Dow Jones report that mining companies operating in Zambia are likely to embark on "massive job cuts" in order to reduce costs following the increase of mining taxes. What a load of nonsense.
Dow Jones quote NUMAW General Secretary Albert Mando. "Job cuts have already started at Mopani Copper Mines and this could trickle in (to) the entire sector." It seems to me this business friendly news wire is rather over-interpreting Mando's quote as a means to beat the Government for going against the wishes of the company. NUMAW, remember, backs the new mining taxes, and they would hardly do so if they genuinely feared mass dismissals. As yesterday's blog entry suggests, initial research suggests the mines will remain profitable, will continue investing, and will shed very few jobs.
Still Dow Jones also quote the one other piece of evidence for their asseration. Mopani Copper Mines, Zambia's second-largest copper and cobalt producer, has announced plans to lay off 40 managers in a bid to keep mining costs down. Dow Jones also claim a Luanshya Copper Mines official told them the company is likely also to cut jobs in a bid to cut mining costs.
The Dow Jones article wrongly claims that the Chamber of Mines of Zambia has said the new tax regime has increased the mining tax rate to 75% from 31%, and is likely to make the sector unviable. Apart from the fact that those figures are way off, the Chamber has officially accepted the new regime.
What the story shows more than anything is that while KCM have openly accepted the new tax regime, there are elements of the business community that will keep trying to fight this one and will make a meal of a cost-cutting exercise at MCM, a mine likely to start making massive profits in the next twelve months.
MineWatchZambia correctly predicted that the companies would not take legal action to block the new mines tax regime, but would threaten it as a political manouvre. I'll make the same prediction about any discussion of job cuts over the next three months. They will be talked up as if they prove something about the tax reforms and their impact on profitability. In fact, they tell us more about MCM's relationship with its own funders, which are not so warm due to a series of delays in bringing production at the plant up to speed.
1 comment:
The new taxes will definately drive the job losses and even closures of companies. Past experience has shown that a lot of investors in this country appear not to want to pay any taxe at all. We have a number of companies that have closed businesses, purported to have gone away, only to have the same business under a different name and new management, at the expirely of the taxe rebate period. By coming as new investors the door becomes open for them to enjoy a fresh taxe free business.
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