrations occur. People start feeling prisoners in their own country and begin to agitate for change. Economic arrangements that do not enforce social stability often leads to social implosion. For this reason even if we don't care about mining workers per se, we should recognise that how they relate to their employers is just as our business, as much as its theirs. More specifically, social unrest raises the spectre of costs associated with keeping a lid on such things when it all comes to the boil. Such costs are usually borne by our justice system (police, courts, etc). There are other economic costs associated with the poor plight of mining workers. These include health costs, wider negative impacts of social break down, political instability, etc. All of these costs are usually borne by ordinary Zambians.
Given the aforementioned reasons, it's imperative to ensure that workers have a prosperous, safe and secure working environment. Their problem is ultimately our problem. Unfortunately this is not the case, many politicians, and sadly ordinary Zambians, ignore the abuse of our mining workers. A number of issues lends credence to this troubling conclusion.
The poor safety practice of mining companies. Thomas Mumba loved to sing in the church choir and dreamt of recording a CD of gospel music. At 23 he did not drink or smoke. He preferred to spend his time worshipping God. Thomas was also the only bread winner in his family. Today Thomas lies buried along 45 workmates following a blast at a subsidiary mine in Chambishi three years ago. His mother Justina Mumba best reflects the sentiments of many : "They came to make profit, not to look after the lives of the people who were giving them profit". The Chambishi incident brought to the surface what everyone knew. The safety records our new masters is extremely appalling, especially for Chinese firms.
A large contributor to the poor safety environment is casualisation - the situation in a which a dual labour market develops : a core of permanent workers with a periphery of workers on fixed - term contracts, or contracted as self-employed individuals. Casualisation diminishes safety in two ways. First, it provides the employer the incentive to undertake dangerous and reckless mining activities because the contracted labour is not fully tied to the mining company. The expected cost to the employer when something goes wrong is therefore diminished. With a large pool of unemployed labour in Zambia, casualisation has found a natural home in mining companies. Secondly, casual labour by its nature is less tied to the firm and therefore has minimal incentive to undertake mining activities that are safe for all employees in the long term. The most common accident in the mines is "rock fall".
These usually happens by casual labourers going mad developing [digging new seams] and leaving people exposed without support in roof sheets. Most of the development work in mining is done by casual labourers.
Casualisation of course has another impact on mining employees - it has led to poor wages. This has occurred through two complementary routes. The opportunity to have casual workers has provided an incentive to mining companies to get rid of contracted workers and hire casual employees. This has often led to reduction in contracted workers and reduced their bargaining power. Mining union power is being eroded as casualisation amplifies - the wages of contracted workers have therefore remained stagnant. The other impact is that casualisation has reduced the opportunities for long term contracted work. With this in mind we can confidently assert that the quality of employment from additional mining investment is generally poor.
Causal workers have no long term pension benefits to speak of. This is clearly a concern because as we have noted many of these casual workers tend to be ex-miners. Without long term pension security there's no transfer of wealth across generations and many people become again dependent on the state. The modern day mining worker is a casual worker living and working for today to support his family, but no security for tomorrow.
Finally, there's the question of labour rights. This is particularly pertinent for many employees of Chinese mining companies who are known to have been denied union rights. Their conditions are probably worse than for those working for Canadian, Swiss or South African multinationals.
These issues taken together present a potent challenge to the likes of President Banda who speak joyously of the benefits of reducing mining taxation in exchange for new jobs. We are surely in order to ask - of what quality? Our mining workers can now be added to the list of losers from the current mining policy, alongside mining communities and the country as a whole. The question then is, who is benefiting?
Next stop - Proposition Four.
Labels: CHOLA MUKANGA, MINING
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Mining Reflections: Proposition Two
Thursday, 26 November 2009
Proposition 2: The local mining communities are not benefiting from the nation’s mineral wealth
The stronger version of the above statement would be expressed as: the people are not just neutral to the existence of the mines in their areas, the communities are currently suffering because of the mines. Or to put it even more starkly - mines are doing more harm than good to our local communities.
For the purpose of this discussion, “mining community” is taken to mean broadly the local area, typically a district, where mining activities are located, but principally excluding the mining employees. That rider is not critical as most workers usually come from outside to take up jobs. Historically this has been the case and underpins the rural-urban drift phenomenon. Similarly, in recent times we have seen mines essentially become magnets of migrant labour, not just from other parts of Zambia but also from abroad (e.g. Chinese labourers).
Related to that of course is the general point that jobs precisely understood are means not an end. What matters is the impact on local personal incomes. We will return to this issue in future posts, the purpose here is simply to note that for clarity, the question of employment is dealt with, without changing overall conclusions in the current narrative.
With the house keeping done, we can now turn to the central question: does the benefit of new mining activities to local communities, as currently delivered, outweigh the costs?
The most obvious benefit that any mining investor can give local communities is local tax revenues. These taxes can either be compensatory or predicated on local “exogenous rights” i.e. taxes that recognise the pre-eminence of local rights with respect to the mining resource in question. Mining companies’ contribution through local taxes is essential for Zambia because it represents the only legislated benefits to local people. Unlike in developed countries, Zambian local councils have no alternative value capture mechanisms and their power remains stunted in terms of engaging investors for local benefit. Even arrangements are not punitive on investors are restricted by central government, as Solwezi found out. In short local taxes are the only way local people capture development benefits from mining in a legally enforceable way.
At present local tax revenues are essentially negligible. There is currently no automatic mechanism for diverting resource revenues to the ground, which has meant many mining communities do not see direct benefits of new local investments. In 2008 KCM released a caption of how much they were paying. This showed that only 2% of KCM's mining taxes are local - assuming all of it goes to the local people. A meagre contribution by any standard..
The current injustice has not been lost on many parliamentarians who continue to call for a better settlement through the establishment of mining communities development funds (MCDFs). Some warn that should government fail to establish MCDFs, people living in mining communities would have no option but to start agitating for it. Nkana MP Mwenya Musenga is a principal advocate :
“.....many countries in the world have a development fund that benefits communities that live in mine areas. If we do not establish this fund in Zambia, even the mine developments that we are talking about like in North Western Province and Southern Province will not amount to anything.....There’s so much excitement for North Western Province but many years down the line, once the investors have made their profits and when there is no more mining to talk about, we’ll just be lamenting like we are doing for the Copperbelt.....the government should retain at least 40 per cent of the profits from the mines to benefit mining communities and cities....This money could be shared between the local authority for that particular town and communities surrounding the mine...”.
The Levy Patrick Mwanawasa (LPM) government toyed with a similar idea establishing trust funds that will make mining companies “contribute funds towards the sustainability of local communities”. These trust funds were to be controlled and managed by the communities themselves. That idea has never seen the light of day, and time after time people continue to agitate for it.
In theory, the government can set up these local arrangements without the need for new legislation. The Mines and Mineral Development Act 2008 does have a provision for sharing mineral royalties but it does not specify who they should shared with. Para 136 states "The Minister responsible for Finance shall, in consultation with the Minister [responsible for Mines], a mineral royalty sharing scheme for distributing royalty revenues".
There’s no provision within the legislation on what this mechanism should be. Equally there are no penalties to government for failing to implement a revenue sharing mechanism. It appears to be another case where parliamentarians fail asleep at critical moments of voting on the Act. Incidentally, even if government was taken to court, as one MP recently suggested, it's not clear the outcome would be a local sharing agreement acceptable to local people.
Normally the problem of poor local taxation would not be a significant problem if local communities are in some way integrated in the local economic system with the mines. The usual way of doing this is through the activities of the mines having sufficient linkages to local business. The reality is direct directly the opposite, a fact which has forced the government in recent years to initiate its own policies of empowerment.
The benefits of having local mines in the areas have not accrued to local economies because many mining companies simply feed suppliers, manufacturers and markets outside the country. The many local suppliers that used to exist prior to the privatisation process of the early 1990s have all but withered away. This is partly due to the fact that foreign companies come with their own supply chains.
Undoubtedly the larger problem is that local companies are currently unable to compete on quality and price with foreign suppliers. This can only be remedied by significant input from government to provide a system of incentives and resources that would tilt the balance. A proper starting point is development of a robust industrial policy designed to support local suppliers and to build a local manufacturing base processing copper.
No industrial policy has emerged as yet, but there has been some promising signs that government taking proactive steps which a future visionary approach may build on. The move by LPM to increase tax on copper concentrates has helped incentivise mining companies to provide more smelting facilities, though the energy deficit has not helped. The current government would also be quick to point out that its export led model of Multi Facility Economic Zones (MFEZs) is yet another mechanism to allow local mining communities to benefit from additional investments. That remains to be seen and significant questions exists on the general policy around MFEZs which go beyond our current series. What is clear is that not enough has been done to directly empowerment local communities per se. It is therefore difficult to argue that any local communities benefit from mining activities.
So the benefits are negligible, what about the costs to local communities?
One might excuse the non-existence of benefits as a “fact of life”, but what is unacceptable to any person who values human life are the huge and unpriced externalities that local communities endure from the mines. A prominent aspect of this is the so called “ecological debt” which has led to visible loss of lives even as many of our people die quietly.
The day is November 6, 2006, women and children living on the banks of the Kafue have just been awaken by the Zambian sun. What do they see? A strange sight! The wonderful Kafue River has turned turquoise. Our precious investor Vedanta has accidentally discharged its toxic waste into it. Panic sets in Chingola, where 100,000 who draw water directly from the river are now deprived of drinking water for at least two days. In the next few weeks thousands flock for hospital check-ups after eating fish from the river. Analyses of the Kafue’s water later show that it contained 38.5mg manganese, 10mg copper and 1mg cobalt per litre: concentrations 1.7 times, 10 times and 10.7 times higher respectively than the limits set by the World Health Organisation. With a pH of 1.5, the Kafue has become a river of acid.
A few weeks more, a Vedanta employee admits the company’s responsibility, only to be sacked on the spot. Reports abound that the company is threatening to withdraw advertising from Times of Zambia if the incident is reported. Will the editors curve in? Surprising not, as public pressure leads the Environmental Council of Zambia to call Vendanta to book and halt to its mining activities. The company reluctantly pays $2.5m. Then business starts up again. The price of copper continues to rise, and with it, the pollution unabated and our people never suffer quietly.
An unauthorised visit by a foreign investigative reporter two years or so later to the massive Vedanta site during the rainy season revealed a vision from Dante’s Inferno: 3km from the mines, the pollution control dam was overflowing, spewing copper-coloured water, reeking of acid, into a tributary of the Kafue.
The stories are endless and Vendata is not alone. In January 2008 acid waste from Chingola’s mines reached the ground water at Mufulira, around 40km away. More than 800 people in the township adjoining the Mopani Copper Mines (MCM) complained of diarrhoea, abdominal pain and vomiting. The mine is co-owned by the Swiss group Glencore and the Canadian company First Quantum Minerals (FQM), and the joint venture was set up with the help of the European Investment Bank.
Mufulira’s mining townships for years have borne the full brunt of the environmental damage. Kankoyo, home to 30,000 people, is an eye sore on an otherwise fertile and verdant landscape. I used to pass through this neighbourhood everyday on my way to Butondo Secondary School. Only two things grow in Kankoyo: avocado trees and cactus. In exchange for this damage the economic input consist of open sewers, dilapidated shacks with tin roofs corroded by acid rain, abandoned pharmacies, and grocers’ shops with broken windows. That is the legacy of the mining companies. When the mines eventually close, is this all they'll leave behind?
Whilst the environmental impacts have gain public attention in recent years, less reported are the broader negatives impacts of the mines on local infrastructure. When FQM announced in March 2007 that it was planning to spend K1bn to rehabilitate roads in Ndola, the move was applauded. It was good to see a mining company recognise the negative effects it imposes on local roads and seek to correct it. But FQM’s actions are a drop in a forgotten ocean, where many mining companies continue to free ride and use the roads with impunity. A fact well observed by Enock Kavindele:
“.....As it stands, the [road] repair and rehabilitation costs are borne entirely by the government and cease to be their problem. In the next three years, both Kitwe to Chingola road and the Kitwe to Lumwana road will be completely damaged.....All this heavy traffic combined with all other road users will place an extraordinary strain on all services, utilities and infrastructure....the combined Democratic Republic of Congo (DRC) and Zambian mines related freight volumes in 2010 would be 2,400 000 tonnes of copper ore per annum..... In Chingola, this will translate to having a truck on the roads every three minutes to and from. Roads in the town will become completely congested with the route between Chingola and Kitwe becoming almost impassable not to mention the hazardous conditions that will be faced by normal motorists and pedestrians".
Of course, it should not surprise anyone that mining companies free ride and when they do act to “correct”, it is done purely for selfish reasons. There's no such thing as "social responsibility" because mining companies are motivated purely by profit and will always act in the interest of their shareholders.
If using an existing road is cheaper than building a new one, then they use the existing one. The same goes for local schools and hospitals. When they occasionally provide a new school or fund the local football team, they "appear" to be socially responsible. Their true motivations are always those of the company. Unfortunately, it is one thing to abuse local roads in a developed country (not that they’ll let you), it’s quite another to destroy local roads where local councils have no financial capacity to replenish.
The other problem of course with the mining companies’ free riding of infrastructure is that it has led to zero incentives for investing in inter-urban infrastructure such as rail or motorways. Until the government realigns these incentives it becomes difficult to develop long term infrastructure for the common good of mining urban areas, and indeed the nation as a whole.
Taken together, the environmental and infrastructural impacts, significantly outweigh the small benefits identified. The mining companies response to all of this is perhaps better reflected by Vendata’s Social Responsibility Manager Sampa Chita attitude to the environmental genocide:
“Of course we pollute…but all the mines do. It was worse in ZCCM’s days...We are fed up being blamed. You cannot run a mine without causing pollution.”
That may be true but the comparison to ZCCM is wrong for two reasons. First, it is morally wrong to pursue profit at the expense of human life. Second, our new masters cannot be compared with ZCCM because these new investors pollute for free without any form of social compensation. ZCCM provided almost everything that held society together in the Copperbelt : jobs, hospitals, schools, housing, and a wide range of social services including HIV-AIDS and malaria awareness and prevention programmes. In many ways ZCCM compensated for any environmental damage directly to local communities through other mechanisms. Our new masters, with their focus on ‘core business’ the provision of social infrastructure goes beyond this remit. They have therefore done nothing to compensate our people in any way for their misdeeds.
Our people living in mining communities are humble and peaceful people. Their only crime is that the creator has endowed them with a precious gift - the minerals below their feet. It cannot be denied that they do not enjoy these precious gifts and continue to pay a huge price. It is a situation which would never be allowed in any society that values its citizens.
Next stop - Proposition Three.
Labels: CHOLA MUKANGA, MINING, NEOCOLONIALISM, TAXATION, WINDFALL TAX
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You can't teach a thirsty childTheme: Water and sanitation
Adam Oxford
guardian.co.uk
Seven-year-old Irene laughs and disappears into the tall grass, leaving her friends waiting on the dusty footpath. A couple of minutes later, she reappears, holding an old plastic bottle which she's just filled from a small stream.
The water inside is green with algae and insect eggs float on the surface. Irene smiles and takes a sip, then carefully screws the top on and puts it into her bag.
Irene walks this route through Simakakata community near Kalomo in Central Zambia every day, commuting barefoot between her home at Chibwe Farm and the area's only school. It's a 14km round trip which takes around two and a half hours each way. She sets off at 7am and gets back, exhausted, just in time for nightfall and bed.
Normally, Irene won't drink anything from the time she leaves home in the morning until she gets back at night. The borehole at the school ran dry years ago, and the nearest functioning one is privately owned and strictly rationed. It's closed to the schoolchildren from 10am daily, and from September to December when it runs low, they are often turned away altogether.
At home, Irene fills pans from a small pond just behind the single room hut she lives in with her sister, her parents, her orphaned cousin and her two baby brothers. It's almost identical to the slow stream that she's just visited. The five month rainy season only finished a week ago, but the water is already cloudy and still, while cattle and children drink side by side from the same pool that's used to wash clothes.
Her story isn't unusual. Statistically, just 40% of the rural population in Zambia has access to safe water, but a 2006 survey by the Central Statistics Office found that that number drops by half again in some of the poorer provinces.
The scarcity of safe water hits areas like Simakakata hard. On top of occasional outbreaks of cholera and typhoid, a fifth of children here will have suffered from chronic diarrhoea within the last two weeks. The resulting dehydration is the main reason that the under-five mortality rate is over one in ten.
Irene's headmaster, George Matantilo, explains that the more subtle effect of water-borne illnesses is to derail the community's ambitious plans for development and self-sufficiency.
"Of course the children are often ill," he sighs, "And when they are sick, they can't come to school, so they fall behind in their studies. If they keep missing lessons, they won't improve, and as they grow up they lose interest in education. Most of the adults here aren't educated, but they don't want their children to spend their lives looking after animals like they do."
Lack of water for basic sanitation exacerbates health problems in a culture where eating without cutlery is the norm. For older girls at schools like these, it can be even tougher: one in five spend a week every month at home because they're embarrassed by not having anywhere to wash during menstruation.
Responsibility for improving access to clean water lies with the government, but like many countries in sub-Saharan Africa, money in Zambia is scarce. Export revenues have been hit hard by the global recession and corruption remains rife. The Anti-Corruption Commission (ACC) reported concerns in February that government officials had used funds for rural water supplies to install private boreholes on their own plots.
Chola Mukanga runs the non-political blog Zambian Economist (www.zambian-economist.com), which hosts lively discussions about development issues within the country. He takes issue with another Zambian commentator, Dambisa Moyo, whose book 'Dead Aid' is currently riding high in the best-seller charts with the message that international organisations should "turn off the tap of aid" to Africa within five years.
"At the moment," he says, "Ninety-five percent of funding in the water sector comes from foreign aid, because the water companies are not in a position to fully recover costs through rates. Without aid in this area, the impact on lives would be immediate."
There are promising signs that money is being used more effectively, says Mukanga. Local radio stations are encouraging debate among the rural population, providing information and an independent voice for communities in a country where most media outlets are state owned. The traditional authorities are also proving themselves a powerful force for change, offering reliable long term oversight for new projects.
"Chiefs are emerging as a real voice to push for a better deal," he explains, "One of the best sanitation drives in Zambia is led by Chief Macha in Choma, who commands confidence from donors and government."
Westone Sianchongwe is the Senior Facilitation Officer for Response Network (www.responsenetwork.org), a local NGO which works through the traditional authorities to start self-help projects. He's a passionate advocate for communities like Simakakata, and encourages them to solve problems without outside help wherever possible. Drilling a borehole, though, costs over 62 million kwacha (around £7,500) and meeting the needs for the Kalomo area alone would require over half of all the extra government funds earmarked for developing the water infrastructure this year.
"We've sunk 12 boreholes in Kalomo district," explains Sianchongwe, "To achieve the Millennium Development Goals they need 2,500 more. Without intervention from outsiders or NGOs, I do not foresee a time that 100% water coverage will be achieved."
There is hope for Irene, though. George is working with a UK charity to raise funds for Response Network's 13th borehole, which will be on the site of a new school building at Simakakata. With a reliable water supply, he says, he'll be able to attract more trained teachers to work here and irrigate a garden for the children to grow vegetables which they can sell to raise funds for the school.
"The most important thing," he concludes, "Is that the children have something to drink during the day. You can't teach a thirsty child."
This longlisted article was published on 23 July 2009. It was written for the Guardian's International Development Journalism Competition between 1 April and 22 June 2009.
Labels: CHOLA MUKANGA, DAMBISA MOYO, DONORS, WATER
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Windfall tax is easier to implement – Mukanga
Written by Chiwoyu Sinyangwe and Fridah Zinyama
Tuesday, September 22, 2009 5:41:02 PM
PRESIDENT Rupiah Banda is ignoring common wisdom of tax collection by defending the windfall tax on the mining sector,
United Kingdom-based Zambian economist Chola Mukanga has observed.
And Lusaka economist Professor Oliver Saasa has said the government's decision of scrapping off the 25 per cent mining windfall tax is short sighted.
Commenting on government's decision to scrap off windfall tax introduced over a year ago, Mukanga said although many agreed that theoretically, the profit variable tax could go some way in capturing the necessary revenue from higher copper prices, a windfall tax was easier to implement.
“It is also easier for the public to check how much revenue government is getting in its coffers,” said Mukanga who is also Head of Aviation Economics for the UK's Department for Transport.
“With a profit variable tax, it is an accountant's job! Multinational companies love profit variable taxes because it is easy for them to hide their profits through inflated costs and so forth. Simply put, the mining companies have smarter accountants than the government. This is why the mining companies have been pushing for removal of the windfall tax. They (mining companies) know they'll pay very little.”
Mukanga said the government's decision to succumb to the demands of foreign mining firms that strongly objected to the popular windfall tax would work against increasing revenues in the country for the much needed finance towards social services as was being advocated by the country's key donors.
“More importantly, the President is alone in thinking the current situation is ideal,” said Mukanga.
“Only yesterday, the European Union called the current situation 'depressing' and asked the government to review its position by increasing the level of tax and improving collection. Simpler taxation mechanisms are key to improving collection.”
During the address to Parliament last Friday, President Banda defended the government's decision to scrap off a 25 per cent mining windfall tax earlier this year following criticism from civic groups and opposition political parties.
Banda denied that there would be losses of revenue as a result of the lifting of the windfall tax, which had drawn complaints from foreign investors in the copper and cobalt mining industry.
And separately, Prof. Saasa said much as the people of Zambia understood government's need of creating an enabling environment for the mining sector which had been adversely affected by the credit crunch, it was important not to forget the revenue losses that the country would experience once metal prices rebounded on the international market.
“The windfall tax is not meant to punish the mining sector,” he said. “It was introduced in order to allow the mining sector to contribute positively to the country's economy in a situation where they are in a position to break even when things are more than conducive on the international market.”
Prof Saasa said the government should not forget the fact that the mining sector was a major contributor to the nation's coffers and any profits which were made above the break-even point for the mining companies should equally benefit the masses.
“Instead of scrapping [off] the windfall tax, government should have just ensured that they adjusted the windfall tax instead of totally removing it and depending on the variable tax,” he said.
“Once this decision is made, government will find it difficult to capture any revenue if the situation was to improve to allow for a windfall.”
Labels: CHOLA MUKANGA, OLIVER SAASA, WINDFALL TAX
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Zamtel is a monopoly, insists economist
Written by Chiwoyu Sinyangwe
Wednesday, December 17, 2008 6:17:44 AM
ZAMBIA Development Agency (ZDA) chief executive officer Andrew Chipwende is exhibiting a very poor understanding of competition issues by saying that Zamtel is not a monopoly,
UK-based economist Chola Mukanga has observed.
Reacting to Chipwende’s observation last week that Zamtel was not a monopoly, Mukanga said higher costs of entry into the international gateway (IGW), coupled with the political stance preventing emergence of alternative gateways were some of issues that made Zamtel have monopolistic control of the international avenue system.
Last week, Chipwende said Zamtel was not a monopoly and that any of the two mobile companies operating in the country could access the International gateway provided they paid the required statutory entry fee of US $12 million.
But Mukanga observed that in terms of distortion of competition, all the experts in the industry including the World Bank agreed that Zamtel distorts competition, beyond control of the gateway.
“Andrew (Chipwende) is exhibiting a very poor understanding of competition issues. It is true Zamtel is not a statutory monopoly because the gateway is liberalised,” Mukanga said.
“The point is that the higher cost of entry into the international gateway, coupled with the political stance preventing emergence of alternative gateways such as a quasi planning restraint - even if you can pay the IGW licence fee, the government is unwilling to give you the licence, prevents other players from emerging in the international segment market. This makes Zamtel a de-facto monopoly.
As for who "controls" the IGW, Chipwende would do well to familiarise himself with previous submissions from the Zambia Competition Commission (ZCC) like the 2003 submission to the Select Committee on Transport and Communication which stated that ‘the position of Zamtel means that it has the power to prevent, restrict or distort competitor access to this essential infrastructure such as the IGW which was built with public funds’.”
And Mukanga, who welcomed the government’s initiative to do a comprehensive evaluation of Zamtel and exploring partial privatization as one of the alternatives, urged the government not to just focus on Zamtel strategy saying there was need to come up with a holistic communication strategy for the country.
“The government needs to take a step back and ask tough questions about the communication industry and where Zamtel fits in, before proceeding with restructuring the parastatal. This should be done through formal conversations with Zambian infrastructure experts at home and abroad,” said Mukanga.
Chipwende last week said he did not agree that Zamtel was a monopoly because anyone could access the IGW, arguing that the Communications Authority (CA), and not Zamtel, controlled the IGW, adding that Zain Zambia and MTN Zambia’s failure to access the IGW was as a result of their failure to pay the reqired entry fee.
Labels: ANDREW CHIPWENDE, CHOLA MUKANGA, MONOPOLIES, ZAMTEL, ZDA
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Exchange rate will determine fuel prices, observes Mumba
Written by Chiwoyu Sinyangwe
Wednesday, December 03, 2008 9:23:41 AM
THE kwacha’s depreciation against major convertible currencies will prevent local consumers from feeling the impact of declining international prices of oil, UK based economist
Chola Mukanga has observed.
And energy permanent secretary Peter Mumba has observed that the exchange rate would determine the extent of reduction in local pump prices of fuel in line with the global trends.
In an interview, Mukanga said the Energy Regulation Board (ERB) needs to have an expanded interaction with the exchange rate.
“There is of course the little problem of the kwacha which is depreciating significantly, and if that continues, the Zambian consumer may not see the gain in lower prices of oil prices on the international market,” Mukanga said.
The kwacha on Monday modestly depreciated to close trading at K4,490 and K4,540 per US dollar owing to mismatched dollar supply and demand.
Mukanga also said there was need to review the cost impact of Indeni Petroleum Refinery to determine its contribution to the final pump price under the cost- plus model the country was currently using.
He further supported a recent observation by the ERB that the local price of fuel lagged behind the international fuel prices due to the cost plus model currently being implemented.
“The ERB is correct with regards to the lag in oil imports and their cost-plus model which I gather is now under review because it does not make sense that we have such high costs of processing crude oil compared to all of our neighbours,” said Mukanga who is also an advisor to UK government on aviation policies.
And in a statement, Mumba stated that while the cost-plus regime ensures cost recovery, it was slow to respond to the price variations as the new prices were effected depending on the cost of each cargo brought into the country.
“The cargo that has been purchased in November was at an even lower cost of US $53 million and this will be processed as from the second week of December this year. This cargo will result in a reduction of fuel prices this month,” stated Mumba. “The extent of the price reduction will depend on the exchange rate. The actual reduction will be determined by the ERB.”
Labels: CHOLA MUKANGA, FUEL, KWACHA, PETER MUMBA
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