Consumers Association: use mine money to drop IFIs

Zambia Consumer Association (ZACA) executive secretary Muyunda Illilonga is quoted in The Post, arguing that increased revenues from copper should be used to shift away from reliance on the World Bank and IMF: “It is time for the government to start deciding on its own. We have had a lot of things done in an improper manner because we prefer to listen to the World Bank or the IMF... The Bretton Woods institutions have contributed greatly to some economic problems we are experiencing today, for example, the concessions given to the mining companies.” Illilonga argues that monies raised under the new tax regime should be invested in infrastructure and social development.

Amid continuing confusion (not least in my head...) over the meaning and importance of the President's speech last Friday, The Post also offers some confusing comments from Economics Association of Zambia (EAZ) national secretary Chibamba Kanyama.

Kanyama argues that:
- Zambian investors should be able to join in the copper profit bonanza and that the Government should force foreign companies to sell 10 per cent of their shares via the Lusaka Stock Exchange,
- if that happened Government could then cut rather than raise the tax burden on the companies,
- the companies should have seen the Government's intentions and accepted a re-negotiation,
- and finally, and frankly bizarrely given what's gone before, that the use of the state's unilateral powers to enforce a solution may lead to pressure on Zambia from international donors and the mines' companies, with the 'policy reversal' leading Zambia to be seen as a pariah, like Zimbabwe! "Their messages will be aimed at sending a signal that Zambia abrogates on agreements, cannot honour contracts with the private sector and should, therefore, not be taken as a worthy destination for foreign direct investment or any form of financing through the private bond market.” Early responses from the mining houses and international donors quoted over the last few days seem to suggest this is a rather over-heated interpretation.

The mines did indeed threaten to sue if the Government tried to impose a unilateral solution. However, in the first place it is still unclear if that's what we're looking at (although how would Levy know how much money will be raised from any new regime if it is still 'to be negotiated?'). Secondly, it strikes me that the political context has changed in Zambia and that the Government is responding to widely accepted social and political demands for a new deal in mining. The Government, as regulator and sovereign authority, still holds all the cards in relatoin to these companies - it could make their lives very difficult if it wanted, especially as it seems the companies have been operating way outside the original terms of their contracts and so won't have too much of a leg to stand on in any renegotiation.