Zambia is conducting an audit of mining companies to determine their earnings and will punish companies found cheating over declaration of revenues, Finance Minister Situmbeko Musokotwane said on Saturday.
Musokotwane said the southern African country, the continent’s largest copper producer, was also on course to produce 700,000 tonnes of copper this year following a rebound in metals output at the mines and a rally in global prices.
Copper output at 675,000 tonnes last year was far above expectations of a forecast 500,000 tonnes.
Musokotwane said the audit had been ordered following claims by some Zambians, including the opposition parties and mining analysts, that the country was not reaping enough benefit from its key mining industry because of mis-reporting of revenues by some foreign owned mining companies.
Major opposition parties and civic groups have even asked for re-introduction of a 25 percent windfall tax the government scrapped this year, after an outcry from the mining companies.
[pullquote]Musokotwane said the audit had been ordered following claims by some Zambians, including the opposition parties and mining analysts, that the country was not reaping enough benefit from its key mining industry because of mis-reporting of revenues by some foreign owned mining companies.[/pullquote]
“We have asked for a special audit to be done on the mining sector and if we find someone cheating, we will deal with that,” Musokotwane told Reuters in a telephone interview from Lusaka.
“Cheating is dealt with by punishing offenders, but you cannot deal with cheating by increasing tax rates, you can’t,” he said.
Musokotwane said Zambia would in the long term begin to accrue more revenue from its mines after foreign investors put in up to $5 billion in reviving the mining industry in the last eight years.
“You have to be patient that you allow investments to come, make it stablise and then the tax revenue will come and I am absolutely sure the tax revenues will come up,” he said.
Analysts say pressure has been mounting on the government from the opposition to raise taxes in view of a presidential election in 2011 with mining discussions increasingly becoming emotive in this country of 13 million people, where the mines are a major employer.
Musokotwane said the government would continue with policies that support growth of the mining sector to ensure the mines help with the diversification of the economy.
“We need a strong mining sector to help us diversify the economy,” Musokotwane said.
Some of the foreign mining companies operating in Zambia include Canada’s First Quantum Minerals, London-listed Vedanta Resources Plc, Equinox Minerals,Glencore International AG of Switzerland and Metorex of South Africa.
[Reuters]
Well publicly listed and traded companies will not cheat on their earnings, otherwise they risk being de-listed and going burst. That is why it is important to only allow publicly listed companies as investors. It is easy for a private company to cheat on earnings. Good luck bwana minister. Numbala # 1 again
its too late Mr minister,where were you all this time?Alot of money has been suphoned out of the country in the past few years and today thats when you are thinking of audits.who will do these audits and who is going to pay them?i would be suprised if RP capital is selected to do the futile audits which will take us nowhere or whose findings will never be published.Mr Minister stop wasting our time and reintroduce the windfall tax.the issue of audits is a non starter.its common knowledge that these investors are making super profits from our minerals and they are externalised their profits at the expense development in Zed.
line 3 in # 2 should read l wouldnt be suprised..
Rhetoric as usual from the Policticians. Well said and intended but I doubt the MMD doing it, this statement is meant to dumpen the complaint. The mines donate hefty to the MMD campaigns in return they get favourable conditions. Where were they, the MMD all these years to start cosmetic audits now!!! The people on the copperblet know the Mines have heavily compromised the Govt., thats why MMD cant win even 2% of seats on the Copperbelt urban areas.
Musokotwane, if your ZRA chaps on the borders are serious and not corrupt and demotivated, you can get the figures of tonnage that have passed through our exit border points. In fact this must be a continous exercise and easy to use to check on compliance.
This is time to raise money for 2011 elections. Find the defaulting ones and ask them to donate to MMD and voila! Campaign money found! Looks like AlaBees “Mwenyes” are not giving and the RP Capital money is not enough.
And the investors who will be caught cheating must be charged with economic sabotage and must be handed with the severest punishment for killing the Zambian economy causing neglect and death by starvation of the Zambian people.These are the people who should know better but instead they are stealing from the poor to provide for the rich.
Zedian in Arusha. these mining projects are long term so even after ten years you can still catch up with them. I expect them to use a private firm for the audit as government may not have the capacity to do it..Government or us tax payers will pay. I dissagrree that all these firms are making super normal profits , if this was the case we would not have seen shut downs two years ago. You also need to consider the investment that some of these forms have put in the mines before you talk of super normal profits
#4 and #6 , Where did you get your misguided view. If you have information and hard facts, take them to ACC or reports to lobbyists where they countries come from if you don’t trust your own institutions. Stop peddling in popularism and emotionalism. Let facts speak for themselves
BA GOVT PLEASE PUT A STOP TO PROFIT EXTERNALIZATION, THAT’S ALL WE NEED. TWAPAPATA PLEASE.
We are aware of what happens in the mines. Foremost, mines have dealing not at fair value( transfer pricing). Firstly, copper is sold to their sister companies at cheap price and this is the price that is declared other than the London Metal Exchange price. Secondly, tax planing is another major revenue eroder from the treasury. Let legislation remove these loopholes as the other taxes such as windfall taxes are not in force and finally increase tax to mines that are going to be banking copper revenue abroad. Once this happens and Zambia retains most of the copper revenue exchange rates will be at the 1970’s level and our reserves will be one of the highest in Africa.
I thought that has been done with the assistance of Norway technocrats according to ZRA Chief early this year.
What is this nonsense again.Just accept you have failled to run the country,you are the ka same man resisting windfall taxes and you thought PAYE will meet your exorbitant allowances with your tourist Boss
# 10 Mikalapatalala how can you stop externalizaruin of profits?? They invested their money and they expect their returns. Some money was borrowed on foriegn stock exchanges so they are entitled to externalise.
Mavimba #11 I expect that mines are using tranfer pricing and other tax planning methods. My hope is this audit can reveal that and action taken. You have given good options but much consideration always needs to be given , governance issues are never that simple.
I however dont see our exchange rates going back to 1970 levels
Wanzelu, # 12 he could be refering to the same audit. I know teh world bank is also pushing an project called Extractive industries transparancy initiative
how i wish i understand these things.
These companies use well known clearing houses whe exporting copper, so the idea of stealin is out. What this non politician minister should say is that we allowed a lot of copper revenue to leave the country without significant benefits for our people. Other wise you are closing the satble after the horses have fled.
#10 Mwikalapatalala, How backward can you be? Am sure you are in Diaspora. How would you feel if you were stopped from sending some money back home and ordered to consume everything you justly earned after all those hefty investments in your education and plane tickets? Lets be realistic before we blog. This is a public forum and not a bar near Kulima Tower. You are embarrassing us please. Try something else.
MMD’s policy is to tax every investor. If you have paid your taxes, royalty fees and employees wages you can take your profit wherever you want we don’t care and it not none of our business and if you want to continue making profits in Zambia, you better also invest in your company to fend off competition. That works and MMD will keep it that way
It is a waste of time to argue that there is anything remarkable or worth emulating about the brand of leadership that is seen in Africa. Throughout Africa not a single country has been able to deliver its people from poverty, malnutrition and diseases. Almost all countries in Africa South of the Sahara are facing deep poverty and that includes resource rich counties like Nigeria, Democratic Republic of Congo, Equatorial Guinea, Guinea, Senegal, Gabon, Cameroon, Ghana, and even South Africa.
Everywhere in the world whenever the word Africa is mentioned four words come to mind: poverty, hunger, wars and diseases. Apart from Botswana where the leaders have relatively been able to use their resources to advance the development of their people, the rest of Africa is nothing but misery. Mise
Cont’ # 17 Misery in sense that the average African is hardly able to live one-third of the comfort that a citizen of the global north (US, Canada and Europe) is able to enjoy in his/her lifetime. Apart from the corrupt politicians, dictators and their cronies who live in luxury, the rest of the population have to survive the harsh realities of the African economy on less than two dollars a day.
Why is black Africa so different? Any time the question of poverty is raised black African leaders are quick to point to colonialism and slavery. But it is a fact that the era in which everything is blamed on colonialism and slavery is past and gone. India, South Korea, Malaysia, Hong Kong were all colonised yet they have been able to shake themselves off.
13 Postitivist pa ZEd, ” pm# 10 Mikalapatalala how can you stop externalizaruin of profits?? They invested their money and they expect their returns. Some money was borrowed on foriegn stock exchanges so they are entitled to externalise. ”
Well that’s a perfect argument against foreign investment.
And there can easily be limits placed on externalisation. For instance, let them put their profits in Zambian banks for 5 years, so cheap money is available to lend to the SME sector, and we gain from interest on it.
But really, we should own the mines, or at least massively tax them. There is no excuse for a country with people as poor as Zambia’s to allow even a single penny to cross Zambia’s border without it benefiting our economy.
#Zambiano
I like your views,ulinshimbi boyi,I don’t mean to flatter you but you have spoken reality.But then we have politicians like Sata who take pleasure lying to Zambians with his miracle of 90 days and he is a serious contender of the the presidency.Are we serious as Zambians?
19 Sharp Shooter,
No need to fall for the first racist trailertrash that comes along. (Check out the avatar first, before you start reacting to a post as if it is part of a serious discussion.)
Musokotwane stop watsing our time. You think we are children that don’t know you are pro minign firms and against anything that will see Zambians get their God given and rightful share of its Mineral or otehr resources. Who doesn’t know that you are more interested in seeing mining firms r.a.p.e us. Why do you think we insist on Windfall tax, Royalty and Tax regime reform for the mines whch youa re dead against??? Not to mention black empowerment issues. Why are all these so called mines staffed by expatriates from Supervisory level to Board level. There are tons of these guys at Lumwana… What are you talking about?
2 zedian in arusha, ” the issue of audits is a non starter.its common knowledge that these investors are making super profits from our minerals and they are externalised their profits at the expense development in Zed. ”
Plus, Minister Musokotwane is a non-executive director of ZCCM-IH, which has not received meaningful dividends, even thought it’s companies are making record profits.
So the Minister has A LOT to prove. If he thinks he can just go through the motions and we’ll be satisfied he has another thing coming.
These are the things the opposition should be debating. If there anomalies in how these mining companies report their activities, the opposition parties should be at the forefront in highlighting the discrepancies instead of merely saying 90 days more money in your pocket blah blah rubbish.
America’s economy despite of all the controls almost sunk until Abama took some drastic measures to prevent cheating.Copper prices have been going up but very little is remaing in Zambia for development. Let us wake up up and confront these cheats whatever their form may be.
Makanja,
That’s exactly the point; it’s like our parliament’s non-existent. MPs like Milupi know that in ZCCM we could break even at 113cents/lb delivered to customer. What’s the current cost profile for these mines and how do they declare their sales?
This audit is well-worth it as there can be a lot of creative accounting. RAMCZ used to under-declare its sales through transfer pricing at close to cost for its metal sales using a wholly owned subsidiary (RAMCZ Ireland Plc).
@ #17 – #18 Zambiano
Fortunately/Unfortunately for you, Africa is coming out of its four horsemen (Poverty, Hunger, Diseases, wars). Africa is slowly realizing its potential. The markets to look at in Africa at the moment are Nigeria, Kenya, Ghana, Angola, Zambia to name a few. Nigeria is soon to become the future financial hub of Africa with the development of Eko Atlantic which will see Lagos become a glittering metropolis as they redesign their city. The economy of Nigeria has been growing at rates of 7 to 8% RGDP and the telecoms sector has grown by as much as 30%. Nigeria was voted one of the most safest investment destinations in Africa topping South Africa and Botswana with high returns too. Angola has been growing at rates of double digits of even up to 15%.
cont from #26
One just has to look at the projects going on in Luanda to see how fast Angola is growing. Luanda is changing so fast one would assume this is a nation that was not at war. With green parks, high rise glass towers cutting through the sky, good road infrastructure and world class Marina’s, Luanda will surely become a destination of the rich. Zambia is experiencing growth in the construction, Agriculture and mining sector. These where the three sectors that accounted for a large chunk of Zambia’s RDGP in 2009.
So please, keep on believing Africa is marred with the four horsemen but the truth is this will soon become a myth in the the years to come. You’ll be one of the people thinking, “why the hell didn’t I invest in Africa?”. Watch this space.
Mr Capitalist you’re so lost.Since when did glittering towers signify advancement?All that glitters is not gold and certainly the most advanced countries don’t have that.Look at Denmark,Norway,monaco,Libya,Qatar and even Equatorial Guinea.These countries have high per capita incomes,foreign reserves,no malnutrition or diseases,good healtcare & education and generally higher life expectancy.Come back to nigeria and you’ll realise that even zambia is heaven when it comes to reliable electricity and lusaka would be easier to organize,clean and develop compared to big chaotic lagos.Nigerians have over 40 bill in forex yet they import refined petrol,unlike zambia nigerians are all over the world for greener pastures.While luanda and nairobi may look good the average angolan/kenyan life…
..continued.
expectancy is not far off zambia’s.The average angolan with 2$ a day will not afford anything in the luanda glass towers as is the case in nairobi,lagos,accra with massive street trading/substandard housing(btw i come from one of these cities).Rather than glitter which brings prostitution,gambling, drugs & inequality provide better healthcare,clean water,education,sanitation & invest in real production/research for higher per capita incomes,,jobs,exports and self reliance.The light you see at the end of the angolan tunnel is an oncoming train my friend.