An editorial in the Business Section of The Post (www.postzambia.com/?articleId=36566) today challenges Zambia Association of Chambers of Commerce and Industry (ZACCI) chief executive officer Justin Chisulo's pronouncement, that windfall taxes will create anxiety.
The editorial responds, "There is no need for anxiety at all because the government has the right to impose windfall taxes to any industry making super profits as they deem fit. Windfall taxes are not a new phenomenon because governments all over the world do it.... Copper boom won’t last forever and history has taught us that, hence the need for Zambians to benefit from their national resources because minerals once mined cannot be replaced. All well-meaning persons should support the windfall tax."
What seems to me to be going on here is a stealthy campaign against the Government's announcement that it will impose a new, fairer tax regime on the mines. As we know from the interviews with mining executives for the 'For Whom the Windfalls?' report, fifteen months ago most were unsurprisingly resistant to proposals for the renegotiation of their 'Development Agreements', claiming that the stability clauses contained in those deals put their 'tax incentives' beyond the reach of the Zambian Government or Parliament, and were protected by 'legally binding contracts'. Some, such as Derek Webbstck at Luanshya Mining Company, had a sense of the political realities in Zambia and recognised that the companies had got an absurdly good deal, that the people and Government of Zambia would rightly want to revisit the terms of those original contracts since they did not envisage the dramatic shifts in world copper prices that followed.
Since the President annouced a new tax regime, including 'windfall taxes' so far as I know, neither the Chamber of Mines nor the big two mining companies, MCM and KCM, nor the international mining companies that own them, Glencore and Vedanta, have responded, other than to say, 'we are assessing the proposals'. Initially, this position seemed to reflect wishful thinking, and various mining executives and business friendly journalists were wheeled out to try out some alternative interpretations of the speech:
- maybe the President didn't mean a new tax (which would immediately breach the terms of the stability clauses),
- maybe the taxes would only apply to new investors,
- maybe this was just a shot across the bows of the investors and designed to pressure them in ongoing negotiations over each individual Development Agreement.
However, on Saturday we found out from the Deputy Finance Minister that the new tax regime will certainly be imposed, not negotiated. The Minister said that Government found that they were making no progress in trying to negotiate with the companies and decided to impose a solution, which will be announced along with the national budget.
The silence of the major investors has left smaller companies to do all the responding:
- Webbstock and LCM have again made politically intelligent noises, effectively saying: yes, we understand why the Government needs to do this, we look forward to working with them on the detail.
- On the other hand, Cancdian based representatives of Equinox (owners of Lumwana) initially said 'we'll sue if they try anything, before loacl managers were forced to quickly back off.
Still, however, the collective representatives of the mining companies, the Chamber of Mines, and the big companies themselves are all keeping quiet and letting the media run an 'anxious' legal action/investor confidence spin for them, effectively trying to hold the Government to ransom by hinting at legal action or the withdrawal of investments.
Well, I think it's time the big companies were challenged by public pressure to speak up and to recgonise:
- The Zambian people have made their views clear.
- The Zambian Government have listened to the people and have signalled their intentions to act.
- The companies rely on the goodwill of the Zambian people and Government for their license to operate, and recognise the right of the sovereign Zambian Parliament to enact an improved tax regime.
- They should state that they will not initiate any legal action, and should annouce their commitment to staying in Zambia for the long term.
When will Vedanta and Glencore find their voices?
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