Vedanta chairman in Zambia over KCM, govt standoff
By Chiwoyu Sinyangwe and Joan Chirwa-Ngoma
Sat 16 Nov. 2013, 14:00 CAT
VEDANTA Resources chairman Anil Agarwa is in the country to help resolve the standoff between its subsidiary Konkola Copper Mines and government.
And former mines minister Dr Kalombo Mwansa says mining companies should be made to pay appropriate taxes to the government.
Meanwhile, Dr Mwansa says allowing mining companies to export copper concentrates without adding value is unacceptable.
Vedanta Resource which is London-listed owns a majority stake in KCM.
On November 2, KCM announced plans to lay off over 1, 500 workers in the next three years as it migrated towards automation and mechanisation at Nchanga Underground.
The move by KCM unnerved President Michael Sata who said embattled chief executive officer Kishore Kumar would be sorted out for attempting to blackmail Zambia.
"If he's threatening us that he wants to lay off people at Konkola Copper Mine let him lay off one person, then we take away the licence from him; that's the best way of laying him off because investment should be for the people," said President Sata on November 5.
"And if that Mr Kumar wants to threaten us, to blackmail us, he can go to hell. We shall sort him out."
Mines minister Christopher Yaluma confirmed that Agarwa arrived in the country yesterday to help the troubled mine.
"Yes, I am supposed to meet him Agarwa this evening," said Yaluma.
And Yaluma said no miner would be retrenched at KCM.
"We had told them that that was non-negotiable and the President made it clear that whoever laid off even a single worker at KCM...and obviously you saw what happened," said Yaluma.
On November 9, Kumar 'voluntarily left' Zambia after home affairs minister Edgar Lungu demanded a meeting with him to discuss his "rhetoric" taunt targeted at President Sata on November 8.
Kumar, who is also chief executive officer for Base Metals Africa, left the country aboard South African Airways.
And Dr Mwansa said Zambia had room to collect enough revenue from the mines through proper taxation.
"We don't get enough from the mining industry. Whatever revenue we can get, we must get it. We must do everything possible to maximise revenue," he said in an interview yesterday.
With an industry that is estimated to be worth around US $10 billion, Dr Mwansa said it was unacceptable for the mines to contribute below US $600,000 (about K3 million) to the treasury in form of taxes.
"On the revenue side, we are very low. Every avenue we can get to increase revenue from the mines should be looked at," he said.
The government recently raised mineral royalty tax on copper from three per cent to six per cent, but shelved plans to re-introduce windfall tax on copper that was suspended by Rupiah Banda's regime.
Dr Mwansa said the country's efforts in the mining industry must be towards value addition, and supported President Sata's statement that mines "should not be allowed to export soil".
Finance minister Alexander Chikwanda on October 4 signed statutory instrument (SI) 89 which allowed mining companies to export copper concentrates tax free.
But President Sata cancelled SI 89, saying mining companies should not be allowed to export copper without adding value.
SI 89, which was to be in force up to September 30, 2014, was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition and to improve accountability in the vast mining sector.
SI 89 has since been replaced with SI 99 to reinstate the 10 per cent export duty on copper concentrates and ores, which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.
"It's not good to export soil, like the President put it. We have to add value… Mining companies can also put resources together to put up a big smelter," he said, and advised the government, mines and mine workers unions to promote dialogue in the industry.
His comments follow KCM's plan to lay off over 1,500 workers as the company seeks to switch to mechanisation.
"If they (mines) have a problem, they should sit down with the government. There is need for government, mines and the unions to find time to sit and exchange ideas. They should not only meet when there is a crisis," said Dr Mwansa, adding that the current government's policies on the mines and job creation were good.
Labels: KCM, STATUTORY INSTRUMENT 89, TAX EVASION, VEDANTA
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Zambia should seek greater benefits from mines - CTPD
By Gift Chanda
Thu 07 Nov. 2013, 14:00 CAT
ZAMBIA, Africa's leading copper producer, should seek greater mining contribution through taxes to enable the country get more benefits from its main natural resource, according to the Centre for Trade Policy and Development.
The CTPD said there was need for a much bigger contribution from the mines to the country's fiscal status. Copper mining is Zambia's economic lifeblood and a key employer in the southern African country of 13 million people.
But copper's contribution to the overall tax take is minimal and has been brought into focus recently with the revocation of the Statutory Instrument 89 which finance minister Alexander Chikwanda introduced to allow mining firms to export copper concentrates and ore tax free.
On Monday last week, President Michael Sata reversed SI 89, which was to be in force up to September 30, 2014.
The SI was to reverse the November 2011 decision of the government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
"President Sata was within his right to revoke the SI 89 because as a country we need to see a much bigger contribution from the mines to fiscal status," CTPD board member, Trevor Simumba, said in an interview.
"The SI 89 was implemented in a vacuum. It was not done transparently and that is why there are lot of problems with it."
Simumba explained that if the SI was implemented transparently, Chikwanda should have ensured that the mines gave something away too.
"For instance, if you are going to allow mines to export the concentrates as the minister said, and we know that they had stockpiles, the minister should have insisted that the mines should use Zambian registered transporters and railway lines so that we gain some revenue as country as well," he said.
"...but to wholesale the copper ore by giving it away for free like that is not correct."
He said Chikwanda should have sought consultancy beyond government officials to ensure that the country benefits from its natural resource - copper.
Copper output in Zambia is expected to rise from 800,000 tonnes this year to 1.5 million tonnes in 2017 as foreign companies invest in expanded capacity.
"As civil society, we feel that there is need for the government to consult all stakeholders," said Simumba.
"It is not just about talks between the government and the mines."
Labels: CTPD, MINING, STATUTORY INSTRUMENT 89, TAX EVASION
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SI 89 cannot be justified - Mtesa
By Gift Chanda
Wed 06 Nov. 2013, 14:00 CAT
THERE is absolutely no justification in allowing mining firms to export copper concentrates tax-free 49 years after Zambia's independence, says Ambassador Love Mtesa.
Commenting on the revoked Statutory Instrument (SI) 89 which finance minister Alexander Chikwanda signed on October 4, Mutesa said the instrument was detrimental to the economic development of Zambia.
On Monday last week, President Michael Sata reversed SI 89, which was to be in force up to September 30, 2014.
The SI was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
"The cancellation of SI 89 by President Sata is something that is very commendable to many of us in the country," Mtesa, a former Consumer Trust Unit Trust (CUTS) international Zambia chairperson, said.
"The mines need to be pointed in the direction of utilising refineries in the country so that they add value to what they produce."
After revocation, the SI 89 has since been replaced with SI 99, which has reinstated the 10 per cent export duty on copper concentrates and ores, which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.
"Allowing the mines to export copper ore or as the President put it, exporting soil, is unacceptable 49 after independence," Mtesa said.
"There is absolutely no justification at all why this SI should have passed. We have the refinery, why shouldn't we be adding value locally?" He said the SI 89, if anything, would have meant the country exporting jobs.
"This SI would have entailed throwing away revenue from those minerals such as gold, found in the copper ore or concentrates, and that is not justifiable," he said.
Mtesa said the government needed to create jobs and value addition is just one of the other many avenues to do so.
"When you look at where we are as an economy, we need to do everything possible to add value to whatever we produce so that we can make enough money not only for the companies exporting but for the government as well in terms of taxation and the employees' Pay as you earn tax," he said.
Chikwanda recently told the Parliamentary expanded committee on estimates that President Sata's reversal of SI 89 would see mining firms stockpiling ores and concentrates fail to export the unfinished resources and therefore raise no revenues to pay tax to treasury.
Labels: ALEXANDER CHIKWANDA, CUTS, LOVE MTESA, STATUTORY INSTRUMENT 89
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(LUSAKATIMES) Mineworkers Union of Zambia wants KCM mining license revoked
Time Posted: November 5, 2013 7:08 am
THE Mineworkers Union of Zambia (MUZ) has called on Government to find another equity partner for Konkola Copper Mines (KCM)’s mining operations in the country.
MUZ president Nkole Chishimba said Government should go ahead and revoke the mining license for KCM and with or without the laying off of workers by the mining-giant.
He said this was in view of the unclear roadmap by KCM management which had adopted tactics of blackmailing government.
Mr Chishimba who was reacting to President Michael Sata’s call on KCM not to go ahead with its intention of downsizing labour said the announcement by the Head of State to revoke the mining license should the company lay off a single employee was welcome.
“We are thankful that the president has taken that move of considering revoking KCM’s mining license should the company downsize labour.
“We welcome that move and in fact, Government must still consider our call of finding another equity partner for KCM and this is because of unclear roadmap by the company,” Mr Chishimba said.
The union leader said from the way KCM had been conducting itself in the recent past and cited earlier attempts by KCM in June this year to lay off 2000 miners, it was clear that the company’s operations in the country had ceased to be certain.
Mr Chishimba said it was MUZ’s fear that if blocked from executing its intended action of laying off workers, KCM would only end up subjecting employees to poor conditions of service.
“This is why we are saying Government must take keen interest in the operations of KCM by finding another equity partner for that mine,” Mr Chishimba said.
Labels: KCM, MUZ, NATIONALISATION, STATUTORY INSTRUMENT 89, TAX EVASION
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KCM layoffs
By Editor
Tue 05 Nov. 2013, 14:00 CAT
Last week, Konkola Copper Mines announced plans to retrench over 1,500 employees as the mining company pursues a mechanisation programme for all its operations. All this is said to be aimed at increasing productivity and reducing costs, and thus increasing profits.
The government's reaction has been sharp. President Michael Sata feels this is a threat, blackmail and he has told Konkola Copper Mines that they can go to hell, they will sort them out.
And the Minister of Mines, Christopher Yaluma, was also categorical:
"Government will not allow Konkola Copper Mines to lay off more than 1,500 miners because solutions can be found to any problems faced by the mining company."
This reaction and disappointment is understandable. The mining corporations promise to create a lot of jobs when they are seeking mining licences. But they never actually fulfill their promises on this score. They create fewer jobs than they promise and they create jobs of a much lower quality and remuneration.
It is understandable why the government may be reacting so angrily to Konkola Copper Mines' plans to lay off over 1,500 workers because this is a company that has been boasting of employing so many people to justify why the government should give them this or that concession or incentive. They get what they want and after that, they want to renege on their promises. Who can easily accept this?
Clearly, these are distressing difficulties for a government and a people that are desperately in need of jobs, that had pinned their hopes for jobs on the mines.
These Konkola Copper Mines layoffs are inevitably a bitter pill to swallow. But if we are to face up to the realities, we have first to become aware of them.
The mining industry will never again employ as many people as it used to do in the 1920s, 1930s, 1940s, 1950s up to the 1980s or 1990s. The numbers of people employed by the mines will continue to decline because of a technology revolution that is fast replacing human beings with machines in virtually every sector and industry in the global economy.
Already, thousands of workers have been permanently eliminated from the economic process, and whole work categories and job assignments have shrunk, been restructured, or have disappeared.
This is not only happening in the mines; it is happening in agriculture and manufacturing, where the numbers of farm workers and factory workers are declining.
Mining industries, like other industries, have been undergoing a steady process of technology displacement for many decades. With the use of advanced computer technology, faster excavation and transportation equipment, improved blasting technologies, and new processing methods, mining companies have been able to increase output at an average annual rate of three per cent since 1970.
While the industrial worker is being phased out of the economic process, many economists and elected officials continue to hold out hope that the service sector and white-collar work will be able to absorb the unemployed labourers in search of work. Their hopes are likely to be dashed because automation and re-engineering are already replacing human labour across a wide swath of service-related fields. The new "thinking machines" are capable of performing many of the mental tasks now performed by humans, and at greater speeds.
In 'The Future Impact of Automation on Workers', authors Wassily Leontief and Faye Duchin described the improved efficiency of automated tellers: "A human teller can handle up to 200 transactions a day, works 30 hours a week, gets a salary anywhere from US$8,000 to US$20,000 a year plus fringe benefits, gets coffee breaks, a vacation and sick time… In contrast, an automated teller can handle 2,000 transactions a day, works 168 hours a week, costs about US$22,000 a year to run, and doesn't take coffee breaks or vacations."
The transformation of the traditional office from a paper-handling to an electronic-processing operation has greatly increased the productivity of business and eliminated millions of clerical workers and will continue to do so at an accelerated rate. Secretaries were among the first casualties of the electronic office revolution. The numbers of secretaries has steadily declined as personal computers, electronic mail, and fax machines replace manual typewriters, paper files and routine correspondence. Receptionists are also being reduced in number as new automated computer systems can answer calls, record messages, and even hunt down the party being phoned.
The intelligent machine is steadily moving up the office hierarchy, subsuming not only routine clerical tasks but even work traditionally performed by management.
Clearly, the successful application of mechanisation typically results in fewer people being employed directly in support of the mining process. This will not be something easy for a government and a labour movement that wants to see more people employed by the mines. If not handled well, conflict is likely to arise. This is so because in addition to losses of jobs, mechanisation can also be seen as having a negative impact on the communities within which mines operate.
But the problem does not end here. A further significant impact of mechanisation is that of the design and structure of the work practices in mines. Changing technology leads to changes not only in the number of people employed directly in support of the production process, but also in their required skills and in the manner that work teams operate internally and interact with other teams and mine management.
So much hope was placed in mining investors employing many people. But the reality is starting to dash those hopes.
We share the bitter feeling of impotence that our political and labour leaders have in the face of such problems and the concern of all statesmen for the political instability to which these problems may give rise.
So gloomy are the realities and the prospects for the future viewed as a whole that they could generate pessimism and discouragement if we were not sure of aims.
We do not have, nor do we think anyone has, magic remedies for such difficult, complex and apparently insoluble problems. History shows, however, that no problem has ever been solved until it has become a tangible reality of which everyone is aware. But no matter how enormous the difficulties, no matter how complex the task, there can be no room for pessimism. This would be to renounce all hope and resign ourselves to the final defeat.
We have no alternative but to struggle, trusting in the great moral and intellectual capacity of the human race and in its instinct for self-preservation, if we wish to harbour any hope for survival.
Only with a tremendous effort and the moral and intellectual support of all can we face a future that objectively appears desperate and sombre, especially for our poor people.
The challenge with mining is that the mining corporations don't want to pay for anything. And if they have to pay, it has to be very little - peanuts, a token. They don't want to pay taxes. They do everything possible to pay nothing or very little in terms of taxes. Now they are trying to employ the smallest numbers of people possible and at the lowest wages possible. This is the way they behave. And this being the case, then what remains for our people, what benefits do our people get from their country's mineral resources?
There is no alternative to fair, just and orderly taxation of the mines. If we don't get fair revenues from the mines, what will remain for us from their exploitation of our country's mineral resources?
This is why we have to take an aggressive attitude towards the taxation of mining transnational corporations. If we don't, they will leave us with nothing but craters.
Labels: CHRISTOPHER YALUMA, KCM, STATUTORY INSTRUMENT 89, TAX EVASION
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'All they want is zero tax'
By Editor
Mon 04 Nov. 2013, 14:00 CAT
IF it was left to the mining corporations to determine what taxes they should pay, we have no doubt most of them would pay zero.
And Miles Sampa is right when he says "all they want is zero tax". We should not deceive ourselves in any way that the mining corporations are here to serve the interests of the Zambian people. These are not charitable organisations. They are here for a profit - and their mission is to maximise that profit.
It is up to us and our leaders to make sure we get a fair share of the rewards of mining. If we don't, we will get very little, if not nothing.
And in this regard, Nelson Mandela in June 1998 gave very timely advice to the political leaders attending the Organisation of African Unity summit: "It would be a cruel irony of history if Africa's actions to regenerate the continent were to unleash a new scramble for Africa which, like that of the 19th century, plundered the continent's wealth and left it once more the poorer."
It shouldn't be forgotten that this country's first coloniser was not the British government but a mining corporation - the British South Africa Company. This company governed this territory, the territory we are today calling Zambia, from 1891 to 1924. What did this company do for us? Nothing. It simply enriched Cecil Rhodes and its other shareholders. Things improved a bit more for our people when the British colonial office took over the administration of the territory.
We therefore know what corporate rule means. And Sampa is right in urging the government to ensure it has full control of the country's economy and assets.
It's not difficult to see through First Quantum Minerals' scheme of stockpiling concentrates, creating a crisis and then seeking to benefit from a self-created situation. They knew what they were doing. They were piling up these concentrates, as Sampa correctly observes, so that in the end, they build a strong case to force the government to forgo taxes on it.
If we are to harness our mining resources for human development, we have to secure a fair share of the wealth now being drained out of our country through unfair and sometimes illegal practices.
The ultimate measure of natural resource is the benefit that it generates for our people. We can see the gap between economic growth as a result of copper exports and the weak progress in human development.
The economic growth the statistics give us is not tying up with the reduction of poverty. Economic growth should result in the improvement of people's living standards. It's meaningless to develop a country without developing the people. Economic growth should be for the benefit of the people. To close this gap, our government needs to spread the benefit of our natural wealth by mobilising revenue through taxation, and by investing it efficiently and equitably in public goods. This requires a taxation system that combines incentives for investors with fairness for our people.
We also need to realise that the mining industry typically operates an economic enclave, with few links to our local firms and employment markets, and little value added in production. Strengthening linkages and adding value are critical if the benefits of mining are to be spread more widely.
Taxation is here a case in point. We have to review the current mining tax regime in the light of prevailing world market conditions. Of course, creating incentives for high quality investment is critical and we can't ignore this. Given the large initial capital costs and the long-term investment horizons involved in the mining sector, it is also important that we create a stable and predictable environment for investors.
There is something seriously wrong in the way we are taxing mining corporations. The current tax regime suffers from several failings. We signed too many concessions with individual mining investors which are increasingly becoming difficult to harmonise and administer. Multiple tax structures do not make for efficient administration. There isn't much benefit or advantage in case-by-case negotiations with investors.
And whatever benefits are there, their significance is exaggerated. They pitch government into negotiations on the potential profitability of a deposit with investors who are likely to be better informed. Adherence to a general tax structure is the rule in Latin America and much of Asia.
We need to pay special attention to the concessions we offer mining corporations. And some of the concessions we have offered need review. Most of the concessions we offered in the 1990s no longer make sense in today's market conditions. In this era of high and rising prices, they are excessively generous.
Clearly, our leaders need to think much more of the future. It is possible to exhaust our minerals with very little to show for it in terms of development. Look at how many years copper has been mined in this country! What is there for us to show for over 70 years of mining?
It's important for our leaders to think about the future and the future generations. What will the future generations find or benefit from our mineral resources which belong to us as much as they belong to them?
We think that the idea of the future is the most important and most noble that any honest, serious, progressive and revolutionary leader can harbour. Good leaders have always fought for the future. But the fight for the future does not mean avoiding doing every day what must be done for the present.
We need to collectively develop coherent, long-term strategies that convert our temporary natural resource wealth into permanent human capital that can expand opportunities across generations of Zambians. There is need for those involved in all these processes and activities to adhere to the highest standards of transparency and accountability.
Without this, corruption will be rampant. Those with the responsibility to make policy and administer it will be selling it for money, for bribes, kickbacks. Highly questionable decisions will be the order of the day. And if they can get away with it, they will continue to do it - for a few million dollars put in their pockets, they will make their country and their people lose billions of dollars in revenue.
And there is also need to protect communities and the environment by assessing the potential impacts of mining activities. Here again, transparency and accountability is a must because all these can be ignored if money, bribes, kickbacks are paid to those who make decisions.
Labels: MILES SAMPA, STATUTORY INSTRUMENT 89, TAX EVASION
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SI 89 was a scheme to evade tax - Banda
By Moses Kuwema
Mon 04 Nov. 2013, 14:00 CAT
FORMER mines deputy minister Ronald Banda says the withdrawn Statutory Instrument number 89 that allowed exports of copper ores and concentrates tax-free was a scheme of trying to evade tax.
In an interview, Banda, who is also former Zambia Revenue Authority deputy commissioner technical, said Statutory Instrument No 89 was an additional tax incentive that reduced the tax liability of First Quantum Minerals and other beneficiaries.
He said SI 89 was an unnecessary relief that should not have been granted in the first place.
"It was a scheme of trying to evade tax. There was no need for SI 89. I don't know why it was even considered. The finance minister cannot be misled. When you make an SI, it follows certain procedure, so it would be strange for the minister to just sign a document without understanding its implications," Banda said.
He said the Ministry of Justice had legal draftsmen who ensure that SIs conform to certain standards.
"Tax in the mining industry and other businesses is treated differently because mines are wasting assets. They involve costly infrastructure and as a result, the mining industry has historically been treated differently in terms of tax compared to other industries. This is so in relation to capital expenditure. Because of this treatment, there are specific provisions contained in the income tax Act Cap 323 that deal with mining deductions," he said.
Banda said capital expenditure incurred on the construction of a smelter would normally be allowed as a deduction in ascertaining the gains or profits from the mining industry.
On Monday last week, President Michael Sata reversed SI 89, which finance minister Alexander Chikwanda signed on October 4.
SI 89, which was to be in force up to September 30, 2014, was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
SI 89 has since been replaced with SI 99, which has reinstated the 10 per cent export duty on copper concentrates and ores.
Labels: RONALD BANDA, STATUTORY INSTRUMENT 89, TAX EVASION
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Magande seeks govt explanation over exports of concentrates
By Chiwoyu Sinyangwe
Mon 04 Nov. 2013, 14:01 CAT
FINANCE minister Alexander Chikwanda should explain why mining companies stockpiling concentrates are shunning existing smelters, says Ng'andu Magande.
And Magande says Chikwanda should not push Zambia into another heavy debt trap like he did when he served as finance minister in the 1970s. On October 4, Chikwanda signed Statutory Instrument number 89 cancelling the 10 per cent export duty on copper concentrates.
However, after President Michale Sata ordered its removal, Chikwanda on October 28 signed SI 99 cancelling SI 89.
Chikwanda, however, insists that mining firms should be allowed to export concentrates which are only 30 per cent pure copper at zero levy to help raise waning government revenues.
But Magande said Chikwanda should explain why mining companies should be allowed to export copper concentrates when the country had sufficient smelting capacity.
"You wonder how one could come up with a Statutory Instrument which is financial in nature without telling the one who approves the appropriation bill because that is approved by the President," Magande said.
"Now Chikwanda is busy saying 'no, why we did this is we were trying to balance here and there'. All these things should have been explained before because everybody is seeing all these stockpiles of concentrates and they are asking; why are these people not taking this material to Chambishi Copper Smelter for processing? The only conclusion is that they don't want to process it because a bar of copper which is already in copper form is going to fetch more money than in fact a tonne of copper concentrate which includes sand from Lumwana."
And Magande said Chikwanda could not continue borrowing huge amounts of money when the country was foregoing revenues from the key mining sector.
He said Chikwanda was running the country's economic affairs like his private business.
"What they are now doing and what they meant is against public interest," he said.
"You can't be doing all these things and they are appearing like they are private things. We see a government which is being formed by a long-standing opposition not being faithful."
Magande, a former finance minister during late Levy Mwanawasa's tenure, said with increasing appetite for debt by the current regime, Zambia would plunge into another death trap.
"Some of us were having sleepless nights some seven years ago. These are all loans that were contracted in the late 70s and early 80s," he said.
"Those of us who have had that experience of going through such a difficult time, where civil servants couldn't even be paid salaries, where we couldn't even buy medicines, fertiliser, why don't we just say we are grown-ups, we don't want to go this way? The President knows what went wrong? The minister of finance knows what is wrong. So why are we being led on the same path again?"
Magande said Chikwanda should learn from the debt he helped drive the country into before the late Mwanawasa's economic team unshackled the country from the over US$7.2 billion debt.
"It's not fair to other people who have cleaned up your mess," Magande said.
"So, what are you saying…that again we will bring another Magande to clean up the mess you are creating now for the future?"
And Magande said Zambia's future debt position could be worse than the HIPC position because the loans contracted were all commercial loans.
"Should we at any time default, you will just see so many plane loads of people coming to Zambia claiming their money and they will be putting interest which we have no way of negotiating at all," said Magande.
"The private sector does not have clubs like the Paris Club, or the meetings we go to at IMF, AfDB where you can talk in a group. When the private sector find the loan is too difficult to collect, they sell it to somebody and so in about 10 to 15 years from now, Zambia will have to deal with vulture funds - people who are extortionists. That's the complication of where we are going. Before, the loans belonged to governments and we could talk to government to government."
Labels: ALEXANDER CHIKWANDA, NG'ANDU MAGANDE, STATUTORY INSTRUMENT 89
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(LUSAKATIMES) President Sata threatens to revoke KCM’s licence
Time Posted: November 4, 2013 1:56 pm
President Sata addresses a Cabinet meeting on the issue of KCM laying off 1500 workers
President Michael Sata has threatened to revoke Konkola Copper Mines mining licence if the mining giant proceeds with its plans to lay off 1,500 workers.
President Sata said his government will not allow KCM to fire even one miner.He said he will revoke the licence for KCM if the mining firm dares government with its plans.
President Sata was speaking at State House Monday morning when he opened a cabinet meeting.
President Sata has since warned KCM Chief Executive Officer Kishore Kumar against exploiting Zambians.He said the PF government is aware that KCM wants to use blackmail following the revocation of SI 89.
“These mining companies want to be exporting Copper concentrates to avoid paying taxes. Mr Shamenda, please go and tell Mr Kumar that we will take away his licence if he lays off even one worker, then we will take away his licence from him, that’s the easy way of we laying him off,” President Sata said.
President Sata also directed Finance Minister Alexander Chikwanda to increase revenue collection from mining sector.
According to KCM, the move is in line with its continued restructuring of operations.
The company said it was moving towards mechanisation and automation in view of the decreased copper grades at some of its mines.
Company chief executive officer Kishore Kumar announced the development yesterday in Kitwe, adding that the process of laying off the 1, 529 employees had since commenced.
Labels: ALEXANDER CHIKWANDA, FDI, KCM, MICHAEL SATA, STATUTORY INSTRUMENT 89, TAX EVASION, VEDANTA
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Revocation of SI 89 may delay revenue to treasury - Chikwanda
By Abel Mboozi
Sat 02 Nov. 2013, 14:01 CAT
FINANCE minister Alexander Chikwanda on Thursday told Parliament that the reversed SI89 was issued as a cash flow management measure to avoid a situation where the government will be compelled to resort to short-term borrowing at high cost or curtailing expenditure to institutions due to non-receipt of mineral royalties.
And Chikwanda says the revocation of Statutory Instrument number 89 will not occasion any revenue losses but may only result in further delays of revenue to the treasury.
He explained that the rationale of SI 89 was to ensure that revenues from the mines to the national treasury were not unduly delayed as a result of the stockpiling that was currently going on.
He said according to section 134 of the mines and minerals development Act, mineral loyalty was due when minerals were sold either in raw or processed form.
"Given that mining companies have been producing and stockpiling, the government has not been able to receive revenues as projected to fund its operations," he said.
"The issuance of SI 89 was part of the cash flow management so that government could not be compelled to resort to short term borrowing at high cost or curtailing expenditure to institutions due to non receipt of mineral royalties."
Chikwanda said the delay in receiving mineral royalty on copper ores and concentrates was dependent on the time it would take the mining companies to process and sell copper.
On Wednesday, Speaker of the National Assembly Patrick Matibini directed Chikwanda to provide an explanation on the SI 89 of 2013 and implications of its re-alignment at the behest of President Michael Sata.
Speaker Matibini gave the directive following a point of order by Mwandi MMD member of parliament Michael Kaingu who asked what the financial implication of the realigned SI was.
Earlier in the week, Chikwanda told the parliamentary committee on estimates that reversal of the SI would cost the country revenue because of inadequate smelting capacity.
On Monday, President Sata cancelled Statutory Instrument Number 89 which Chikwanda signed on October 4.
SI 89 which was to be in force up to September 30, 2014 was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
SI 89 has since been replaced with SI 99 which has reinstated the 10 per cent export duty on copper concentrates and ores which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.
And local government minister Emmerine Kabanshi told Parliament on Thursday that her ministry had received K50 million to pay off constituencies that had not received their Constituency Development Fund.
In her policy debate on the budget, Kabanshi dispelled allegations that the government was segregative in the way it administered CDF.
"MPs that have not received CDF should remain patient, besides the treasury has just released K50 million and the 38 remaining constituencies will be paid off. There is no segregation in the way this fund is administered," said Kabanshi.
Labels: ALEXANDER CHIKWANDA, PATRICK MATIBINI, STATUTORY INSTRUMENT 89, TAX EVASION
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Revocation of SI 89 may delay revenue to treasury - Chikwanda
By Abel Mboozi
Sat 02 Nov. 2013, 14:01 CAT
FINANCE minister Alexander Chikwanda on Thursday told Parliament that the reversed SI89 was issued as a cash flow management measure to avoid a situation where the government will be compelled to resort to short-term borrowing at high cost or curtailing expenditure to institutions due to non-receipt of mineral royalties.
And Chikwanda says the revocation of Statutory Instrument number 89 will not occasion any revenue losses but may only result in further delays of revenue to the treasury.
He explained that the rationale of SI 89 was to ensure that revenues from the mines to the national treasury were not unduly delayed as a result of the stockpiling that was currently going on.
He said according to section 134 of the mines and minerals development Act, mineral loyalty was due when minerals were sold either in raw or processed form.
"Given that mining companies have been producing and stockpiling, the government has not been able to receive revenues as projected to fund its operations," he said.
"The issuance of SI 89 was part of the cash flow management so that government could not be compelled to resort to short term borrowing at high cost or curtailing expenditure to institutions due to non receipt of mineral royalties."
Chikwanda said the delay in receiving mineral royalty on copper ores and concentrates was dependent on the time it would take the mining companies to process and sell copper.
On Wednesday, Speaker of the National Assembly Patrick Matibini directed Chikwanda to provide an explanation on the SI 89 of 2013 and implications of its re-alignment at the behest of President Michael Sata.
Speaker Matibini gave the directive following a point of order by Mwandi MMD member of parliament Michael Kaingu who asked what the financial implication of the realigned SI was.
Earlier in the week, Chikwanda told the parliamentary committee on estimates that reversal of the SI would cost the country revenue because of inadequate smelting capacity.
On Monday, President Sata cancelled Statutory Instrument Number 89 which Chikwanda signed on October 4.
SI 89 which was to be in force up to September 30, 2014 was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
SI 89 has since been replaced with SI 99 which has reinstated the 10 per cent export duty on copper concentrates and ores which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.
And local government minister Emmerine Kabanshi told Parliament on Thursday that her ministry had received K50 million to pay off constituencies that had not received their Constituency Development Fund.
In her policy debate on the budget, Kabanshi dispelled allegations that the government was segregative in the way it administered CDF.
"MPs that have not received CDF should remain patient, besides the treasury has just released K50 million and the 38 remaining constituencies will be paid off. There is no segregation in the way this fund is administered," said Kabanshi.
Labels: ALEXANDER CHIKWANDA, PATRICK MATIBINI, STATUTORY INSTRUMENT 89, TAX EVASION
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Milupi backs SI 89 Revocation
By Chiwoyu Sinyangwe and Moses Kuwema
Fri 01 Nov. 2013, 14:01 CAT
PRESIDENT Michael Sata's decision to reverse SI 89 has saved the country millions of dollars from people conniving with mines, says Charles Milupi. On Monday, President Sata cancelled Statutory Instrument Number 89, which finance minister Alexander Chikwanda signed on October 4.
SI 89, which was to be in force up to September 30, 2014, was to reverse the November 2011 decision of the PF government to impose a 10 per cent export levy on copper concentrates and ores to encourage value addition to copper exports and improve accountability in the vast mining sector.
SI 89 has since been replaced with SI 99, which has reinstated the 10 per cent export duty on copper concentrates and ores, which Chikwanda briefly abolished after being lobbied by First Quantum Minerals and Lubambe Copper Mines.
Commenting on the developments, Milupi, who is opposition Alliance for Democracy and Development president, said there was "something deeper" that motivated Chikwanda to sign SI 89.
"The mining industry has so sophisticated people and it's not right that we have institutions, whether it's Ministry of Finance or individuals, conniving with these people to further disadvantage the country," Milupi said in an interview yesterday. "The decision by the President to cancel that SI 89 was the right decision, and it is not going to result in any revenue loss to the country. I find it extremely strange that finance minister is saying the country is going to lose revenue from the reversal of SI 89. He needs to explain that."
Chikwanda this week told the parliamentary expanded committee on estimates that President Sata's reversal of SI 89 would see mining firms stockpiling ores and concentrates fail to export the unfinished resources and therefore raise no revenues to pay tax to treasury.
But Milupi, a former Public Accounts Committee chairperson, said there was a "deeper motive" that drove Chikwanda to sign SI 89 without approval of the President.
"Any measure that is affecting revenues is a matter that should be tabled before full Cabinet and only when it's approved can you sign it," he said. "Now, the President was giving an impression that this matter was not taken to Cabinet; it was just the Minister of Finance who decided to issue that Statutory Instrument. That is a very serious omission by the Minister of Finance and he must explain what his interest was in signing the SI…unless he is telling us that they took the SI to Cabinet and that when it was being discussed, the President was inattentive. That is a very serious omission. I think the President was very kind in trying to blame the commissioners from ZRA because the buck stops at the door of the minister. There is a signature of the minister on the SI unless he is an ignorant minister but that is not the case… All we are saying is that in terms of the interest of the nation, their arguments do not hold water."
Milupi said it was not surprising that Chikwanda, who labelled proponents of the windfall tax on base metals as "lunatics" was championing a regulation that was going to deprive Zambia of her fair share of the benefits from the mining sector.
"For anyone to argue that the reversal by the President will lead to tax revenue loss clearly indicates that there is something deeper in this whole issue which any sensible person can see straightforward," he said.
And Milupi said the argument that the country did not have enough smelting capacity "does not hold water".
"I find it strange to even suggest that because the country has no smelting capacity and therefore the mining companies will not be able to smelt the concentrates... that is very strange," Milupi said. "Even if that was true, the country may have lost revenue if the decision of the President was to ban the export of the concentrates so that the mining companies won't be able to process what they get and therefore not raise revenues from it and not pay government what's due."
Milupi accused Chikwada of working against the PF manifesto of more jobs and wealth creation for Zambians.
"Now, if you export ores and concentrates, you have cut off the employment opportunities in terms of refining and smelting and any other processes," Milupi said. "And that means you also have to sell the concentrates and ores at a less price. Therefore, the country is not getting as much as it would have got. And most of our ores exist with other metals, especially precious metals like silver, gold, platinum. Now if you export concentrates, that opportunity to recover those precious metals is lost to the country because all you are declaring when exporting is that this is so much copper. You are not going to say this is silver or selenium."
Milupi said encouraging the export of raw copper would see more and new mining firms resisting to establish smelting facilities.
"The significant portion of our copper is not from sulphide ore but from oxide ores, and this means sulphide ores are not smelted; it is electro-wind," said Milupi. "So, to say we have no capacity to process it and so on raises a lot of questions of the real motive for their earlier decision of lifting that 10 per cent export levy."
Meanwhiles, commerce deputy minister Miles Sampa says the stockpiling of raw minerals by mining firms is a deliberate move to avoid paying tax.
Debating the 2014 budget in Parliament on Wednesday, Sampa said there was too much tax evasion by mines, adding that some of the mining firms were known internationally.
He said Zambians were getting "ifikwangwa" (residue) from the mines.
"All they want is zero tax. Even the stockpiling of raw minerals is a deliberate move aimed at avoiding paying tax," he said.
Sampa said the non-payment of tax by some mining companies was causing budget overruns.
He said the expenditure side in Zambia never goes down for instance, on the issue of salaries.
"People cannot allow their salaries to go down, even when they have a leader who opposes the increase, his people will do a don't kubeba on him," Sampa said.
He said the government would ensure it has full control of the country's economy and assets.
But Monze UPND member of parliament Jack Mwiimbu rose on a point of order in which he wanted to know if Sampa was in order to lament about tax evasion instead of giving the government's policy.
Speaker Patrick Matibini ruled that as much as Sampa was at liberty to highlight the problems of tax evasion, it was important for him to highlight how the problems could be resolved by the government.
Labels: ALEXANDER CHIKWANDA, CHARLES MILUPI, CORRUPTION, STATUTORY INSTRUMENT 89, TAX EVASION
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SI 89 cannot be defended
By Editor
Thu 31 Oct. 2013, 14:00 CAT
IT will require the courage and tenacity of Michael Sata to deal with the mines and enable our people to get a fair deal. Mining corporations are too powerful and manipulative. They are able to get whatever they want and when they want it. Very few African governments are able to stand up to them.
Mining corporations buy some of our best brains and most influential citizens and make them their agents, representatives, advisors or consultants. These are the ones who lobby for them. In some cases, they even pay ministers of government to protect and promote their interests.
It is therefore not surprising that when the interests of mining corporations are threatened in any small way, the first ones to speak for them, to defend them are our very own best people - our best mining experts, economists, lawyers and so on and so forth. Even some politicians start to speak as if they are representatives of mining transnational corporations and not the people; they speak as if they are directors or chairmen of the board of directors of these corporations. There is no doubt many of our people, experts live off these mining companies and they are ready to sell or sacrifice the interests of our country and our poor people for the allowances or salaries they receive from these corporations.
And this explains why our entire Ministry of Finance could sign such a clearly questionable Statutory Instrument giving First Quantum Mining and others the right to export unprocessed minerals with duties waived. For the peanuts they are receiving as allowances, salaries or kickbacks, they are ready to make their own country lose such gigantic amounts of revenue.
We are told that our Minister of Finance just signed that Statutory Instrument without fully understanding it on the recommendations of the Zambia Revenue Authority. If this was the case, then those responsible at the Zambia Revenue Authority need to be made accountable and pay for their dishonesty, deception. But the minister will also have to explain his negligence. We say this because it is negligence to sign such an important Statutory Instrument without reading it or understanding what it is about. If this is the way our Ministry of Finance works, then there is a serious problem in that ministry. We doubt this.
We don't think what happened was a product of oversight. We believe that these actions were not a product of oversight nor were they unconscious, but rather that they were deliberate and conscious. All those involved in this issue simply allowed themselves to be blinded by personal interests and benefit. If one is honest, truly honest, one can't enter into such a deal. Michael is not an economist or a tax expert. But that does not inhibit him to see that something here is wrong, something here is not right. Anyone who is honest will not fail to see that something here is amiss. Let's forget about economic, business or tax jargon. Let's talk straight language that everyone understands.
And when something is wrong, it is wrong no matter what language or jargon we use. It is not about bombastic words, it is simply about things being right or wrong. And what was done was wrong and Michael was correct to correct it.
We have to be self-critical and unassuming. Let's examine everything we do, checking to see whether it is correct or not, whether or not we have let ourselves be carried away. It is not about who produced that Statutory Instrument and signed it. It is simply about it being wrong, and reeking with corruption in every pore.
We all know that taxing mining transnational corporations has not been easy for our poor countries in Africa. In most cases, mining companies have resolutely opposed the progressive, fair and just tax reforms our governments have come up with, threatening to invoke "stabilisation" clauses written into the agreements they negotiated with our governments in the 1990s.
We have not forgotten how the mining transnational corporations behaved when our government sought to renegotiate its royalty rate on copper exports. They opposed the measure despite a four-fold increase in the price of copper between 2000 and 2011, and the very low effective tax rates that they were paying.
But opposing balanced tax reforms is not in the best interests of the mining corporations themselves. Our governments need a fair stake in mining revenues to invest in the infrastructure that the mining transnational corporations themselves require. Our governments also need the revenues to share mining gains with citizens who might otherwise see mining activities as benefitting only a privileged few foreign investors and the national elite - a perception that is unlikely to foster a stable environment for investment.
We know that the mining corporations will always argue that there is nothing illegal they are doing and that they are not evading tax but are simply engaging in tax avoidance, which is legal and permissible. But we also know that tax avoidance is a matter of major global concern today. Governments - and societies - can only function if the individuals and companies who benefit from wealth generation, public investment and public goods share in the cost of financing. In Europe, there is increasing public anger directed towards highly visible multi-billion dollar corporations that minimise their tax liabilities through sophisticated but aggressive "tax planning".
Our poor countries are highly vulnerable to aggressive tax planning and sometimes even tax evasion facilitated by the extensive use of offshore companies, the high levels of intra-company trade and the commercial secrecy surrounding foreign investment activity. Our governments lack the human, financial and technical resources needed to secure tax compliance, and the commercial market intelligence needed to assess company tax liabilities. As a result, we are losing significant revenue streams.
Our transnational mining corporations can minimise tax repayments in several ways. Some are legal, some are illegal, and some are in the grey area between the two; and all are difficult to detect.
In 2008, the Zambia Revenue Authority engaged an international tax accounting team to audit selected mining companies, including Mopani Copper Mines. The main shareholder in Mopani Copper Mines is Glencore, the world's largest commodity trading company, which holds a controlling stake through Carlisa Investments - a company based in the British Virgin Islands owned in turn by Glencore Finance (Bermuda). The audit report noted that Mopani Copper Mine was selling copper to Glencore, which is registered in the town of Zug, Switzerland, at prices far below those on the international markets - a practice that the team identified as plausible evidence of transfer pricing.
Glencore executives strenuously denied wrongdoing. However, the European Investment Bank, which had extended a loan to Mopani Copper Mine, expressed "serious concerns about Glencore's governance".
Attempting to estimate the overall losses associated with mispricing has been described as an exercise in night vision. One of the most detailed analytical studies, carried out by Global Financial Integrity, put the average annual loss to Africa between 2008 and 2010 at US$38 billion. To place this figure in context, it was slightly higher than the flow of development assistance to the region over the same period. Put differently, Africa could double aid by eliminating mispricing. Another US$25 billion is said to be lost through other illicit outflows.
In saying all this, we are not in any way attempting to paint anyone black. We are simply trying to state that which needs to be stated in the clearest and most honest way possible. If we could be ripped off in this way, what more when we start to allow mining corporations to export "soil", as Michael intelligently and simply put it!
When we allow these mining corporations to export "soil", instead of processed minerals, it is impossible for us to know exactly what is being taken out of the country in terms of mineral content and quality.
This is the most reckless way for a country to give away its income, its revenues. Yes, we are desperate for money. But this desperation shouldn't drive us to do silly things like these.
Michael's anger over this issue is understandable. Any responsible leader of one's people would feel and act the same. It is not Michael's action that is going to make this country lose money. It was the action of the Ministry of Finance that was going to make this country lose gigantic sums of money. Michael's intervention, contrary to what is being said, is not going to lose us money, it is going to help us save money as a country.
Clearly, these issues need eternal vigilance and an incorruptible spirit. And only those who are incorruptible, those with a strong public spirit should be brought somewhere near these activities.
Again, what spirit moves us to make these criticisms? Do we do this to bring about a change of opinion, to create an unfavourable opinion in regard to those citizens serving at the Ministry of Finance and the Zambia Revenue Authority? No, never. On the contrary, we do not wanting to expose so many good public servants at the Ministry of Finance and the Zambia Revenue Authority to blame and to the scorn which bad decisions will expose them. And this is because such bad decisions bring discredit and tend to spread. And they tend to make the masses regard all those serving in these institutions as bad people.
We make this criticism simply to overcome these bad decisions so that our government and those who run it free themselves from the consequences of such bad decisions.
We believe that our public servants, including our politicians, serve the cause of the people to the extent to which they work well, to the extent to which they are sincere, to the extent to which they are honest, to the extent to which they eradicate lying from their work, and to the extent to which they eliminate deceit in their work.
Labels: MICHAEL SATA, STATUTORY INSTRUMENT 89, TAX EVASION
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Quashing of SI 89 pleases Kaingu, Magande
By Gift Chanda and Abel Mboozi
Thu 31 Oct. 2013, 14:01 CAT
MICHAEL Kaingu says the MMD is very happy with President Michael Sata's strong stance against Statutory Instrument 89 that permitted exports of copper ores and concentrates tax-free.
And Kaingu has questioned finance minister Alexander Chikwanda's logic on his statement that government will lose out revenue from revoking Statutory Instrument 89.
Meanwhile, Ng'andu Magande who on Monday raised concern over the scrapping of the 10 per cent duty on mineral ores and concentrates has commended President Sata for revoking SI 89.
And Speaker of the National Assembly Dr Patrick Matibini has directed Chikwanda to explain the financial implications of the revocation of SI 89.
President Sata on Monday directed that SI 89, which was signed by Chikwanda on October 4, suspending 10 per cent export duty on copper ore and concentrates for one year, be reversed.
The government introduced the export tax on raw metals in November 2011 in a bid to encourage the development of local industry and to add value to the economic chain.
The tax made exporting copper concentrates less profitable, encouraging mines to use local smelters.
But Chikwanda, during an appearance before the expanded parliamentary committee on estimates on Tuesday, said the government would lose income from Kansanshi following the revocation of the Statutory Instrument 89 permitting mining firms to export concentrates tax-free.
Chikwanda said the Ministry of Finance had realigned SI 89 in line with President Sata's directive that it be revoked although the move would result in revenue losses due to low smelter capacity locally.
But Kaingu supported the decision by President Sata to have the 10 per cent tax on copper ore and concentrates brought back as Chikwanda could not have the luxury to continue giving tax incentives to the mines given the country's deteriorating fiscal position.
"When you export copper ore, you are actually not only exporting copper but other minerals. I tend to agree with President Sata and I am glad that he has come out strongly; it is not only me but many of us in MMD. We have been wondering why the mines were being allowed to ship out copper ore when we have many smelters in the country," he said.
"It has been proven that copper ore has many other minerals integrated, you find gold for example, and there is no way we should be allowing this to go untaxed."
Kaingu said Chikwanda's defence of SI 89 does not hold any water because the without the 10 per cent duty in place, mining firms would have continued to rob poor Zambians of the necessary revenues for development.
"I don't understand what the minister is saying because how can you lose revenue by allowing exports of ore tax free when the same ore contains so many other minerals?" he questioned in an interview.
"So much revenue that could have been collected on the other minerals that are contained in the ore was going to be exported tax free. So I do not understand what the minister means when he says the country will lose out."
Kaingu said many poor Zambians needed services but resources were scarce.
He said it was ironic for Chikwanda to borrow huge amounts of money from international sources to finance government expenditure when there was an opportunity to raise revenue from the mines through the 10 per cent export duty on copper ore and concentrates.
"...there is no way you can ever think that by exporting copper ore tax free you are helping the country," Kaingu said.
"When you look at our budget you cannot allow tax free exports. Look at the deficit of 8.5 per cent instead of 4 per cent. Look at our indebtedness, the local debt is 13 per cent, the national debt is 12 per cent, where are we getting the luxury to give away taxes? I don't think there should be any tax freedom for anybody. We have lost luxury particularly in our mining sector because it is one of the sectors that is doing well."
He said Zambia was lucky that despite the drop in copper prices, the fall had not been excessive.
"Besides, copper production has been very good. So what should be the reason for tax rebates? I don't see it myself," Kaingu said.
And Kaingu said he did not believe Chikwanda could have be misled by officers at the Zambia Revenue Authority.
Revoking SI 89 on Monday, President Sata admonished Zambia Revenue Authority commissioner general Berlin Msiska and commissioner of customs Dingani Banda for allegedly advising the finance minister wrongly.
"The truth of the matter is that Chikwanda is a highly qualified person in that job. He is doing it for the second time, I don't think he can be misled by his officials," said Kaingu. "I tend to disagree with that allegation that he was misled."
And Magande said Chikwanda needed to tell the nation how much the county was going to lose following the revocation of SI 89.
"If the minister is saying the country will lose money, let him get the details because that is what his officials are paid to do," he said.
"When they were putting this SI, they were supposed to work out the details of how much we are we going to lose. So if he says we will lose revenue, let us see the numbers in which case perhaps some of us who are not so close to what is happening will not miss out," said Magande.
And responding to Kaingu's point of order raised on Tuesday on whether the revenue from the mines through the imposition of export duty on ores and concentrates would be factored into the budget, Speaker Matibini said he had adequately studied the point of order to warrant a ruling.
In his ruling, Speaker Matibini explained that the point of order emanated from the customs and exercise (ores and concentrates), export duty (suspension) regulation 2013 as Statutory Instrument no 89 of 2013 which was issued on October 4, 2013, by the finance minister.
He said the SI in question suspended the levy of export duty on ores and concentrates from October 4, 2013 to September 30, 2014, and that the operation of the SI thus meant revenue loss to the government during the period that the law would be in effect.
"However, I wish to inform the House that on Monday October 28, 2013, Chikwanda issued a customs and exercise ores and concentrates export duty suspension amendment regulations 2013 being SI no 99 of 2013 which amended SI no 89 of 2013," Speaker Matibini said.
He explained that SI no 99 of 2013 therefore reduced the period of suspension of export duty on ores and concentrates to October 25, 2013.
"Effectively, SI 99 of 2013 has revoked the SI 89 of 2013. Honourable members, I therefore direct the Minister of Finance to explain the financial implications of this measure," said Speaker Matibini.
Labels: ALEXANDER CHIKWANDA, MICHAEL KAINGU, MICHAEL SATA, MMD, NG'ANDU MAGANDE, STATUTORY INSTRUMENT 89
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Chikwanda to blame for Si 89 - Mpande
By Abel Mboozi, Gift Chanda and Chiwoyu Sinyangwe
Wed 30 Oct. 2013, 14:01 CAT
COMMENT - Team Lunatic 1, Team Sound Minds 0
Prominent people on the Windfall Tax, before the elections. And start prosecuting the former Finance Minister, who kept talking about 'future profits', when he knew very well the extent of tax evasion, including the underdeclaration of profits by the mining corporations. -MrK
THE government will lose income from Kansanshi following the revocation of the Statutory Instrument permitting export of copper ores and concentrates tax-free, says finance minister Alexander Chikwanda.
Meanwhile, Dr Mathias Mpande says Statutory Instrument 89 which allowed mining firms to export concentrates tax-free squarely rests on Chikwanda.
President Michael Sata on Monday directed that SI 89, which suspended 10 per cent export duty on copper ores and concentrates for one year, be reversed.
Chikwanda yesterday appeared before the expanded parliamentary committee on estimates in the company of Secretary to the Treasury Fredson Yamba and finance permanent secretary in charge of budgeting Pamela Chibonga.
Chikwanda said the Ministry of Finance had realigned Statutory Instrument 89 in line with President Sata's directive that it be revoked although the move would result in revenue losses.
This was in response to Monze UPND member of parliament Jack Mwiimbu, who asked Chikwanda to be categorical on whether SI 89 had been revoked in line with President Sata's directive.
Mwiimbu wondered what would happen to stockpiled mineral concentrates since the Chamber of Mines of Zambia last week said Zambia had no capacity to process concentrates as they needed to be commingled to be processed in the three existing smelters in the country.
In response, Chikwanda said: "Honourable Mwiimbu is correct; we have realigned the SI which should have been in force up to next year September. It's a complex issue on concentrates because Kansanshi Mine is building a smelter to process but it will take a year or more to complete and so there will be no income as concentrates will not be processed locally."
Meanwhile, chairperson of the committee, Highvie Hamududu, assured the minister of Parliament's support on such a move once brought to the House.
Chikwanda said the government was aware of such an anomaly where Zambians were not benefiting from their mineral wealth.
Members of the committee also wondered whether the government could consider reintroducing windfall tax, which was a sure way of maximising profits from the mining sector.
Chikwanda, in response, said there was extensive fraudulence in the mining sector, where players were quick in declaring losses even when they had made huge profits.
He said the government could no longer ignore concerns by majority Zambians that the nation was being 'robbed' of its mineral wealth by investors.
"Mines are not renewable like agriculture, and so we need our citizens to benefit more from this sector. We need to come up with a tax that will compel mining houses to pay whether they have made profit or not; that's their own business," Chikwanda said.
"We are reinforced with your views as a Committee. We shall subject this to MPs and we hope it shall be supported. We feel now we have been put under scrutiny over mine taxation.
A member of the committee Kapembwa Simbao said the taxation structure for the mining sector in Zambia favoured mining houses who tended to manipulate profit figures.
Lukulu West MMD member of parliament Dr Christopher Kalila said it was gratifying that Chikwanda and the government were taking ownership of the mines by imposing taxation that would benefit Zambia.
And Dr Mpande, who is also chief Mpande of the Mambwe people of Mbala, said senior ZRA officials were sacrificed over the responsibility that should have been solely absorbed by Chikwanda.
Revoking SI 89, which Chikwanda signed on October 4, President Sata admonished Zambia Revenue Authority commissioner general Berlin Msiska and commissioner of customs Dingani Banda for allegedly advising the finance minister wrongly.
SI 89 reversed the November 2011 decision of the PF government to impose a 10 per cent export duty on copper ores and concentrates.
Commenting on the matter, chief Mpande, a mineral economist and former dean of the School of Mines at the University of Zambia, said Chikwanda misinformed President Sata to believe ZRA misled him into signing the Statutory Instrument.
Chief Mpande, a former deputy minister of mines, was also a lead consultant for the establishment of the Audit Unit for large scale mining at the ZRA.
He is currently a board member of the Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), a parastatal which holds shareholding in mining companies on behalf of the government.
Chief Mpande said SI 89 was solely the work of Chikwanda.
"I don't think there was meaningful discussion by the minister with anybody else at Bank of Zambia, ZRA or Ministry of Mines because they could not have supported that legitimately," Dr Mpande said.
"But you know, the Minister of Finance has become so powerful that he can do anything he thinks. He is borrowing money whenever he needs and yet he is allowing concentrates to go at zero tax. I think the minister is lying when he says he acted on advice of ZRA because I know Zambia Revenue Authority sufficiently and fundamentally."
Dr Mpande said senior ZRA officials were sacrificed over responsibility that should have been solely absorbed by Chikwanda.
"I know the Commissioner General Msiska and just last week, he was telling the Parliamentary Committee on estimates that mining sector was not contributing sufficiently to the Treasury and his vision is to raise revenues from the mining sector," he said.
"Msiska is probably the best person you would ever have at ZRA because he is very qualified and experienced. He was employed by International Monetary Fund (IMF) to be in charge of and help IMF improve taxation in Africa. That's how highly rated he is and he was based in Mauritius, which is the foremost advanced financial country in Africa. The PF brought him Msiska back at ZRA to improve revenue collection and improve the expertise, honesty and integrity. So, the minister cannot do that SI with the support of Msiska. So, the minister is not telling the whole truth."
Dr Mpande said if Chikwanda's decision had not been reversed by the President, it would have hurt the country's economy and also aided mining firms to avoid paying taxes to Zambia.
"We are just abetting the dishonesty of the mining companies if we allow them to export concentrates without penalties," he said. "In fact, for me, we should not just impose export duty but we should completely ban the export of ores and concentrates."
Dr Mpande accused Chikwanda of putting the interests of mining firms first at the expense of the country.
"Between the President and the minister, you can tell who is working in the interest of the country," chief Mpande said. "The President did broader consultation and has broader knowledge…it's not the so-called economic education. You don't have to have a degree in finance which the minister says he has. You just need to be sensible; it's about being nationalistic and patriotic. So, you tell him Chikwanda that chief Mpande is in full support of the President's decision."
Chief Mpande also said Chikwanda was pursuing interests of the foreign mining firms at the expense of Zambia.
Dr Mpande also dismissed the arguments that Zambia lacked sufficient refining capacity for copper, accusing mining firms of wanting to siphon minerals out of Zambia by hiding them in concentrates.
He said concentrates were less than 30 per cent processed copper while 70 per cent comprised other minerals that would be exported without taxation or verification.
"If there is no capacity, then they should build their own smelters," chief Mpande said. "After all, Kansanshi is a very rich company. They are exporting more gold than copper. The refinery only costs about US$400 million but at Kansanshi, FQM is making billions of US dollars. So, if there is no capacity to refine their copper, let them reduce their mining. If they are mining but they are not paying tax and not increasing employment, why should they be allowed to do what is wrong to the country economically and financially?"
He said it was not sensible to allow export of concentrates at a time most key mining operations were mechanising and cutting back on employment levels.
"Since we are not benefitting from increased employment because of technological changes, we need employment in our refineries," said Dr Mpande.
"Now people want to export raw materials and the minister thinks he can encourage that? Even those so-called copper concentrates, they comprise cobalt, gold, and many other minerals. So, I don't know the wisdom of the Minister of Finance to encourage that type of exports. It's harmful to the economy and to our fragile infrastructure because raw minerals are sometimes 50 tonnes heavier and then you are exporting them on the roads."
Labels: ALEXANDER CHIKWANDA, CHIEFS, CORRUPTION, FREDSON YAMBA, JACK MWIIMBU, KCM, MATHIAS MPANDE, PAMELA CHIBONGA, STATUTORY INSTRUMENT 89, TAX EVASION
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