The International Monetary Fund (IMF) on Monday backed Zambia’s plans to raise mining taxes but warned that critical power shortages will curtail investments in new projects.
A team of eight IMF board members assigned to assess economic progress since the Fund, the World Bank and other western financiers cancelled Zambia’s debt in 2006, said power shortages posed a major challenge to further growth in mining.
Miranda Xafa, an alternate IMF executive director, welcomed moves to raise mining taxes.
“The taxes previously were extraordinarily low, not just within Africa but also globally, and we so believe there is room to increase the taxes,” she told reporters.
“But of course that is up to the government and the foreign investors to negotiate the taxes.”
Zambian wants to lift taxes from April to generate more revenue from its extensive deposits of copper and cobalt, the lifeblood of the southern African economy.
They have proposed a windfall profit tax at a minimum of 25 percent, raising the mineral royalty to 3.0 percent from 0.6 percent, a variable profit tax at 15 percent on taxable income above eight percent and plan to lift corporate tax to 30 percent from 25 percent.
Foreign mining companies have criticised the proposals, and argue the government had not consulted them over the plans.
But Xafa also warned that Zambia should not be “too ambitious” with new mining projects because it did not have the capacity to supply power to new projects.
“I understand there are investors waiting to come in with mining projects but there is not enough energy right now to service these new requests,” she said.
“So, I think, before we can talk about plans to expand production, it is important to remove these bottlenecks.”
Zambia has suffered outages that have hit output at mines, and is looking at ways to shore up waning capacity. It announced plans this month to spend $1 billion to build a new 750 megawatt plant.
The Fund said Zambia has made strides in growing its economy but needs to handle commodity price windfalls prudently and develop infrastructure to avert a possible recession.
“We acknowledge that despite the impressive economic performance and positive medium term outlook, challenges and risks remain,” the IMF directors said in a statement after a meeting with President Levy Mwanawasa.
Zambia’s economy has grown by an average 5 percent in the past six years and it has brought inflation to single digits for the first time in three decades.
The Fund said Zambia needed to manage windfall from higher commodity prices wisely to maintain steady economic growth. Copper mining is the cornerstone of the Zambian economy.
“We would note two important challenges … the first being how to manage the macro impact of large foreign exchange inflow,” said Miranda Xafa, an IMF director.
“You certainly do not want to get into a boom (and) bust cycle that others have found themselves in, in that while the boom and bust lasts, they try to spend it all at once and while commodity prices fall, they slow down in possible recession.”
Treasury data showed Zambia received nearly $1.5 billion in foreign direct investments while earnings in copper exports were around $4.7 billion in 2007.
“The second challenge is building the infrastructure and removing impediments to private sector development . . . to improve the business climate by facilitating investments and growth,” Xafa said.
The IMF also discussed a new financing package of a “small” undisclosed amount with Zambia after the expiry of the $320 million three-year poverty reduction growth facility.
The IMF warned Zambia about managing its debt.
“We are aware that the government is now seeking a sovereign credit rating that will facilitate access to international capital markets and we are confident that the government will use these funds wisely,” Xafa said.
“We would caution that after this debt forgiveness, it is important to maintain debt sustainability by using non-concessionary borrowing to finance viable projects (that) have a rate of return high enough to justify the borrowing.”
Mwanawasa told the board members that Zambia would continue with prudent macroeconomic management and economic reforms to attract further foreign direct investments.
Good move, only problem is the money shall just end up in the thieving hands.
Yes, spent already on housing for people with houses:
Levy, KK, FJT ‘get’ K3.3bn. for houses
By KASUBA MULENGA
GOVERNMENT has allocated over K3.3 billion in this year’s national budget for construction of houses for President Mwanawasa and his two predecessors.
Former Presidents, Kenneth Kaunda and Frederick Chiluba would receive K1.6 billion and K1.25 billion respectively while K500, 000,000 would be used on building a house for Dr Mwanawasa.
This brings the total to K3, 350,000,000.
This is according to the activity-based budget for the period January 1, 2008 to December 31, 2008 under the Ministry of Works and Supply’s architectural unit on housing for former heads of state
Xafa! Get out of our lives with your imperialistic IMF. You’re highly paid for being a traitor to your fellow black man. Away with your IMF.
I think that this special condition should no longer apply to future presidents. The first president had no house so it was justified to build him. The second and current presidents already own property. If I were them and aready owned property, I would have foregone this condition and the money would have gone to build hospitals and schools. It is clearly not fair that there are scores of people with nothing and others have houses being built for them at the expense of the Tax payer.
I am not standing for president – Maureen
First lady Maureen Mwanawasa yesterday said she does not intend to contest the Republican presidency in 2011.
Reverend Musasu,
The first lady has finally responded. Doesn’t that bring us shame????
Do we really need the intervention of IMF in this Issues? In what capacity are they talking? Do we really need them at this juncture? It would be a good idea if they keep their eveil fingers away from this issue.
We just need to listen to their (IMF) advise otherwise we have got the expetise to handle the situation. I mean whatever IMF is spelling out PF has already highlighted. Time and time again Sata has preached on Mining taxes and IMF is only saying it now.The same way he has spoke against Chinese and their so called investment.A few months from now we shall prove that Sata has been right with the Chinese issue
#7 You really find ways of golrifying “sata” , do really have to go this far.Give credit where its due, LPM has improved Zed period.Hes our first educated president, so maybe lets continue on this trend.
IMF & World Bank are serious hypocrites, they are profit mongers and should stop pretending they give a damn! They are the same chaps who pressured Kafupi into rushing into the shoddy privatisation program, now they say mining taxes are too low? C’mon, even the HIPC debt forgiveness is not really genuine coz in real terms, we’ve actually paid them back many times over via suffocating interest payments! We need to be very careful when dealing with these bazungu’s, profit and NOT helping us, is their true motive!
Ba Miyoba,you are missing the point. LPM was voted into office to improve ZED.He is merely doing his job and he is being paid for it.He might be educated but man shall not leave on bread alone.His education has manifested in his appointment of two minister’s handling one portfolio.Simple education will tell you you cant pay two people for one job. Hate him or love , Sata did stress the need to increase mining taxes long ago before LPM implemented
Well put Miyoba # 8.How many Copper mines are the Chinese owning in Zambia? it shud be 1 or 2.NFC & Chambeshi metals which z not a mine but Sata’s followers r blowing it out of proportion.
Magande has done exceptionally well.
To be inclusive is better than to be exclusive. Let us be patient and give the IMF a chance to advise us, but we must be the ONLY ONES to make a final decision of what is best for ourselves.
#8. While I agree with you that LPM is the first formally educated President we have ever had, I would like to make metntion that Sata ha been to the University of Common Knowledge in the School of Life Experiences.
The man Sata is not that dull, he is actully crafty. This is how he has managed to create panic in the country. I personally was worried when he was seemingly winning in the 2006 persidential election, but we need to educate the voters carefully against his tactics if we have to get hope of bringing him to a politcal halt.
Lets faced it Sata had a point.# 11 Wazelu how many mines are owned by Zambians? you have counted 2 major former ZCCM mines so please tell us which of the former ZCCM mines is owned by a local Zambian? # 8 Miyoba education without wisdom does not make a good leader. LPM is being paid to improve Zed , so he is doing his job. He needs to be thankful to PF for bringing the tax issue to the fore so that he can implement it
PEOPLE sata is a tricksta from the beginning,he will capitalise on anything…this is the same man that has refused to attend NCC because of huge free money….this is the same man who used to get free tax payers money in a fake ministry as minister without portifolio.REMEMBER THE BROWN ENVELOPES HE GAVE THE LIKES OF ESTHER NAKAWALA 2day sata is for accountability and equity..all lies.sad the people of kanyama are victims of the trickstar….people lets finish SATA.LET HIM FORM A TRADE UNION
and not politicks..
may i also say shame to the doctor who has bade farewll on the blog.i did’nt know doctors can insult may be from matero.
Am bored. Where is legal expert? Maybe he can share his views
Lets just be careful here, a populist does not mean progress.We tried that already with Chiluba.Sata once voted will be a different person.Its easy to throw ur toys out of the house if you’re opposition.The govt has introduced the new tax regime after stabilizing the mining sector.U cannot do that just after a year or so after getting new investors, in short we are telling them “you have recovered ur capital, lets share whats ours from now on”.#10 note, I like Sata for opposition only, hes too streetwise for my president.
# 14 u’ve jst shown how misinformed u r? KCM got the biggest chunk of former ZCCM mines followed by MCM.
If u wanted to be given mines jst coz u r Zambian then u must research on y Zambia needs foreign direct investment.
The tym the mines were being sold no Zambian company offered to purchase any en now u r blaming govt y u dont own a mine.
Govt cud not sustain ZCCM financially thats y they looked somewhr else 4 partners & outright sale.
Sata ws thr wen the mines whr being sold.
Am happy with what our President is doing though i feel he should do more on empowering the citizens, I feel there are a lot of business which by rite be reserved for locals only, Lets take the transport sector for instances, you would agree that most of the buses and wholesale shops are owned by foreigners, does it mean that there are Zambian s who cant run these business. Secondly, Small companies servicing the mines should also be reserved for locals and of course positions where locals are qualified, at least its working in other countries.
#15 so many people brought the tax issue to the fore and not sata alone! Dont over credit the man.
Sorry # 15. I meant #14 Brrr!
Righly said #19, our next stage is empowerment.But this will not need the “mugabe style” we will collapse our growing economy.As Zedians lets stand up and be counted.I see we have an empowerment group now … let these guys probe govt and investors for the people.Go to mines check for local involvement in procurements, etc.The govt has set the environment, legislation will come and add strength to this cause.The unions should stand up to these investors not govt.We in the diaspora lets invest at home … thats a challenge.
# 18 that is exactly what Sata has been preaching. the fact that KCM was bought by Indians does not make it ok.We want a Zambian Owned mine. You cant tell me if Zambians pull their little Kwacha’s together they cant buy a mine. The mines were basically being given away. Zambian should have been given priority to buy shares then look at foreign investors.Foreign direct investment could have come inform of new mines not KCM,MCM,CHAMBISHI etc,. Sata is the right man to lead Zambia. We are too laid back always wiating for the chinese and Indians to invest. Zambians can invest also and tht is what Sata is advocating
# 21 Well said alot of pipo cried for mining tax review and not one of them was from the MMD. Thank you for the correction.But i do have Sata on record advocating for that. You are free to qoute any one else who is on record wanting a review
Whatever most pipo can think, Sata’s reasoning makes reasonable sense. We should never have let our mines go into the Chinese, Indian hands.I support Sata 100% and when he is in power i am prepared to bring my accumulated wealth back home. At least he appreciate Zambians unlike MMD which wills to appease the Chinese and Indians, and the Boers.
chimwemwe sata will never kiss in nkwazi house forget it…..
#19 So you happy with what our President is doing spending K6b on his medical checks ups ha!!!
Zed has no capital.Lets not deceive ourselves, those mines were lying idle for poor privatisation and on record sata was part of this failed process.He can talk from outside its easy guys. So how do you transfer ownership without paying? What are u guys advocating? The zim-style grabbing … of course not.We can not attract the yankess zed has no oil.Lets regulate investment, the kavindeles with money did not buy the mines, ask urselves why? Maamba Collieries is rotting no local buyers … until Li Yo Bo I’m afraid buys it.We more copper depoists discovered … again Li Bo Yi.
Why are the IMF in Zed? They should go to the US and tell their govt. to close all those universities, schools, and dismember the army as it is taking too much tax-payers’ money from real people issues.
The IMF prescribed some harsh measures for Zed, and they should do the same to the USA so that their economy does not drag the world into a recessin.
All PF cadres here be reminded that Zambians put you and Sata on ice in the last election so just dream on about the amount of kwacha you can put together to buy and own mines. Sata is an alarmist and not supringly so given that he was a bus conductor, police seargent and later locomotive driver.Yes kafupi sold the country short on the mines, but we are slowly fixing that legacy as well.Credit to Levy he is standing up to opportunists and staying the course in reigning in government excesses that had become a hallmark of our govt
Satana is not gonna bring any change to Zambia.he will destroy it the way Kafupi did.he will bring the whole clan of monkeys to Lusaka from copperbelt and Luapula and Northern.
mwibaleni koni…akota nakukota mudala uyu.VIVA LPM and tax issue……….
Sata and his PF are second generation MMD. Now, experience has shown from time to time that a copy can never be like the original. The current MMD is far much better than PF.
PF has recycled old mentality. MMD on the other hand is trying to improve. It has also improved the Zed economy.
The question that remains is that what change will Sata bring when he failed us in the past while he was Chiluba’s right hand man? Someone said “old habits never die.” I dont think this is always true, but in Sata’s case it seems to be working. Remember his passport issue in London (compare with the brown envelop stuff stuff alluded to already above).
#27 i don’t condone reckless spending by our presidents or any1 in Government, The point am trying to put across is that there is a bit of kwachas in Zed(atleast thats what i saw during the Christma holidays when i was there), you can easily see it by the level of activities, though on a small scale by ordinary locals, There are a lot of businesses that can be run and controlled by Zambians instead of foreigners eg Wholesale and Transport sectors really(what are locals doing now, selling kapenta and saladi at soweto market.There should be a way the licencing system should work where certain businesses are reserved only for locals and i mean in every sector of the economy.
The IMF CHAPS should NOT be allowed to interfere in countries like ZAMBIA… because they are full of trickery. Basically all the remaining loans should be paid up and the IMF guys should be shown the door.
IMF and WB are not GOOD for africa…!