MAJOR mining companies in Zambia and the Chamber of Mines of Zambia have rejected the new tax regimes for the mining industry, arguing that the development agreements (DAs) were still binding.
The mining firms have since threatened legal action against the Government, noting that they were not consulted before the new measurers were introduced.
Seven major mining companies that appeared before the expanded parliamentary committee on estimates, chaired by Itezhi-Tezhi member of Parliament (MP) Godfrey Beene, maintained that the DAs were still legally binding, thus tax could not be adjusted.
The Chamber of Mines of Zambia was represented by the president, Passmore Hamukoma, and general manager, Frederick Bantubonse.
The Government recently raised mineral royalty tax to three per cent from 0.6 per cent, pegging corporate tax at 30 per cent and introducing windfall taxes to be triggered at different price levels.
The mining companies that appeared before the committee were Mopani Copper Mines (MCM), Konkola Copper Mines (KCM), Chibuluma Mines, Lumwana Mines, Kansanshi Mines, Luanshya Copper Mines (LCM) and NFCA Mines.
Acting Secretary to the Treasury, James Mulungushi, when he appeared before the committee last week said the Government would not renegotiate the DAs with the mining companies and that a new mining regulatory law would be proposed which would, among other things, remove the requirement to enter into DAs.
Dr Mulungushi said section nine of the Minerals Act was being proposed for amendment by repeal and replacement.
Attorney General, Mumba Malila also told the expanded committee on estimates that the DAs could not stop the Government from making a Law and said all the good things in the DAs would be captured in the Law.
Mr Malila said in the event that the mining companies dragged the Government to court, the State was ready to proceed and defend its position.
The mines, however, yesterday told the committee that their doors were still open for re-negotiating the DAs to ensure that both parties got the best out of them.
Mr Bantubonse said the proposed tax was too severe and the action would trigger economic recession and consequences of unemployment and poverty.
Mr Bantubonse said the DAs were legally binding documents and any disputes arising from the breach of these should be settled in either London or Johannesburg depending on when the agreements were signed.
He said President Mwanawasa wrote to all mining companies and held individual meetings with some CEOs and indicated that the Government wanted to re-negotiate the DAs.
He said all mining firms with the DAs confirmed that they were willing to re-negotiate the agreements.
Mr Bantubonse said at the Zambia International Business Advisory Council (ZIBAC) conference that was held in Livingstone in July last year, mining companies informed the gathering that they were ready to re-negotiate the DAs.
At the same conference, Minister of Mines and Minerals Development, Kalombo Mwansa said that the negotiations would start in October last year.
“Mining companies were, therefore, surprised when Minister of Finance and National Planning, Ng’andu Magande, during his Budget address in Parliament announced new tax measures for the mining companies as they were still waiting for the committee to invite them to the negotiating table,” he said.
He said following the Budget address, the tax consultants worked through an example and found out that the effective tax rate came up to 79 per cent.
Chibuluma Mines general manager, Ed Mounsey said the taxation rate would increase from 22 per cent to 50 per cent over the life of the mine.
Mr Mounsey said the investment made by the key shareholders, Metorex, would not be recouped and that there would be no dividends to Metorex and ZCCM-IH.
He said the Chibuluma DA was a legally binding document both in Zambia and internationally.
He said there was need for an independent review of the proposed tax changes on the viability of mines.
First Quantum Minerals (owners of Kansanshi Mine) country manager, Chisanga Puta-Chekwe said if the Government proceeded with the new tax regime the company would have problems with the shareholders.
Mr Puta-Chekwe said the Government in that case would be liable for the costs to be incurred.
He said his company was not against the idea of introducing the new taxation but rather the manner in which the process was conducted.
In the presentation to the committee, Lumwana Mines stated that the DAs were signed at the end of 2005 at a time when copper prices were high and when the Government was not under duress.
The report states that economics of developing Lumwana were never robust and it took the mine two years to negotiate and close the financing for the project with 12 international banks.
The report states that the Lumwana DA formed a key project document, the fiscal and other obligations formed the basis of the financial model.
“Lumwana is now at an advanced stage at a rate of $1.5 million per day. This debt financing is the largest in the history of the African continent and will take nine years from the start of production to pay back under the agreement with the banks,” the report stated.
The report said Lumwana had never enjoyed any windfall profits and would likely be some years before it did, depending on whether copper prices ruse or fell.
Mopani Copper Mines (MCM) submitted that the new tax regime had the potential to destablise long-term plans of expansion and recapitalisation at MCM.
KCM director of operations, CP Baid said the new tax regime was detrimental and jeopardised the ability to generate surpluses and raise funds for infusion towards growth and extension of the mine’s life.
Mr Baid said the tax regime was contrary to the Fifth National Development Plan (FNDP)’s spirit and fundamental requirement for sustainable development and growth of the copper mining industry which had passed through a decline phase and was now in the phase of recovery.
[Times of Zambia]
It is very unfortunate that these mines have attained such high levels of insatiable greed. The mines are making the highest profits ever. Copper prices are at their highest records ever. If these mines had the interest of the nation at heart, they would have been realistic and would have recalled that these DAs were signed at a time when copper prices drastically fail. Now things are not the same and conditions in the DAs should be dynamic. It is very unfortunate that these companies are now threatening government instead of working with government for national development.
The government should stand firm. 3% mineral royalties and 30% corporate tax on mining firms is within the norm thru out the world. Actually in Australia and Canada were some of these companies are registered mineral roylties are above 3%. They also in some instances pay other taxes to indigenous people if the mine is located in a reserve.
So what happens now.we go 2 the circus.and some of those decrees and declarations form part of law then we just wake up refuse 2 negotiate agn and impose taxes.procedure bane we have 2 be Careful.and can we afford costly arbitration in london or jburg.and the lateral effect on the action on the developers by the financers.we shall be third parties.kindly open ur registry 2 the public so that we can inspect these so called DAs b4 we have another HIPC.DAs ar public docs grz 4 and on behalf of the pipo of zed
grz should stand firm. Let those who want to leave leave and reposess the mines
Agree with the figures in essence coz thats what is pertaining on the world market.now chibiliti and magande should explain why they adopted that procedure. IN everything u do as a public officer the substantive issue as well as procedural issues count. We fell short on the latter that is all there is to it
This case will go to show where the mouths of our leaders are; whether with the public or these multi nationals that have an endless money pot. Show us your substance GRZ and tell you what, we will ever be grateful for standing firm to the arm twisting antics of these greedy corporations.
The excessive greed being exhibited by the mines is shocking.Now they want to rally behind DAs.
Govt is not obliged to consult if it wants to slap various taxes on anyone.
Govt shud be firm & non compromising on this issue.To hell with hired guns like Bantubonse.
Those firms needs to no who is in charge here. That they are not above the law. that if they are not happy they can go. After all they have been “stealing” all along. That they will not blackmail this nation.
Just demonstrates the fact that foreigners are never interested in developing a country and so they can never be a good source of eonomic development. They dont have the heart for the country at hand. Their hearts are of course and logically in their countries. The earlier Mwanawasa realises this, the better. KCM for e.g is also a major financier of the sister mine company in India which is not making any profits. All the capital for salaries and other running costs are coming from Zambia. Its such a shame.
In as much as I agree that the newly introduced mineral taxes are infact long overdue, i don’t blame the mines for taking the stance they have taken. From the strategic point of view, government made a mistake by not involving the mines in the tax reform process, they should have been involved from the begining to allow them time to plan ahead. In business you can’t just impose such measures that will drastically change the operational landscape of the mining industry, or any business for that matter. The point the mines are making is that they were kept in the dark and I think its a valid point to anyone who understands a bit of business management.
#8 Uncle P! Its not a matter of who is in charge, the mines have done nothing wrong, they have been operating within the stipulations ofthe agreements they signed with govt when the mines where almost on their knees. It seems gvt was at the time unable to make accurate projections on the future viability of the mines thats why they drew those ridiculous DAs. So, critically speaking, this mess is as a result of Gvt technocrates’ gross incompetence which the mine owners took advantage of. It happerns all the time in the corporate world, if you are not sharp enough, you loose! Now gvt is in a hurry because 2011 is around the corner instead of acting in the best interest of all stakeholders.
THE MINNING COMPANIES SHOULDN’T BE SO NAIVE BY REFUSING TO RENEGOTIATING THE MINNING DEALS.THEY HAVE MILKED ZAMBIA ALOT OF WEALTH HENCE THEY MUST APPRECIATE.THE GOVERNMENT AND MINE OWNERS NEED TO MEET AGAIN AND RENEGOTIATE A FAIR DEAL ENSURING THAT ZAMBIANS BENNEFIT FROM RICH MINERAL DEPOSITS.
Gents, as much as we need to renegotiate these agreements, we need to be very careful not to dent the strong investor confidence we’ve achieved in the recent past. The problem is quite complex and the mining companies have every right to squeeze the Govt’s balls! FJT the midget appointed Francis Kaunda to head the mines privatisation committee and that’s where the chaos begun. FK & team seriously shafted us on this one bane and big Chuchu is trying his best to mitigate the damage done. I’m just a bit shocked that Magande apparently did’nt consult the bazungu & mwenye mine owners?
I am disappointed to read of Bantubonse and Hamukoma supporting the maintenance of the status quo where the nation is gaining zilch benefits from its only God given heritage. Why are some of our citizens eagerly jumping onto defending the continuation of slavery? Why aren’t they championing the end to poverty and poor infrastructure? Why is it that the same people that benefited from our minerals via KK’s government mineral policy denying their fellow citizens from the same benefits? It is a shame that these mining companies have decided to be defended by Zambians. It is true that we are our own worst enemies.
All Zambians must rally behind increased beneficiation from our minerals.
Why Zambia, is always at a disadvantage? We sign these contracts and now we are crying. We don’t have competent people to read the fine lines before we sign? Vulture attorneys are just waiting to pounce. Next time don’t just think of your 10 percent commision. Think about your country.
Around the globe, serious FDI will only flow to places where the legal & regulatory framework is stable. Manje our situation is rather chaotic – first, the midget & Francis Kaunda shaft us and fck up big time on the initial DA’s; Magande then pulls a fast one on the mining owners and insists he does’nt need to consult anyone on tax!; what nxt, Cycle Mata threatens to expel mwenye’s & chinese “when” he finally comes to power? C’mon fellow bloggers, u can’t expect any serious investor to waste time with such crap, which may explain why Zambia continues to attract mediocre investors.
The Mines have done their homework. It is clear that our GRZ was inept in the original negotiations. The proof of their ineptitude is that they have withheld the agreements from the public so that we cannot be able to see their poverty in their minds.
Case in point, our neighbour Angola has one of the highest GDP growth rates in the world, why? After yrs of civil war, they got their act together and now have a robust regulatory framework to manage their oil resources. As a result, they continue to attract high quality FDI! Unlike their counterparts Nigeria, who despite having abundant oil reserves, continue to screw up with corruption, violence (kidnapping of expat oil workers!) etc. I pray that we learn 4rm the Angolan’s and get our fckin’ act together, otherwise we’ll be shafted again even on the oil we “dream” of discovering in NW province!!!
So now Passmore Hamukoma and Fred Bantubonse are defending the interests of the investors against the best interests of the nation! Well just like the technocrats who sold us out with the Development Agreements. When shall we ever learn? A few silver pieces really go a long way in Zambia.Lets for once see men with a backbone not a wishbone.
Folks, it is true that there is no where in the world where a government is required to consult any entities about taxation, it is the the government’s fiduciary responsibility to manage the fiscal machinery of a country. Hamukoma and Bantubonse are employees of the aggrieved mining firms and they re standing between a rock and a hard place because their employers are using them to cast a bad light on their own government. Threats of courts in Joberg or London are baseless. These mines are located in Zambia and these investors came to Zambia to make money out of these mines, which they are making a hundred times over.Reason must prevail here and Zambia’s interests should be upheld.
The mine owners(Shareholders) will only be playing with fire if they continue on this path. Do they know why pipo almost voted for SATA.. Elections are only in 2011 and if these Taxes are rejected, Zambians will Vote for a President who wont even need to inform them but tell them to pack and GO…
Mwanawasa, warn these people as Zambians are tired of smelling the boiling soup while they are hungry…Simple advise, Accept the Taxes or negotiate or risk being kicked out come 2011
Doomed!
Gov’t must take a radical stand against these investors by increasing the royalties even further to something like 6% and corporate tax to at least 50%. If the investors refuse then the mines should be repossessed. Gov’t must see this issue as an opportunity to create a better future for all Zambians.
Give Ceaser wat belongs to Ceaser Period….Those blaming technocrats and also those requesting govt to consult b4 it increases taxes do not certainly understand the tax policy and should not expose their ignorance on this blog. Technocrats just make recommendations, the final decision is made on top so dont blame them if u dont kno wat they recommended. Govt each year receives submissions from the business community on the tax propoasals, then they analyse those that can be effected and implemented. of course on the part of increasing tax no company can submit for an increament and hence its the duty for govt to impose an increament even without consultations. let the aggrieved mines submit
their reduction proposals this year for govt’s consideration. gentlemen we r very poor, the ninth poorest in the world…lets reap funds from the mines for the betterment of the majority zambians
Pliz!! we don’t need to plead for the so called infestors!if anyone of them isn’t happy,let them pack and go to hell where they come from!
Well put Ba Mwine # 24 & 25.Govt is not obliged to consult where it sees there is potential 4 revenue.
These companies are really silly and it shows the contempt to which they hold not only the government of this country but also the people that elected it. For Levy, I think he should take a significant portion of the blame for this stinking cockyness being displayed by these fools. He should show the same resolve he did when he fired Chitala and Nevers Mumba, for once he should put on some bollocks of steel like Chavez of Venezuela and prevail over these neo-colonialists.
I doubt whether the “overworked” brain has any balls to tackle this. He has come back from his mental/medical review
Either GRZ or the Investors are not telling us the truth concerning the negotiations or no negotiations before the tax revisions. I hope we do not end up in a situation like the suspicious Dr Chituwo-Depo Provera saga which is highly likely. LPM stop your global tourism adventures and attend to these national problems. Look at what serious leaders like Bush are doing to help their nations in times of serious economic problems. Get serious iwe chi chitumbo maliketi atase!!! You are busy getting awards which do not mean anything to the common Zedian and yet your job is to protect the interests of these commoners. Sort out the tax issue and that in favour of the Zedians.
All you consumed in blogging 24/7-SAGE,Patriot,Joze,Easy,Kuku,Original Pundit,Chapi,Wanzelu,Zulu,Zedian, Mwine whatsoever,Concerned Citizen,Mwinepole, Citizen, Paparazzi & all the kids sleeping here ,
Looking at your devotion to the internet, I presume you don’t go to school to build on your future or work for a living, but are plutocrats in your own world just delegating ways of making wealth remotely from your love seats in homes. Here is a big test for your degree of responsibility, love, compassion and ability for leadership.
In the UK, Mrs Elizabeth Mulaisho passed away last week.
Mrs Elizabeth Mulaisho a Zambian lady, passed away in the UK on Tuesday, 5th February 2008 in Blackpool, leaving behind 3 children and a husband.
Mr Mulaisho has no job and no income to support his young family and needs immediate assistance to bury his wife or return her body to Zambia.
Mr Mulaisho joined his wife and three children 2 years ago, by then Mrs Mulaisho had already lived in the UK for 4 years and was working as a nurse. She was the family’s only breadwinner while the husband stayed at home looking after their young children. Their youngest child is just over a year old.
When Mrs Mulaisho became very sick and got admi
When Mrs Mulaisho became very sick and got admitted to hospital she was unable to work for many months and in the process lost her job and income. The husband cannot work and the family visa status does not allow him to access benefits or get any support from the British government.
While Mrs Mulaisho was ill in hospital, her family got evicted from their house due to non-payment of rent and are now living in a bed and breakfast supported by members of a local church.
He is seriously appealing for donations/any help from all of us Zambians reading this email.
His contact details are
Mr Lewis Mulaisho
Tel: +44 (0)7934 694 241
Bank details: Halifax Bank.
Name: Lewis Mulaisho
Sort-Code: 11-00-01
A/C: 03055516
This family is in desperate need and shall accept any donations.
If you are unable to assist financially, please at least do something by circulating this article to other people who may be in a position to help.
Senior Citizen, you’re indeed a weirdo. First you start by insinuating that the majority of regular bloggers on LT are youngsters with nothing better to do, then you go on to “beg” for financial help for Mr Mulaisho? What nerve! if you seriously expect to demean fellow bloggers and yet expect help 4rm us, then perhaps you’re growing too old and have a few screws loose! go to hell…and since you’re so sharp and mature, go out and find the money to assist the Mulaisho’s yourself, we certainly don’t need snobs like you on this blog.
Ba Bali,
Lets just be real here.Life is rough and we have none to spare for others when our own parents and siblings at home are just on the threshold of survival hopeless every day.Our short-fall has nothing to do with Senior Citizen’s punches as all the data for the family in need is posted here and is subject to verification which i have just done myself already.If you have the means, just verify it and do your thing.Senior could just be here to tear us down at a personal level or challenge us to audit the benefit of blogging day in and day out. He is challenging us as of what measure of recordable progress we have made thus far in view of devotion to blogging.
The govt made their own mistake by not charging taxes right from the satrt of the contract as well as mining concessions. The mine owners also were taking of advantage of the free taxes. Go Magande ge back all the taxes for the Zambians.
Lets just get back to the subject at hand, mine investors resisting the new tax regime! #34 senior citizen, stop seeking attention and post your bogus “appeals” elsewhere. I don’t see how the amount of time certain people spend blogging, affects you or makes your grey haired balls itch! if you think the majority here are time wasters, then why bother logging on? Back to the topic @ hand, mine investors should indeed pay a reasonable tax but Magande and Chuchu (“lawyer wama lawyer?”) should make sure they don’t end up liable to unecessary law suits…
Hey Senior Citizen, spare this blog and take your appeals to the Embassy. That is why we set up the embassy there for such things or better still go to the Zambians in UK website ..check the details on the Zambian COmmunities World wide on this site’s front page
Anonymous (39),
LT has no terms of reference to blogging.Anything and anyone can have their message of choice deposited within the international cyber laws. As long as articles pass the obscenity and criminal acts test, they are ideal for the site period. Anything that doesn’t appeal to you, surely you have the right not to be on that thrill ride of rebatle.Don’t dictate your own jungle laws because you will miserably fail by all dimension and later only realize how inadequate you are in the real world diversity and aspirations with time.If there is any legal recourse i need, just pin it down i’m a responsible citizen to oblige.
Ba Bantubonse, you have just come out of poverty yourself and you are already at it – bootlicker. Government decision to increase/reduce taxes cannot be challenged. Yes, you can make submissions but once the law is passed/announced, you have no recourse and cannot seek redress in a court of law. Last year the same mines were refusing to renegotiate the DA, now that’s what they want – ABASH!
Senior Citizen, You are now bring your confusion for Zambia Online (ZoL) weya u are used to insult each other with “shutup IWEkombwe”. As you can see, this is a more mature blog and as such even as you make your requests you ought to be more diplomatic. And can you convince me that its not you who is requesting for the donations? Give us more information and the source. And wat has Zambian Embassy in UK done about it? You think anyone can sink so low and put money in that account just by seeing your post? come’on get your acts togatha naiwe.
I mearnt bringing your confusion FROM Zambia Online…
senior citizen #40 you are an irrelevant chap! guys, let’s just ignore his stupidity! I thought the title of this particular post was “Mine’s reject tax regime”?. So bane, let’s be wary not to post irrelevant info on LT…abena katondo namushupa sana, you’re becoming tech savvy & are now using LT for your “zooking”? Even if I wanted to help, i’m over-taxed by LPM and have more pressing needs to spend my hard earned kwacha’s on!
ha ha ha Rhodespark, u r hilarious…u made my day…..ala nabafya ba katondo mwana…..
kanabesa ba Mwine #45, ala yili badi badi…katondo boyz balitemwa zooking, especially now that they’ve learnt how to use laptops and wi-fi! my fellow bloggers pls beware, it reminds me of the Nigerian internet conmen (the pioneers of zooking) who are able to con unsuspecting americans out of their dollars!
ba rhodespark #44, hahaha ala you’ve got a sick sense of humour + sarcasm, i’m laughing my lungs out…, i think we need such humour especially when tempers on LT get so heated
This bill is equivalent to a 60% tax on earnings when copper is at $ 3.5! more and more when the copper price up !
With the project nobody will invest in zambia and the president will have a successful break this beautiful machine cash!
For two years, all the benefits of mines has been invested in the work tool and permits increased production in the future!
Zambia could receive the much-ih zccm with which owns 20% of mines and income taxes by 30% and royalties of 3%.
for bank Zambia’s risk is very high now and banks will no give easy money for the projects in zambia!
What disaster for the country
This windfall tax will push the country in 1997!