KK, HH, many others back Zambian Government

Local and international commentators are coming out in floods over the last week to support the Zambian Government in its battle with international mining companies. Amongst others Zambia's first President and 'father of the nation' Kenneth Kaunda (KK), and opposition UPND leader Hakainde Hichilema (HH) both backed the Government, condemned the companies and suggested that, if anything, the mine taxes came too little and were too late.

• The Post report comments by Dr Kaunda criticising mining companies for their resistance and demands for negotiation: "What do you dialogue about? This is a just what every government anywhere and everywhere does. Why can't they be reasonable and sensible? I think what government has asked is something that I could not have asked. I could have asked them to pay more," Dr Kaunda said. "What do you negotiate about? The government must just put its foot down and tell them that this is what we have decided and this is it... period.... I do not understand how some people thought about Africa... because it is not just about Zambia. We welcome the investors in Africa and Zambia, but they must understand that this is the property through which we want to get funding for our education, health, rural development, agriculture, communications, roads rehabilitation and other social services," he said. "Just on the eve of our independence, we paid BSA (the British South Africa company) three million pounds to get back our mineral rights as they were still in the hands of the foreigners. And that was done for the good of both the foreign investors and Zambians. It is justice and fair play on both sides."

• The Post reports that opposition party UPND president HH claimed that Zambia has lost $2 billion dollars (K8 trillion) as a result of delayed taxation on the mines. “The MMD was so slow in affecting a higher tax regime and because of those delays the country has lost $2 billion dollars,” Hichilema said. “If taxes were effected at the right time, we would have accrued K8 trillion ($2 billion).” He said the right time to have introduced the new tax regime was in 2005 when the copper prices went up. He also said the increment of mining taxation from 31.7 per cent to 47 per cent was not sufficient. “Taxation on the mines should be around 50 per cent if we are to generate proper revenue, the current increment is still low,” Hichilema said. “The direct and indirect tax on the mines should be able to generate $1 billion (K4 trillion) per annum if it was pegged at 50 per cent.” Hichilema said if the government aimed at getting $1 billion per annum, the revenue would translate into 30 per cent of the annual budget. “Imagine raising 30 per cent of the budget just from one sector. This is more than the total donor funds that we get per year,” he said. Hichilema said the new tax regime should be in place by the end of March and that once implemented, revenue must be applied prudently.
• In a long profile of eminent Zambian economist Gilbert Mudenda, The Post also reports the academic's insistsence that the mining companies must accept the new situation: "what the mining companies are doing is dishonesty. The understanding is that you make your money and you should be protected but if you get windfall gains, you also need to be willing to share. If you stand by the law, then the other people will also begin to take unilateral decisions. In the budget of last year, there was an announcement that there will be negotiations. Those negotiations didn’t take place because some of the mining companies refused saying ‘no, look at the agreement, we are not here to discuss, go and talk to our shareholders. Now, that is actually being rude because how do you get shareholders of a company to a meeting? The people who are running the mines are running on behalf of the shareholders. So you have to negotiate with them and then they can go to their shareholders. So there has been an unwillingness on their part because they believe that they have these agreements on their side and they can go to court.”
• The Times of Zambia also report that Caritas-Zambia economic justice programme officer, Edmond Kangamungazi said the new tax measures would ensure that Zambians shared in the mining sector successes.Mr Kangamungazi said that it was, however, cardinal that the Government refocused on responsible spending of the proceeds from the taxes."With the above issue in mind we demand that our Government proceeds to act with integrity, and without fear and favour to secure an equitable resolution that ensures the well-being of the people. "In addition, Caritas-Zambia recommend that the Government refocuses on responsible spending of the increased revenue on mining-related issues such as environment protection, infrastructure development, etc," he said. He urged the Government that in all future development agreements which would affect the nation, the civil society and other interest groups should be consulted. "Government must ensure that the process and outcomes of all such negotiations are transparent and accessible to the general public in order to enhance the confidence of the people to whom the Government owes the ultimate responsibility," he said.
• The Post also reports comments from Scottish Catholic International Aid Funds (SCIAF) policy analyst Abi Dymond who noted, "Zambia must be careful because the threat by the mines to go for arbitration can be a negotiating ploy aimed at reaching a negotiated settlement on a toned down version of the tax regime with the Zambian government,” Dymond stated. She stated that changing tax regimes and introducing new taxes was by no means a unique phenomenon to Zambia. “In 2005, for example, the UK government increased the North Sea oil supplement that oil companies had to pay from 10 per cent to 20 per cent in recognition of the high windfall profits that these companies were making. South Africa has also recently introduced mineral royalties for the first time,” stated Dymond. “Another example is Bolivia, which introduced a series of far-reaching and comprehensive reforms which included the following measures in its hydrocarbon sector, that 50 per cent of the proceeds of sales to go to the Bolivian government and an additional 10 per cent of the proceeds to be split between the company and the state and these measures meant that the Bolivian government now takes around a 60 per cent share of the wealth generated by the oil and gas sector compared with the 25 per cent share they were receiving in 2004.”
  
• The same Post report notes comments from Copperbelt University lecturer Professor John Lungu who said the mines should not resist the new taxes because the new measures would only apply to the surplus profits and not the actual normal profits. And Prof Lungu said there was no reason why the government should continue borrowing when money could be raised locally through putting in place tax measures that were in line with international trends. “The investments that the government has pumped into the mines through tax exemptions since the privatisation era is equivalent to the investment that the mines have put in and this decision is commendable because the mines should not resist because it is not the profits that will be taxed but the surplus above factors of production,” said Prof Lungu. In an editorial in its Business Section, The Post newspaper also backed Lungu's comments.