GOVERNMENT is disappointed that the mining industry is using blackmail to push for value added tax (VAT) refunds, Minister of Mines, Energy and Water Development Christopher Yaluma has said.
And Glencore-owned Sable Zinc Mine Limited in Kabwe has retrenched 170 workers and placed the company under care and maintenance.
In an interview in Lusaka yesterday, Mr Yaluma warned that Government will not allow mining companies to hold it to ransom.
“Mining companies need to be straightforward and not try to bend rules. As a government, we will not tolerate this. Before they [investors]come here to invest, they set aside capital to run their operations.
“But how come they are now basing their businesses on VAT refunds? If that was the case, we would not have allowed them in the first place,” Mr Yaluma said
The minister was commenting on reports that Glencore’s Sable Zinc Mine in Kabwe has laid off 158 employees citing Government’s refusal to pay VAT refunds.
Recently mining companies have been advocating VAT refunds but Government has demanded proof of exports by way of receipts from the importers before effecting payments.
Mopani Copper Mines (MCM) has also threatened to suspend capital projects and to retrench workers over US$200 million VAT refunds withheld by Government.
But Mr Yaluma wondered when mining companies started to rely on VAT refunds to run their businesses.
“Government has not yet received official communication on the reported laying off of workers at Sable Zinc. But if it’s true, then they will have to undo the retrenchment and that is when we can talk,” Mr Yaluma said.
Mineworkers Union of Zambia (MUZ) general-secretary Joseph Chewe confirmed in a separate interview that 158 unionised and 12 senior employees have been retrenched at Sable Zinc Mine Limited in Kabwe.
Mr Chewe said the retrenchment has been necessitated by delays in the enforcement of the Zambia Revenue Authority (ZRA) VAT Rule number 18 (1) (b).
He said MUZ is in receipt of correspondence of notice of redundancies from Sable Zinc Mine Limited.
He said the company has officially written to MUZ and that 158 unionised employees have since been declared redundant.
Mr Chewe implored Government to resolve the controversy surrounding VAT Rule 18.
According to a letter of notice of redundancies signed by Sable Zinc general manager David Littleford obtained by the Daily Mail in Kitwe, the last day of the affected employees will be November 17, 2014.
Mr Littleford said the withholding of VAT refunds has affected cash flow and made it impossible for the company to continue operations.
The refundable VAT being withheld for Sable Zinc, according to the letter, amounts to K64,905,765.
“Sable Zinc has been forced to place its operations under the Mineral Processing Licence 102158-HQ-MPL, on care and maintenance,” Mr Littleford said.