The Post today reports comments from Finance Minister Ng’andu Magande making it quite clear that mining companies will not be consulted over the imposition of new taxes in the mining sector, legislation for which is expected in Parliament this week, and that there will be no change in the other clauses of the companies' Development Agreements. For what it's worth, I think Magande’s comments are inaccurate legally (he’s effectively pretending the stability clauses written into the companies' Development Agreements never existed) but politically smart. My assumption is that they are intended as pre-emptive strikes against the companies because the Government remains nervous that one or two of them might try to make a legal issue of the reforms. See the other two posts I will put up today for a new NGO analysis of the legal and financial implications of the new regime and for details on an NGO campaign designed precisely to discourage the companies from considering any legal steps or requests for compensation.
“Do we consult you when we increase Pay As You Earn (PAYE)?” Magande asked. “If we do not consult you, why should we consult them (mining companies)? So there is no room for negotiations and all we are waiting for is for Parliament to approve and then we shall go and implement.”
Asked what happened to the team put together to negotiate with mining companies, Magande responded, “That team we constituted was the one that came up with the recommendations on the new tax regime that we have imposed on the mining companies so that we get a fair return on our resource. It was not about going to renegotiate with the mining companies because the government does not negotiate with anyone when it wants to impose tax.”
Luanshya Copper Mines (LCM) chief executive officer Derek Webbstock said many mining companies were still trying to understand the finer details of the new mining tax regime. “Government got to do something. Unfortunately, government has got to please as many people as it can,” Webbstock said. “We don’t understand some of the finer details, yet, of the new tax regime. It’s not ideal to happen this way. We will always argue on one side but there will still be people to invest.” In a separate article, also in The Post today, Webbstock is quoted suggesting that although new taxes would have an impact on the profits made by the mining firms it was not his company policy to oppose the government.
The Post's editorial, is very supportive of the Finance Minister. Here are the edited highlights of a long diatribe against the history of unequal relations between foreigners and indigenous Zambians:
"The selfishness of our friends is frightening. From the time mining started in the early 1920s in this territory, our friends have gotten away with everything, leaving nothing or very little for us.... The new Zambian, the new African will not continue to take this rubbish forever. Things must change, they have to change. This is not a relationship that can be said to be of mutual benefit; it is one of the exploiter and the exploited, it is one of servitude. There is no dignity in our dealings. It is too one-sided to be a fair deal. Can’t they see that there is something wrong with the way they deal with us?... We are happy that our government, our people are starting to realise that things must change; there has to be a sense of justice and fairness in our dealings with these brothers of ours. We are not going to drive them away because they are very much part of us, and we need them as much as they need us. But now they also have to learn to meet us on our terms – it can’t always be on their terms. They have gotten everything they have wanted for too long....
We agree with finance minister Ng’andu Magande’s determination not to change the new mining fiscal regime in response to their demands. These changes are actually too modest. If we were in government, they would be paying a bit more than Magande is asking of them. And it has to be realised that this new mining fiscal regime is not a product of arbitrariness. A very competent and honest team of Zambians was assembled to investigate this issue and come up with recommendations. And it is on their recommendations that this new mining fiscal regime is based.... We have to permanently put an end to a regulatory and tax framework for mining that clearly benefits large-scale mining to the detriment of our country and our people. And let’s ensure that all the time our people, the citizens of this country, are able to impose their views on those who govern and an industry increasingly distant from the concept of great politics in which the public task evolves strategic vision...
We cannot continue to develop the mining industry at the cost of ceding to multinational corporations practically all the income that belongs to the country and its people. Now is the moment to change these policies. Zambia needs the income from its copper for development and to protect its citizens. Mining uses a non-renewable resource, which means that there is an economic rent that belongs to all Zambians and which at present is almost appropriated by the industry....
It is this fact that justifies a new mining fiscal regime. It is the evident injustice of the mining sector’s level of contribution that inspired many Zambians to agitate for a change in the mining fiscal regime in order to address this deficiency that is generating distortions and inequalities. And as we have stated before, this is supported not only by our own lawmakers, but also by various resolutions and reports of organisations such as the United Nations and the World Bank. We hope the measure the government has decided to take will be fully supported by all our politicians in Parliament and will help the mining sector’s contribution to meaningfully increase and consequently raise the sector’s contribution to the development of the country to higher levels and lift our people out of poverty and despair."
1 comment:
The Post's editorial, is very supportive of the Finance Minister. Here are the edited highlights of a long diatribe against the history of unequal relations between foreigners and indigenous Zambians:
It is an underlying issue. Guess who stood in the way of tax reform? Who stands in the way of land reform (in Zambia, probably in the name of conservationism - look at the massive tracts of land that have been declared national reserves)? Who stands in the way of building up the marketeers to where most businesses in the country are actually owned by Zambians? Who is going to make the argument against all of the above?
I think these things are always best to be brought out in the open by the well meaning, instead of left to unscrupulous politicians. Who is making waves over the mining tax right now? Even if you look at those in parliament that would make trouble for this new tax regime, who is standing behind them - the mining companies. Why are no mining companies owned by Zambians? In a country that exports 25% of all the world's copper? We are looking at a post-colonial economy, that has retained a lot of the old colonial characteristics - and this is true throughout Africa. What if all business owners belonged to one tribe - wouldn't that become a political issue pretty quickly?
So it is best to defuse these issues beforehand and as quickly as possible.
There is a need to build a national economy, based around hundreds of thousands of SMEs, including medium sized farms. That would correct a lot of the structural imbalances in the economy. It would greatly stabilize both the economy and society.
On a different tack, what I don't understand is Magande's apparent 180 degree turn on taxation.
Not that I am complaining at all. Maybe I have judged him incorrectly. But is change on the issue is still unexplained.
However, if everything is above board, I will applaud the MMD for a true milestone achievement.
Mining uses a non-renewable resource, which means that there is an economic rent that belongs to all Zambians and which at present is almost appropriated by the industry....
Taxes and profits from the mines should be going into infrastructure and agriculture.
There is really no alternative source, unless the country would put itself into massive debt again.
The money is needed to build the country's infrastructure and agriculture.
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