In his budget announcement for 2007, Finance Minister Magande finally unveiled much-trailed increases in Zambia’s mineral royalty rates. Many in Zambia have been anxious to see a bigger share of the mega-profits being made by mining companies reclaimed by the state and used to fund development.
The announcement might have been expected to spark celebrations then as Magande increased the mineral royalty tax from the current 0.6% to the world average of 3%, cut the length of tax holidays for foreign investors, and leveled company tax for foreign owned mining firms at the same level as applies to domestic companies.
However, as the report ‘For Whom the Windfalls?’ warned was likely, the announcement was not quite what it appeared at first. A few days after the announcement, the Government conceded that the new rules would not apply to the companies that currently own the major mines concessions in Zambia, and would apply only to future investors. As IRIN report in a detailed news item (ZAMBIA: Mineral tax increase holds no benefit for citizens), Magande conceded: "The new tax revisions won't affect existing mining companies ... the difficulty we have is that all mining operations have legally binding development agreements. Most of them are actually expanding their operations on the basis of the [existing] development agreements, which contain 0.6 percent as mineral royalties."
All of the major known deposits in Zambia are already being mined for huge profits, are unlikely to change hands while this remains the case, and many will be exhausted by the time the agreements under which they were sold have expired. The budget will not of itself change the facts on the ground – the remains of the country’s most precious resource continue to leave Zambia with minimal benefit to citizens.
Nonetheless, the Government still claims that the existing Development Agreements will also be renegotiated in due time. The phony war of the budget is over. The real battle over renegotiating existing flawed agreements remains in the future.
1 comment:
I agree completely. So what is being done?
I think it is clear, that the mining agreements are, corruptly, being shielded from any kind of change or scrutiny, by the same people who took the bribe to sign these terrible agreements.
Surely, that in itself has to be illegel - unconstitutional, against international law, against agreements on transparancy and corruption.
Is this why the IMF is insisting that Zambia renegotiate? The only reason I can think of, for members in the government to stonewall re-writing these agreements, is because they themselves benefit from them.
There has to be a massive effort to get to the root of this problem.
The mines should be re-nationalized and operated by private companies, on behalf of the state.
Or, there should be a substantive tax on production, which can be more easily monitored than 'profits'.
If someone took a bribe, they committed an act of treason against the people of Zambia. Maybe they can't be hanged for it, but that is what it is.
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