Zambia Media Forum Statement on Mining Taxes

PRESS STATEMENT
FOR IMMEDIATE RELEASE
FEBRUARY 16, 2008
ZAMBIA MEDIA FORUM RALLIES BEHIND GRZ DECISION
TO REVISE MINING TAX REGIME

The Zambia Media Forum, an online community of about sixty-eight (68) Zambian media practitioners and friends of the media resident in and out of Zambia, strongly supports the decision by the Government of the Republic of Zambia (GRZ) to raise the rates of tax and royalty paid by the mines. We consider the issuance of this statement our civic duty as Zambian citizens. We believe that there has never been so opportune a moment to express ourselves on a public affair of epic proportion.

As media practitioners and friends of the media, we cherish our professional autonomy. It is this conviction in our autonomy that compels us to freely express our civic responsibility to the greater polity of the Republic of Zambia. In making this statement, we affirm our professional independence. We also affirm our commitment to ensuring that Zambians embrace an ethos of civic activism by constructively engaging not only their elected representatives but also transnational corporations with business concerns in our country.

As such, our statement reflects our professional commitment to the kind of investigative media work that delves deep into the operations of such corporations to ensure that they are accountable to the Zambian citizenry as much as they are to their shareholders. It is in this context that we hope our statement will be construed: a commitment to democratic outspokenness and a civic revulsion against any undemocratic tendencies displayed by foreign investors.

Public participation in negotiations
We start by decrying the lack of public participation and debate in the processes leading up to the signing of the Development Agreements that have become such a bone of contention between the mining investors and the Government of the Republic of Zambia. While we understand that the government of the day may have been eager to show the general population that it was doing something about reviving the mines, we are averse to the general lack of transparency and accountability in the processes of negotiation with the mining investors. It is evident, from our independent analyses of the Agreements, that the investors knew precisely what they wanted from the negotiations.

We note, however, that the government prefaced the Agreements with the need to derive “maximum benefit” for the Zambian people from the mining operations. This is evident, for example, in the Development Agreement signed on the 11th of September 1998 between the Government and Chambishi Metals Plc. In the words of the Agreement: “GRZ wishes to ensure that the rehabilitation, development and continued operation of the facilities will secure the maximum benefit for, and adequately contribute to the advancement and the social and economic welfare of, the people of Zambia, including the people in the vicinity of the facilities in a manner consistent with their needs and the protection of the environment and secure an appropriate return on investment commensurate with the risks involved to the company and its legitimate commercial expectations” (our emphasis).

It is clear to us that, while the companies have been generally profitable, the people of Zambia have not derived any appreciable social and economic benefit from the mining operations. Even worse, going by some of the environmental disasters reported, the companies have not engaged in the best of environmental protection practices. We are not surprised by this, for the mining companies seem to have negotiated themselves into a comfortable position with regard to environmental issues. For example, the Agreement cited above enjoins upon GRZ not to take any action against them in the event of breaking environmental laws. To be fair, the Agreement provides for an “Environmental Plan”, to be agreed upon between the two parties, but there does not appear to be much commitment to this on the part of the mining companies. In effect, the Zambia government loses any claim to national sovereignty in determining questions of environmental protection relating to the mining companies for a period of fifteen years. If left unchecked, the Development Agreements might degenerate into “Underdevelopment Agreements”.

The legality of the Development Agreements
This brings us to our next area of concern, namely the legality of the Development Agreements. While most of us on the Zambia Media Forum are not lawyers, we have sufficient legal know-how to know that the Agreements virtually render Parliamentary oversight redundant for the duration of fifteen years. How else can one explain the fact that the tax regime negotiated requires that the government makes no laws to disadvantage the companies in any way? Take, for example, the section in the Agreement which enjoins upon the government not to raise any corporate income tax or withholding tax rates, or otherwise amend the VAT and corporate tax regime applicable to the companies from those effective on the date of agreement. The Agreement goes on to forbid the government to “impose new taxes or fiscal imposts on the conduct of Normal Operations”.

Clearly, these provisions raise fundamental questions about both the constitutionality of such provisions and the possible usurpation of Parliamentary oversight role. As media practitioners, we would be interested to know how such legal and constitutional issues will be resolved. While these questions may be resolved in any number of ways, we find it appalling that the country suddenly finds itself in a situation of legislative numbness relating to the Development Agreements.

The morality of the Development Agreements
The third area of concern, then, relates to the morality of the Development Agreements. We have already noted that the majority of Zambian citizens do not seem to have benefited much from the mining investments. At the same time, we believe that the companies have been making reasonable profits. We are unable to estimate the exact return on investment, but we can ascertain it from the fact that prices for copper and other minerals has generally improved in the global marketplace. We take pleasure in the fact that Her Majesty’s Government, the World Bank and the United Nations have come out in full support of the Republic of Zambia. This should alert the mining investors to the fact that there are moral questions to be addressed here, which include the need for the country to be truly sovereign in its policy and legislative decisions. Another moral issue has to do with the immense public support that has emerged in the wake of the government’s hike of the tax regime. This is unprecedented in Zambian history and it means that the force of public opinion might weigh heavily on the shoulders of the shareholders of these mining concerns. As such, any legal action, while it may be seen as justifiable by the companies concerned, will have to contend with the weight of national and international negative public opinion ignited by what seems to be the companies’ intransigence and recalcitrance in accepting the new tax regime.

A proposal for conflict resolution
We want to conclude by suggesting a three-phased mechanism of conflict resolution. The first stage should centre on constructive engagement. This should be underpinned by the principle of openness on both the government’s and miners’ sides. There is a lot at stake here, not least the need to know by the Zambian citizenry. It is partly the secrecy surrounding such negotiations that has landed the country into this situation of possible unconstitutionality. We support constructive engagement because we believe it might yield better results and prompt a genuine healing of divisions between the government and the mine owners.

We know that the country needs foreign investors. We know that foreign investors look for countries with stable investment policies and legislation, comfortable in the knowledge that things will not alter at the whims of politicians. We know that this particular situation might be viewed as nothing but political intervention. But we would caution the investors against assuming such an attitude to the situation. It is clear that the government has been under pressure to revise the tax regime upwards in keeping with the needs of the Zambian people, something that is explicitly recognised by the Development Agreements themselves. A negotiated resolution of the conflict is obviously desirable, but it must secure much more than what Zambians are currently getting out of the mining investments.

The second phase, assuming the first one fails, should be legal. This is less desirable, but preferable in the event that the mining companies insist on the unjust provisions of the Development Agreements. We have raised very important points about how the Agreements seem to subvert national sovereignty in matters of law. Any interpretation of the Agreements must, we believe, consider the totality of the Zambian political experience. We know that legal interpretations might want to be so reductionist as to give effect to the narrow intentions of the contracting parties, but intentions can be deceptive. In this particular case, the intentions of our Zambian negotiators, while generally noble, cannot be said to have reflected what the majority of Zambians intended for their mineral wealth, namely material sustenance and freedom to choose.
The third phase must be centred on citizen involvement in the processes of contraction, especially when future generations of Zambians are bound to ask questions of the decisions taken on their behalf. This citizen involvement is structured at different levels: Parliament, civil society, the media, etc. These are important pillars of democratic participation in, accountability for and ownership of development processes.

As media practitioners and friends of the media, we seek answers to questions, as much as we proffer possible explanations. In this statement, we have attempted to set out what we consider to be the key issues, namely the historical circumstances in which the mining agreements were signed, their implications for the entire policy and legislative architecture of the country and the moral questions they raise. We prompt our fellow media workers to analyse these discussions with an even finer comb, including investigating the claims of the mining investors about their profitability, among other things. Our civic duty, as Zambian citizens privileged to be media professionals, is hereby affirmed.
Ends

Notes for editors:
The Zambia Media Forum, hosted at The-Zambia-Media-Forum@googlegroups.com, is a voluntary online community composed of media practitioners resident within and without Zambia It seeks to promote the value of professional fellow-feeling among media workers across different media and communication practices – journalism, public relations, community media, etc.
This Press Statement is issued, in no specific order, by:
Professor Fackson Banda (South Africa)
Alphonsius Hamachila
Daniel Maimbo
Douglas Hampande
Brian Yuyi (South Africa)
Austin Mbozi
Justine Mwiinga
Mwelwa Muleya
Mickie Mumba
Makomani Mutemwa
Kunda Mwila
Joseph Munsanje
Stanslous Chewe
Cephas Moonga
Lawrence Michelo
Marjory Chonya
Mulenga Chomba
Wilcliff Sakala
Chishimba Milongo
Innocent Mwape
Raphael Phiri
Webster Malido
Isaac Chipampe
Muna Sikaulu
Kelvin Shimo
Nigel Mulenga
Liversage Mulinda
Allan Ndambasha
Muntanga Sibalwa
Herbert Macha (Mozambique)
James Simasiku
Mildred Chama
Clayson Hamasaka
Zarina Geloo
Etambuyu Gundersen (Norway)
Mulawa Mulawa
Sipo Kapumba
Brian Lingela
Bornwell Mwewa
Mwape Mwenya
For any further details about the process leading up to the preparation of this Press
Statement, contact:
Professor Fackson Banda
SAB LTD-UNESCO Chair of Media and Democracy
School of Journalism and Media Studies
Rhodes University
Africa Media Matrix Building
Upper Prince Alfred Street
PO BOX 94
Grahamstown 6140
SOUTH AFRICA
Tel: + 27 (0) 46 603 7156
Fax: + 27 (0) 46 603 7101
Mobile: +27 (0) 78 208 7529
e-mail: f.banda@ru.ac.za