Editor's Comment

Mines’ agenda fishy

AN open pit mine.

ZAMBIA is one of the few countries across the globe that is richly endowed with mineral resources.
The country is internationally recognised as a major producer of copper and cobalt and ranks as the seventh and second highest world producer respectively.
Zambia also produces precious metals (gold, silver), gemstones (amethyst, aquamarine, emerald and tourmaline), coal and industrial minerals.
While the country boasts of such wealth of resources, it has struggled to derive significant benefits to support its development agenda.
This is why 54 years after independence the country is grappling with high poverty levels with over 60 percent of the population living below the poverty datum line.
Government, under the leadership of President Edgar Lungu, recognises the fact that the country has been getting a raw deal from its mineral resources, due to overly generous tax incentives.
It is also true that despite the over-generous tax regime, which has seen mining companies reap colossal sums of money through value added tax refunds, these companies have also been known to evade tax by under-declaring production and profits.
For a long time, the mining companies have been known to take the lion’s share from our mineral resources.
Despite operating for many years, mines keep on claiming that they are making losses thereby justifying their failure to fulfil tax obligations.
It is, however, common sense that no one can continue investing in a loss-making venture for a long time.
The revelations made in 2014, by Vedanta Resources chairman and majority owner Anil Agarwal during the Jain International Organisation conference held in Bangalore, India, that he was making annual profits of around US$500 million from Konkola Copper Mine which he bought for a paltry US$25 million, tell it all.
Mr Argawal told the meeting that an extra US$1 billion was being made from Konkola Copper Mine.
In a video which was circulated by activists from Foil Vedanta, Mr Agarwal told a large audience how he bought Konkola Copper Mines for just US$25 million, rather than the asking price of US$400 million, for which he received loud cheers after disclosing the US$500 million annual profits being made from Zambia’s natural resource.
While Mr Agarwal was making these revelations, which tied with Foil Vedanta’s figures from the mining corporation’s annual reports showing that the company made US$362 million in 2013, then CEO Tom Albanese disputed these figures during his visit to Zambia that same year.
He claimed that KCM was making “a very low profit” or a loss due to high operational costs and taxes.
This is the proverbial song mining companies have been singing, rather hoarsely, all these years.
But from revelations by Mr Agarwal, it is indisputable that Zambia has all these years been cheated out of her mineral resources.
Government, which is obligated by the Zambian people to collect taxes on their behalf, has devised a new tax regime effective this year aimed at creating a win-win situation.
Government has introduced a new 5 percent copper import duty and also plans to replace value added tax with a non-refundable sales tax.
The new taxes also include a royalty on copper production that increases as commodity prices rise.
This is all in a bid to give Zambians a fair share of the country’s valuable yet diminishing mineral resources.
It is, however, sad that the mining companies are determined to continue getting a lion’ share at the expense of Zambians and are using the usual arm-twisting tactics to force Government to rescind its decision.
Earlier last week, Mopani Copper Mines management announced the shutting down of two of its supposedly uneconomic units, namely Mindola North and Central shafts, claiming that they had outlived their useful lifespans.
Reports also indicate that Barrick Gold Corp is planning to sell Solwezi- based Lumwana Mine in the second half of 2019.
Konkola Copper Mines in Chingola has been downsizing the mine’s workforce apparently in an effort to stay afloat.
It is known that all these are tactics that mines employ to protest against new taxes.
It is illogical for Government to continue lavishing mining companies with huge sums in VAT refunds when there are so many needs that require funding.
The mining companies are just exhibiting their true colours and their interest is amassing wealth at the expense of Zambians.
The tantrums by mining companies have created uncertainty in the country, particularly among employees in the sector.
It is, therefore, comforting that President Lungu is concerned.
The head of State has travelled to the Copperbelt where he is scheduled to meet stakeholders in the mining sector.
The President’s visit is timely as people on the Copperbelt need assurance from the father of the nation.
We are, therefore, positive that the President’s meeting with the mining sector’s representatives will be fruitful and bring hope to Zambians.

Facebook Feed