Mopani Copper mine accountants under investigation for ‘flawed’ tax submission

Mopani Smelter in Mufulira

The Zambia Institute of Chartered Accountants may punish the accountants of Mopani Copper Mines Plc, a unit of Glencore International AG, if they were complicit in “flawed” tax submissions.

“We need maximum cooperation from the company and if those interviewed are found wanting, necessary punitive measures shall be imposed,” Chintu Mulendema, president of the association, known as Zica, said by phone on Feb. 26 from Lusaka, the capital. Their practising licenses could be suspended, he said.

There may have been “irregularities” in the company’s tax submissions for the 2008 fiscal year, Wisdom Nekairo, the director general of the Zambia Revenue Authority, said on Feb. 13.

The audit, commissioned by the Zambia’s government last year, concluded that there were inconsistencies in production and revenue figures submitted by Mopani for tax administration between 2006 and 2008.

The draft audit into Zambia’s second-largest mining concern, Mopani Copper Mines, showed the company inflated costs and evaded taxes at its unit claims which officials at the mine and its parent company rejected.

The government hired Grant Thornton Zambia and Econ Poyry, a Norwegian consulting and engineering company, in February 2009 to audit mining companies operating in the country.They produced a preliminary report in November.

The draft audit into Zambia’s second-largest mining concern, Mopani Copper Mines, showed the company inflated costs and evaded taxes at its unit claims which officials at the mine and its parent company rejected.

Tax consultancies Grant Thornton and Econ Poyry said that Mopani uses its relationship with its parent company, Swiss commodity trader Glencore International AG, to carry out practices such as inflating operational costs, underpricing of copper, irregular hedging and “transfer pricing” with Glencore’s unit in the United Kingdom, according to the summary. Transfer pricing usually refers to allocation of assets between related entities, sometimes at non-market prices.

A spokesman at Glencore’s Zambian unit said last week that the company rejects the conclusions of the audit.

Mopani Chief Executive Emmanuel Mutati said that the audit is “flawed and incomplete.”

“The draft report fails to recognize that Mopani is a tolling facility where 50% of the copper it produces comes from its own mines and the rest is made from third-party concentrates,” Mutati said. “This failure explains the inconsistent results and is one of the main reasons why the draft report has been unable to reconcile figures.”

Mopani is 73% owned by Glencore, while Toronto-listed First Quantum Minerals Ltd. (FM.T) holds a minority stake.

Mopani operates the Mufulira smelter and underground mine in Zambia as well as the Nkana mine. In addition to concentrates from its mines, the Mufulira smelter also treats concentrates from First Quantum’s Kansanshi mine.

The audit said that Glencore, which is also the sole purchaser of Mopani’s copper, determines prices and that some copper from the mine was sold between 2006 and 2008 under an old contract, in one instance 25% below the London Metal Exchange price.

Mutati however said that Mopani conducts transactions in an open and transparent manner, and the Zambian government as well as state mining companies have seats on the company’s board and are involved in decision making.

Mopani has output capacity of 250,000 metric tons of copper a year, making it Zambia’s second-largest miner by installed capacity.

[Bloomberg/Dow Jones Newswires]

40 Comments

  1. 1 flag Maria

    Why are they going after accountants and not the CEO? He is the one that signs off everything and should bare the responsibility. If they go after small fish, then they will not be effective. I am looking forward to hear the financial penalties for this tax evasion. Hopefully it should cover all the money stolen from the Zambian people as well as act as a deterrent for the future.

    Reply
    vote
  2. 2 flag MODUS OPERANDI

    The report only brings to fore the findings which can be sorted out if necessary consultations with the management at MCM can be ironed out!

    Reply
    vote
  3. 3 flag MODUS OPERANDI

    It’s very difficult especially in our time to ‘bite the finger which feeds you’ !

    Reply
    vote
  4. 4 flag Joneson

    Create some room we take over the positions. I know a lot of accountants are not even members of ZICA.

    Reply
    vote
  5. 5 flag Livingstone

    Let the law enforcement take action and not an academic forum to investigate….why why……GRZ should come and not watch from the distance

    Reply
    vote
  6. 6 flag Peter Cool

    It would appear that ZICA wants to ride a populist bandwagon and it may get its fingers burnt in the process. In any case I doubt it would have the necessary capacity and resources to carry out the sort of investigations required. It would most certainly not just be about interviewing a couple of people. The allegations posed are very serious and there are government institutions (Zambia Police, Drug Enforcement Commission, Anti Corruption Commission, Zambia Revenue Authority etc) that have the full might of the law and the resources to carry out the requisite investigations. Thereafter and once guilt has been proved ZICA can take action against implicated officers if they indeed fall within its realm of influence…..

    Reply
    vote
  7. 7 flag Nalineka

    This will not go anywhere, for get it number 4!. We shall continue working for Mopani, ZICA can not suspend our licences, we were within the ethical duties of our profession. Did Chintu expect us to be whistle blowers?

    Reply
    vote
  8. 8 flag Digga

    Thats why we believe Royalties are the fairest form of taxation in mining and minerals and should account for the largest component to total taxes. simple to calculate and administer and is linked to pricing ruling on the international metal exchanges. These are clear , objective and fair to the country and the mining firm. I say bulk we should have a tax regive structured like this 15-20% royalty calculated on tonnage of finished copper equivalent produced at ruling price. so like in the case of MOPANI who export 250,000 metric tonnes = $2billion, royalty wold be $300m = K1.5trillion per year which is fair

    Reply
    vote
  9. 9 flag Mosi yanga

    That s waste of time,The mines are bankrolling the MMD,unless you are looking at it from the per dieum point of view

    Reply
    vote
  10. 10 flag Hello

    Zambia Chi-puba Caonaula Mine (ZCCM). Mopani are culprits because they pay themselves huge amounts of money and give poor Zambians peanuts. When copper finally runs out ZCCM (as defined here) will have themselves to blame! Check Mopani secretive deals and destruction of data to hide it from GRZ!

    Reply
    vote
  11. 11 flag Shi Philipo

    ZICA may what to be seen to be working, some accountants may not even be ZICA members, so soon we shall see ZICA disowning these characters ! Just investigate all the mines, these characters have identified loopholes in our system. No wonder we are not seeing any real growth in our economy due to ”creative accounting”!

    Reply
    vote
  12. 12 flag hello

    Zambia Chi-pu-ba Chaonaula Mine (ZCCM). Mopani are culprits. ZCCM as defined here must investigate shoddy deals by mangement who pay themeslves hefty amounts up to $16,000 a month and give their Zambian workers peanuts! ZCCM will realise late after her copper has run out that they were sleeping! Mopani is secretive and often hides what goes on from ZCCM. Wake up ZCCM!

    Reply
    vote
  13. 13 flag Ba Mwine

    Shame on ZICA! Why victimise Accountants? Instead of engaging GRZ and See how best the laws on whitsle blowing can cover Accountants adequately. Many companies equate Accountants to Secretaries and this would have been a good ground to advocate for a better place for Accountants in various establishments

    Reply
    vote
  14. 14 flag Ba Mwine

    GRZ also has failed to elevate Accountant General to the post Permanent Secretary. But what has ZICA done? The problem at ZICA is that it is run by non Accountants. The only way Accountants can have good representative is to fire those ilitrate chaps in the name of Hapenga and his comrades.

    Reply
    vote
  15. 15 flag Global citizaen

    #1 ZICA is going after its member.the CEO may not be a member of ZICA for all you know. Gov did what a responsible gov would do and that is commission an audit. that is done now what do we do with the report?

    Reply
    vote
  16. 16 flag Proff

    The Zambian Govt should emulate the SA Govt in forming a new mining company to act as a watchdog to all these mining companies. The problem is that you have a few Zambians in these new Mining companies that are being pampered by some american dollars from these “Infestors”. I dont think ZCCM Holding is strong enough!!

    Reply
    vote
  17. 17 flag Proff

    To make matters worse you have a few Zambians like, Mutati,Pilula,Equamo who have been selling Zambia’s bread( Copper), and have amassed millions of dollars are the expense of poor miners that go under ground not knowing they will be alive the next day. These investors continue to ROB THE COUNTRY IN DAYLIGHT ROBBERY

    Reply
    vote
  18. 18 flag Li Xhan

    Emmanuel Mutati….is he related to Minister Mutati??

    Reply
    vote
  19. 19 flag mwine pabo

    As former ZCCM Accountant we never used to belong to Zica and don’t think there are now. Some have no qualifications but experience even to teach the so called graduates. One needs to know the process of processing copper as well. What was the internal Audit doing if at all there is one now. Mind you there is also accounting in mettaluugey hence Accountants work in collaboration with Mettalurgical clerks and plant mettalufgist. Even the dept head is involved sa a smelter Manager. Its a long process starts from mining, concentrate, smelter and finally refinery before its sold. Also concentrates from abroard is treated by the same guys. Anyway, go ahead

    Reply
    vote
  20. 20 flag Proff

    Not sure if the two Mutati’s are related but I know the Mutati at Mopani has been in the mining business for a long time. Since Kaunda GOVT!

    Reply
    vote
  21. 21 flag Tracy Phiri

    P.O.O.R – Pass Over Opportunities Regularly,
    R.I.C.H – Residual Income Creates Happiness.

    Marc Rich is the CEO of Gelncore, he is a big tax evader please google his name (Marc Rich, Zambia).
    Crazy indeed.

    Reply
    vote
  22. 22 flag Management tool

    if these mopani owners cooking up figure could just take a short ride in their backyard and see the sufferings of the people i dont think they can steal even a pen from these people.

    Reply
    vote
  23. 23 flag One Zmk was equall to One British pound

    #7 Nalineka, dont worry if you where within ethical duties of your profession as u claim, your friends who are experts on ethical duties as you put it will find out. that is why they want to interview you. Should you be a whistle blowers? of course yes, Why not? you are a Zambian who loves ur country, when u know ur employer is using u to invade tax. you have the right to secretly report them to any of our gvt bodies eg ACC, ZRA. That is how a responsible citizen should be and that is why you belong to a professional body. I just hope you are not a young man. Because I dont expect young men who want to be future leaders of this country to behave like that!! Wish u the best during the interview.

    Reply
    vote
  24. 24 flag Dawa1

    What is more troubling about the Mopani case is that the guy who is at the center of dribbling his own country is a Zambian, Emmanuel Mutati. I guess this Mutati guy was just instructed by the bazungu, his bosses to find a way of avoiding tax . Its like a neighbor instructing you to stub your child and you go ahead. I guess this Mutati guy has been in the mines for ages, cant he earn a living without the job he is doing? Is it also why his brother Felix Mutati swore never to bring back the windfall tax as long as he was government Minister? What a shame!

    Reply
    vote
  25. 25 flag Kelvin Mulanga

    South African Economy was nearly sent into tail spin when one Germany Co. withrew more than U$1bn and externalised it without the knowledge of the South African Reserve bank. The South African currency, the Rand weaked almost 4 – 5 times. The Thabo Mbeki led Govt. then instituted an inquiry which resulted in the culprit being fined large sums of money. Our Govt. has a golden opportunity to earn extra cash by not only recalculating what belongs to the public coffers but also by charging penalties which will scare our so called “Local Accountants” or auditors who may be receiving blank cheques by overlooking these practices during audits of their companies. It will also send a warning signal to this and oher companies from depriving Zambians what is rightfully theirs.

    Reply
    vote
  26. 26 flag Pride

    This Mutati Guy has been je…..ing of zambian dollars for a while. He is a shareholder in a company called mplelembe drilling, guess who gets these contracts??? You are right!!

    Reply
    vote
  27. 27 flag Pride

    another wake up call for ZICA and their standards. too much corruption in Z. KMPG was in one a few weeks ago. Mopani. We need a stronger SEC!! Hello, its about time we protected our own resources.

    Reply
    vote
  28. 28 flag MrK

    1 Maria,

    ” Why are they going after accountants and not the CEO? He is the one that signs off everything and should bare the responsibility. If they go after small fish, then they will not be effective. ”

    If they get a few accountants in jail, or at risk of losing their license, maybe they will cooperate with the authorities. Let’s see how far up these investigations go.

    Reply
    vote
  29. 29 flag MikeTe

    Congolese state expelled FQM from DRC because of malversations several months ago

    Why Congolese politicians can do it and the MMD crooks are not be able to expel Glencore (Mopani) from Zed ???

    “The government is like an estate agent and if you have an estate agent who cannot collect rent, what do you do with them? You fire them,” Dr Mpande said.

    In fact, on the one hand full mouth and full pockets for rupiah and his cronies

    on the other hand empty mouth and empty pockets for many people

    each Zambian must fight this corrupt regime…

    Reply
    vote
  30. 30 flag Pride

    These F…ken Jorkers in Govt they don’t even know what a dollar is worth! They bring fr…ken Chinese with their own laborers from China, to come and work in our MINES!! What a shame, you mean Zambia is out of labor? On top of that you externalize the profits? Ask where Andrew Sardanis is, Where is Francis Kaunda, Mutati you will be next in exile!

    Reply
    vote
  31. 31 flag Deja Vu

    @18
    Li Xhan- He is the First born in the family

    Reply
    vote
  32. 32 flag Liungamoyo

    The Mutatis have a long history of stealing in Zambia. Same thieves, new tricks! shooo.

    Reply
    vote
  33. 33 flag Joneson

    I am an Accountant at a prominent company in Zambia and our team is young in terms of Age and every one abides by the ethics of our professional bodies such as ACCA/CIMA and ZICA.

    We call a spade a spade and refer to various ISA and IFRS standards and we have never encounted any problems with authorities such as ZRA/NAPSA.

    Reply
    vote
  34. 34 flag Lelo lelo

    # 7 u actually don’t sound professional. Yes we expect u to be whistle blowers or report to Zra or Zica where your employer or client is engaged in tax evasion. I would add that u are the only less enlighted Accountant I have learnt from in my last 20 years of practising.! Shame.

    Reply
    vote
  35. 35 flag Mpangula Mputyu

    Thieving Mines being aided by thieving MMD. The Mines bank roll the MMD campaign. In return they falsefy records to re-coup what they have used or pumped into MMD. MMD on the other hand is smiling that Mining companies are dishing out help. The MMD do not realise that this aid is actually Tax payers money. catch22. Thieving MMD going out in 2011.

    Reply
    vote
  36. 36 flag VJ Rigger

    ZICA is sh.it professional body.I am really looking forward for a rival Accountancy body in zambia.This Bull sh.it has really misrepresented accountants.

    Reply
    vote
  37. 37 flag VJ Rigger

    #35 Mpangula Mputyu
    ”The government hired Grant Thornton Zambia and Econ Poyry, a Norwegian consulting and engineering company, in February 2009 to audit mining companies operating in the country.”
    Dont rush to vormit your filthy ignorance before reading the article.GRZ is run by MMD, so they cant start shooting their own foot.Typical kaponya who thinks any irregularity is embraced by MMD.

    Reply
    vote
  38. 38 flag Global citizaen

    #37 youare right. here gov acted in good faith they contracted experts to do an audit. having recieved the result they have to act on them. we have to bear in mind that running gov is no easy matter. if it was 50% of the world’s nations would be run properly. finding a problem is one issue then correcting is an even bigger issue

    Reply
    vote
  39. 39 flag TREASON ACCUSED LOZI

    Chintu Mulendema, remind yourself why “good coporate governance” came about. It is because scandals are not made by junior employees like the accountants you are talking about. These accountants dont make decisions. Decisions are made at Glencore International headquarters boardroom where even emmanuel mutati does not sit nor participate. Decisions to evade tax were made in Switzeland. However, the accountants who need to be punished are mopani auditors (internal and external).

    Reply
    vote
  40. 40 flag Aaron Mwale

    Accountants are mere employees of the company and thy dont have the independence to blow the whistle esp that jobs are so difficult to find we accountants have no option but to bend to management’s decision. ZICA neeed so wake up and protect accountants , thy are some accountant who are being paid slave wages why cant ZICA set up a minimum wage for Accountants.

    Reply
    vote

Leave a Reply

Your email address will not be published. Required fields are marked *

 characters available

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>