Levy’s legacy on mining taxation needs to be restored – Chitala
By Chiwoyu Sinyangwe
Mon 07 Dec. 2009, 04:01 CAT
LEVY Mwanawasa’s progressive legacy on mining taxation needs to be restored, Lusaka political and economic consultant Dr Mbita Chitala has said.
Meanwhile, Chamber of Mines of Zambia (CMZ) has said Zambia is expected not to attract further investment in the mining sector despite the recent recovery in commodity prices as the country lacks investor confidence.
Copper prices last week on the London Metal Exchange reached over US $7, 100 per tonne, near the previous session's peak of $7,170, the firmest since late September 2008, promoting calls from key stakeholders for the government to restore the windfall tax to help the country tap into the ‘abnormal prices.’
However, the government has remained adamant with commerce minister Felix Mutati last week saying Zambia will not introduce new taxes for the mining sector to encourage further investments into the industry.
Dr Chitala last week said late president Mwanawasa’s decision to come up with the popular mining fiscal regime of 2008 was well thought out and should be restored.
He said the absence of the revenue estimates from the mining sector in the 2010 national budget was an indication that the country was not going to reap anything from its lifeblood.
“We need to revisit this. This legacy that Mwanawasa left us was progressive and it should be re-addressed and I am glad that we are discussing it as of today,” Chitala said.
“…when I was in government at the time when we were negotiating with the mining companies over these matters…in fact, I was the deputy minister in the office of the President to Mwanawasa, we went to great lengths to agonise ‘how do we make Zambia benefit as well from this God-given resource in terms of copper and cobalt?’”
Dr Chitala said what late president Mwanawasa did by abrogating and abolishing the Development Agreements (DAs) was an act of bravery.
“…I remember Mwanawasa said to me, ‘Mr Chitala, what we are about to do, in other countries like Chile, Allende Salvador Isabelino Gossens was overthrown on account of this,’” said Dr Chitala.
“So, what Mwanawasa did was a very brave thing that with insight…he abrogated the DAs and brought us a tax regime which was going to give us US $415 million.”
Meanwhile, CMZ general manager Frederick Bantubonse said Zambia was not expected to attract more investments into the mining sector as the current mining fiscal regime did not provide consensus between mining companies and the government.
Bantubonse said the current mining fiscal regime clearly spelt out that the government would not enter into new development agreements, a move he said made it difficult for the country to attract future investment despite the rising global commodity prices.
He said that was why Zambia only had junior mining companies and was struggling to attract global international mining firms such as Rio Tinto and BHP Billiton.
“We need to agree. But as of now, the government hasn’t said this is the situation. We need a consensus. The country is divided,” Bantubonse said.
“If we are to restore investor confidence, there has to be need to look at the laws and that we have not done that yet. 2009, there is no agreement…2008 cancelled the development agreements and there have not been any agreement.”
Bantubonse also said the government’s decision not to hike mine taxes next year was not enough as investor confidence went beyond taxation.
He also said Zambia’s mining sector still suffered from political risk.
“You still have people saying that when I come into power, I will chuck that one out…investors are very sensitive to that,” said Bantubonse.
Labels: CMZ, FREDERICK BANTUBONSE, MBITA CHITALA, MWANAWASA, WINDFALL TAX
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Foreign firms call for new Zambia mine policies
Written by Reuters
Wednesday, August 19, 2009 6:26:13 PM
LUSAKA (Reuters) - Foreign mining firms in Zambia, Africa's top copper producer, want the government to adopt mining policies that will boost investment at a time when copper prices are recovering, an industry official said on Wednesday.
Nathan Chishimba, president of the Chamber of Mines of Zambia (CMZ), which represents interests of the mining firms, said companies wanted stable and longterm policies that would reduce risk to their investments.
"(Mining companies) are not saying the policies should not be changed, but that there should be consistency so that any changes to the policies should not result in fundamental shift in the direction of the industry," Chishimba said.
In 2008, Zambia introduced a 15 percent profit variable tax, 25 percent mineral windfall tax -- which it scrapped in 2009 -- and raised corporate tax to 30 percent from 25 percent, upsetting foreign mining firms.
Zambia said last week it will not refund foreign mining companies millions of dollars they paid in taxes when the controversial law was in force, but could revise existing taxes.
"We must have policies that recognise the magnitude of the risk in the mining sector, which is the longterm nature of the industry," Chishimba said.
Chishimba said Zambia was set to achieve the targeted production of 600,000 tonnes of copper this year.
"The country can achieve the target provided that all other factors such as reliable supply of power and other logistical arrangements are met," Chishimba said.
Some of the foreign mining companies operating in Zambia include Canada's First Quantum Minerals, London-listed Vedanta Resources Plc, Equinox Minerals and Glencore International AG of Switzerland.
Labels: CMZ, NATHAN CHISHIMBA, WINDFALL TAX
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CMZ optimistic copper price rise will ease mines operation costs
Written by Florence Bupe
Thursday, August 06, 2009 5:24:35 AM
THE Chamber of Mines of Zambia (CMZ) has expressed optimism that the current upward trend in copper prices on the international market will ease operation costs for local mining houses.
Commenting on the recent surge in copper prices on the international market, CMZ president Nathan Chishimba said with more attractive metal prices, operational costs for the mines were likely to ease, hoping that this would in turn result in spiral benefits for the country’s economy.
“The first benefit which one could talk about is that the pressure of operational costs of local mines will ease. The high prices will also boost confidence in other sectors of the global economy and this will help relieve economies of the effects of the financial crisis,” he said.
Chishimba said more investors would be willing to venture into projects that would foster economic growth once confidence returned to the mining sector.
He noted that there was need for the local industry to help boost investor confidence through the provision of a conducive and consistent business environment.
“In order for this improvement to be sustainable, we are required to assist build confidence by providing a conducive and consistent environment that will make people willing to risk their money,” Chishimba said.
He said an improvement in copper prices on the international market was a clear indicator that the economy was moving in a positive direction.
Chishimba, however, stressed that the price of the metal was not expected to rise dramatically above the current levels.
Last week, copper prices on the international market hit a ten month high of US $5,737 per tonne.
Chishimba also said the contribution of the mining sector to the country’s economic growth was underrated.
“If you critically look at the mining industry, you will discover that it has strong linkages with other sectors of the economy. The policies in place strongly determine mining related sector growth. If as a country you have high operational costs, growth will be limited,” said Chishimba.
Labels: CMZ, COPPER
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Govt opens negotiatons with mining companies
Written by Chiwoyu Sinyangwe
Wednesday, December 24, 2008 3:27:20 PM
GOVERNMENT has commenced negotiations over the requests made by mining companies for the sector to remain afloat despite continued collapse in international copper prices.
Chamber of Mines of Zambia (CMZ) president Nathan Chishimba who disclosed the development stated that the cartel of mining companies in the country was grateful to the government for allowing dialogue to ensure the investment climate in the country’s lifeblood remained positive.
Chishimba however refused to disclose the contents of the ongoing discussion between CMZ and the government, saying it was inappropriate for him to disclose the contents.
“I can confirm that we have engaged with the government regarding the urgent need to ensure that the mining industry remains afloat during this acutely trying period, but I think it is not appropriate for me to divulge the details of the ongoing discussions with government at this time,” stated Chishimba in response to a press query.
“Having said this, I would like to place on record our appreciation of the efforts that government is making to engage with us and ensure that the investment climate remains positive.”
But it has been learnt that some of the demands the mining companies have made to the government included the zero rating of windfall and variable tax and that mineral royalty tax be graduated at levels of copper prices as follows; above US $3 per pound at three per cent, US$2 per pound to US$ 3 per pound at 2 per cent and one per cent for below US$2 per pound.
They further proposed that in calculating mineral royalty tax, mining companies be allowed to offset copper and cobalt price participation from gross sales, as these were not realized in the hands of mining companies. The other demands are that the government should reduce company tax for mining to 25 per cent from the current 30 per cent and allow mining companies to offset selling against gross revenues.
In respect of the customs and Excise (Amendment) bill 2008, the mines are proposing that these be withdrawn until sufficient smelting and refining capacity is successfully commissioned and that the government suspend excise duty on local diesel and waive road levy on diesel imported for use in plants and mines
And Chishimba stressed that the genesis of the current global economic crisis lay outside the country, with the world economy in recession which was close to a slump. He said any efforts that the government could make in response to any representations may only go so far to mitigate the adverse fallout from the crisis.
“We can only try and assist government to ensure that any measures taken dovetail with and complement the strategies that other countries are taking in this regard. This way, we will minimise, but cannot avoid, the adverse impact of the global economic crisis on Zambia, not only in the mining sector, but in other industries as well,” stated Chishimba.
Labels: CMZ, MINING, NATHAN CHISHIMBA
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LuSE yet to attract mines
By Maimbolwa Mulikelela
MINING companies operating in Zambia are yet to be attracted to list on the Lusaka Stock Exchange (LuSE) because they are still managing to raise huge amounts of money for their investments through large international capital markets, Chamber of Mines of Zambia (CMZ) president, Nathan Chishimba has said.
Mr Chishimba said some mining companies had dual listings on the global capital markets and that any decision to list on an additional market like LuSE was seriously weighed against such market’s regulatory and compliance environment compared to current listings.
Mr Chishimba said although CMZ would not speak authoritatively on investment decisions and strategies of individual members, there was need to evaluate the resultant additional compliance work required to satisfy multiple exchanges versus the quantum of possible investment funds available in the additional markets.
In response to a Press query, Mr Chishimba said there was need to understand that mining houses in Zambia were not individual investors and that mining investments tended to be large, long-term and highly risky.
He said raising adequate funds for large scale investments required mining companies having to procure financial resources through the larger international capital markets mainly in Australia, United Kingdom, Canada and South Africa.
“For example, if a company needed to raise US$500 million but could only raise US$10 million on LuSE with the same amount of effort to raise US$250 million in London and US$250 million in Toronto, then on that basis alone, an economic justification to list on LuSE would be difficult.
However, if the quantum were only US$10 million it needed to raise, then the playing field would swing heavily towards LuSE for a local development,” explained Mr Chishimba.
He explained that this could be the reason why the market has seen more service and supply companies related to the mining industry list rather than mining companies themselves as their investment capital required is normally substantially less.
However, Mr Chishimba acknowledged that LuSE had in recent months demonstrated admirable growth rates that had attracted a lot of international interest.
The growth would improve the liquidity of the market and enable LuSe to acquire the depth to attract listings by larger players in the economy.
“Importantly, it needs investors whether individual, institutional, local or foreign who are prepared to take risk for better returns.
This is why it is important that the investment climate in the country continues to provide stability, maturity and attractiveness,” he said.
Finance Minister, Ng’andu Magande, observed yesterday that mining firms in Zambia preferred to list on the international capital markets rather than LuSe.
Speaking when he disclosed that the Government will not sell off some of its 87.6 per cent shares in Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), Mr Magande wondered why mining companies were not floating some shares, saying it was unfortunate that mining agreements did not have compelling provisions.
“As you may be aware, the mines in Zambia are owned by foreign companies and they have their capital markets where they come from, so perhaps they prefer to float their shares there,” he said.
Labels: CMZ, LUSE, MINING
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Magande quiet on mine contracts
By Kingsley Kaswende
Friday March 30, 2007 [02:00]
Finance minister Ng'andu Magande yesterday remained mute on whether the government will proceed to renegotiate the contracts with mining firms. When contacted over the issue, Magande, through his secretary said he had a “busy schedule” and could not attend to any questions. This was after he had earlier agreed to give an interview to this reporter on this issue.
There have been mounting calls for the government to renegotiate the mining contracts to allow the country benefit from high copper prices. The recent call is from the visiting special advisor to the Norwegian Minister of Development Cooperation on anti-corruption and money laundering, Eva Jolly, who said on Wednesday that she was very shocked to see Zambia being deprived of rent from its land through the mining contracts.
Jolly said time was up for Zambia to renegotiate the mining contracts. “Looking at them (mining firms), I am very shocked that Zambia is being deprived of rent of its land. I think maybe time has come to renegotiate these contracts. These contracts are depriving you of too much,” she told parliamentarians. Jolly is likely to meet with Magande next Monday.
While presenting the national budget last month, Magande said the government would seek negotiations with mining companies “so that there is mutual consent by contracting parties to revise the tax regime.” In the budget speech, Magande proposed to increase the country’s royalty tax on copper mining from 0.6 per cent to three per cent. However, the taxes’ increase would not affect the current mining operations, Magande later said, because most of them had entered into long-term contracts with the government.
On the other hand, mining firms are not prepared to renegotiate, the Chamber of Mines of
Zambia (CMZ) recently said. CMZ general manager Fred Bantubonse said development agreements were legal documents which both parties entered into voluntarily. “If authorities come up with a harsh fiscal regime, the impact may come later than now when investors decide not to invest,” Bantubonse said.
Last week justice minister George Kunda told Parliament that the development agreements entered into with mining companies were above the law. Kunda warned that the consequences of breaching the development agreements would lead to harsh penalties and that Zambia could be taken for international arbitration. He, however, said the development agreements provided for re-negotiations and the government would like to re-negotiate.
Labels: CMZ, EVA JOLLY, MAGANDE, MINING CONTRACTS
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