Features

MOSES of mineral value chain monitoring

KUNDA MWILA, Lusaka
ZAMBIA is among the top 10 producers of copper in the world. To be precise, Zambia is number eight in the world and second in Africa on the Copper Producing “Elite” List.
The country’s copper production stands at approximately 710,000 metric tonnes; whereas that of Democratic Republic of Congo as the continent’s leading producer is at 1.1 million tonnes and Chile tops the list with 5.8 million tonnes.
But how precise are these production figures? And how much tax revenue is the country earning from the mining activities? These are very pertinent questions and it is in an effort to find answers that gave birth to the Mineral Value Chain Monitoring Project (MVCMP), a venture aimed at monitoring the mining and mineral value chain from extraction to exportation.
Despite the drop in production, copper still remains Zambia’s major earner of the country’s hard foreign currency and, therefore, justifies high national interest in the sector. The citizens have every right to know, not just the production figures but how much revenue the nation derives from mining activities.
According to mining experts, as of 2014, mining production and exports were similar to the levels that were obtaining in the “Golden Era” of mining tax-revenue collection in the first decade after independence (1964-1973).
During the Golden Era decade, the Zambian government collected between 25-30 percent of the gross domestic product (GDP) on average per year in total tax revenues, compared to below 10 percent of the GDP during recent years of post-privatisation in 2000.
This is despite the privatisation of Zambia’s mining industry that has recorded significant foreign direct investment (FDI) inflows since 2000. The difference is mainly explained by the inability to transparently monitor production, costs, sales and sales revenue in a manner that is reliable and independently verifiable throughout the value chain from exploration to exportation of minerals out of Zambia, resulting in low rate of revenue collection from the mining sector.
The government, through the Ministry of Finance, therefore, tasked the Zambia Revenue Authority (ZRA) to spearhead the implementation of MVCMP, whose objectives include:
• Review the mechanisms for monitoring of the mining and mineral value chain from exploration to exportation;
• Develop and implement the mechanisms for monitoring and facilitating the movement of minerals within and out of Zambia; and
• Institutionalise the framework in other government institutions and agencies through effective change management.
The other leading institution in the implementation of the MVCMP is the Ministry of Mines and Minerals Development as owner and user of the mineral production monitoring system. Other key implementing institutions include the Zambia Bureau of Standards, Central Statistical Office, Road Development Agency, Road Transport and Safety Agency, as well as the Patents and Companies Registration Authority.
The MVCMP’s primary task is to design and implement a multi-purpose and multi-stakeholder scheme for the purpose of monitoring Zambia’s mineral resources throughout the value chain. The project has engaged the United Nations Conference on Trade and Development (UNCTAD) to develop and commission the Mineral Output Statistical Evaluation System (MOSES), whose key components are the mineral production reporting and the export permit issuance modules.
Once fully developed and commissioned, MOSES will also serve as a tool in development of Zambia’s national statistical system, in that it will improve the quality and availability of administrative registers that can be used in the production of official statistics as pertains to the mining sector.
Saviour Simwanza is the MVCMP team leader based at ZRA head office in Lusaka. According to him, the MVCMP mineral production reporting module has already been piloted and is being used by the major mines and will be officially launched in the fourth quarter of 2016.
“The mineral production reporting module, one of the key modules of MOSES, has been finalised and already being used by major mining companies to online submit monthly mineral production reports. This is after various stakeholder engagements with both Government and private stakeholders in the development of the system user specifications,” said Mr Simwanza recently.
The 12 major mining companies that were trained and are using the system are: Lubambe Copper Mines, Chambishi Copper Smelter, Luanshya Copper Mines, Chibuluma Copper Mine, NFCA Copper Mining Company, Sino Metals, FQML Kalumbila Copper Mine, Lumwana Copper Mining, FQML Kansanshi Mine, Konkola Copper Mines, Mopani Copper Mines and Chambishi Metals.
Mr Simwanza added that several trainings for both government officials and the mining companies have been conducted and more are planned to ensure that all the users are competent to use the system once rolled out.
ZRA commissioner of customs services Dingani Banda says: “It’s about time the country used technology for a more accurate platform for monitoring and regulation of the mining sector. The MVCMP, therefore, comes in handy to provide Government with efficient and accurate technology for it to better exercise its regulatory role.”
He adds: “The rolling out of the Mineral Production Reporting System comes at the time when President Lungu, opening the National Assembly, called for implementation of the mineral production monitoring mechanism to enable Government have full view of the mineral value chain so as to improve tax collection from the mining activities in the country.”
The project is comprised of several modules that are collectively referred to as the ‘monitoring framework’. The principle with which the framework is being built is that of ‘collecting information once and used several times’.
The information that will be collected in the framework will only be asked of the mines once and then shared among all relevant government institutions and agencies for them to perform their duties. This is going to be an online, centralised system that will be accessed by mining companies and government institutions, and agencies from the comfort of their offices.
Key among the modules being developed is the ‘Mineral Production Reporting Module’ that will allow mines to submit their monthly mineral production reports online and the ‘Export Permit Issuance Module’ that will allow for the online application and obtaining of export permits.
This will ultimately reduce the burden of compliance and the cost of doing business with Government by mining companies and also the cost of monitoring and regulating on the part of Government as the information will be accessed from a single database.
The MVCMP is supported by the Norwegian government, the Public Finance Management Reform Programme and indeed the Government of Zambia. The project team is also working closely with the Mineral Production Monitoring Support Project (MPMSP) that is supported by the European Union and based at the Ministry of Mines and Minerals Development.
The envisaged benefits of MOSES, once all the components are developed and integrated, include:
• Lower cost and burden of compliance in meeting obligatory reporting to the Ministry of Mines and Minerals Development and other relevant government institutions;
• Minimise the need for users to supply duplicate information;
• Simplified procedure for obtaining export/import permits;
• Some documentation can be sent by uploading scanned documents;
• Ability for Government to produce consistent and harmonised ‘official statistics’ to be used for informed decision-making;
• Access to own data and customised industry-wide reports;
• Improved efficiency of customs at the borders when using electronic ‘quota count-off’;
• Real-time production of export and import statistics to enable more reliable planning;
• Improved trust among all stakeholders in the industry; and
• Confidentiality and security for data suppliers and other users.
The MVCMP is a US$10.2 million project funded by the Norwegian government, the Zambian government and a consortium of donors through the Multi-Donor Trust Fund (MDTF) comprised of the German KFW, the German Co-operation, the Embassy of Finland and the UKAID and managed by the World Bank Group.
There is a common adage which says “Figures don’t lie” and it is hoped that the MVCMP system with the support of the MPMSP will be able to provide accurate mining production figures and, above all, help the country get much-desired correct revenues from mining and mineral development activities from exploration to exportation.
The author is a communication consultant to the MVCMP.

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