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Monday, March 30, 2020

Dr. Lubinda Haabazoka responds to the Chamber of Mines on tax proposals

Columns Dr. Lubinda Haabazoka responds to the Chamber of Mines on tax proposals

Dr. Lubinda Haabazoka
Dr. Lubinda Haabazoka

By Lubinda Haabazoka PhD

Colleagues just read this statement from the Chamber of Mines. They want to increase loss carryovers from 7 to 10 years. Meaning they want to extend periods of declaring looses when they know that in a fiscal year they made profits but declare losses on technicality. Then they demand the VAT refund arrears to be repaid.

A brief history on that. VAT refund is not capital as the mines claim. VAT is normally refunded to companies to help them, reduce the cost of raw materials. The condition of VAT refund is that you need to prove that the materials you bought are for use in production. The best proof is to give receipts and show the final destination of your products. When then Finance Minister Chikwanda tightened procedures of VAT refunds, most of our colleagues could not show evidence of the final destination and other requirements. That is why VAT was never given to them. Up to now, some have not complied but why do they want government to give them that money? Why call a subsidy working capital? As an individual I get a salary, save some money, build a house, put it on rent and government without even asking my source of income will tax rentals. No consideration of whether I built the house using a loan or not. So why should the mines bully government on taxation?

The chamber of mines mentions that they want to want to increase production to 1 million tonnes a year. As a country we are not interested in that amount because the more they produce, the more we lose because their contribution to government tax revenue is insignificant.

How can you pay mineral royalty of 3.5% and then fail to declare corporate income tax despite the fact that you receive $700m in VAT refunds, $240m in electricity tariffs, $60m in fuel subsidies? It’s high time the mines came on board to help government raise resources.

Government buys power from Maamba coal plant at 13 cents then sells to the mines at 6 cents when households and other companies pay 9 cents? Mines should stop holding government at ransom. It’s a pity that every time government moves in to correct the wrong, the mines start retrenching employees. Instead of employees siding with government, they side with mines therefore promoting the same problems.

I understand that mine tax policy should be consistent. But how do we promote consistency of nonpayment of corporate income tax?

What the mines should understand is that there are other investors watching on the terraces! This includes the option of nationalising non profit posting mines. We are alive to the fact that copper is the next gold!!

A conventional car now uses about 12kgs of copper. An electric car uses about 60 kgs of copper cables. By 2030, the European Union will move to 100% electric cars! Other developed nations are also moving in that direction. So copper is the past, the present and the future.

Zambia has enough qualified specialists to move in. We are moving in slowly to correct the situation. Mines should find a way of posting profits like their counterparts in Chile. Mining in Zambia is easier than in Chile. And by the way, at the rate we are mining, we maybe only have a decade or two of copper remaining. I am even scared when we even increase the figures to 1 million tonnes.

By the way, can we be told where the over $4.8bn raised from sale of over 800,000 tonnes of copper is and maybe how it was spent? How much of it reached Zambia? Why didn’t it reach Zambia? Where is the warehouse of copper that we send to Switzerland? In China, location of those warehouses is known. Where is the copper sent to Switzerland stockpiled? 

These are some of the things government and citizens of kamakonde, Kankoyo, etc want to know?

We don’t need people benefiting from the mines to engage us in semi baked academic debates and telling us that the current situation is ok. We know that the current model of mine ownership is dead until we see mines contributing at least 40% to GRZ’s national budget! When government borrows money to do a road in Chingola, we ask where the money from the mines in Chingola goes to? We can’t push so many responsibilities to a government we can’t fund!

At $6000 of copper per tonne, even Street kids on the Copperbelt should feel the positive impact of mining. The whole Copperbelt economy is based on mining so colleagues we need to see your input. The number of experts has increased once more in towns like Kitwe meaning business is booming again. But that boom should reflect in control 99.

The Chamber of mines further say that we can ill-afford to resort to “Father Christmas type”, fanciful, unresearched, archaic commentary that have had ruinous effects on our economy and the people of Zambia in the past. I understand that the authors of the statement were never in Zambia when ZCCM did wonders for this nation.  I understand that despite the fact that the statement is signed by someone with a Zambian name, the paymasters are foreign. If what I am saying is not researched, why not dispute my figures? I know probably there are other real figures we might not be given but from mine owner boasting and other consolidated financial statements colleagues post abroad, we have indications of what is happening.

Its is unfortunate that the chamber of mines uses words like “Father Christmas type” and ”Unresearched archaic commentary”. What needs to be understood is that there is problem. Where there is a problem people look for solutions.  Fortunately this time, we shall ensure that solutions are implemented. I just advise that people up their game and contribute positively to Zambia’s economic development agenda. Some of you are Zambians so your loyalty should be with the country. Have respect for us. We have trained many of your employees!!!! Do not underestimate us.

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51 COMMENTS

    • I sincerely agree with Dr Haabazoka.

      Zambia cannot carry on bleeding, we need to harness our resources from our major income streams, the mines, and start making deliberate policy to wake up other industries.

      What Dr Haabazoka is saying is that we have a severely bleeding arm and we have to use a tourniquet and then manage the process of going to the hospital.

      The other argument I read, says, no… let’s carry on bleeding and manage the lose of blood on a drip whilst we go to the hospital.

      Surely I prefer Doc Haabazoka’s approach!

    • Thank you Dr. Habazooka for stating what we know. Sadly it always ends there in Zambia. We complain about being corruption exploited by these mining houses but nothing gets done about it. Our precious copper was given away for peanuts and foreigners Continue to enjoy huge profits. Government after government has failed to implement a mining policy that benefits the country. Mostly because of fear of losing political office.
      In addition, the scourge of corruption and the evil of greed are so embedded in the hearts and minds of our politicians that they are easily bribed out of taking meaningful steps to address the issue. All they do is talk.

    • @Journeyman: Isn’t it surprising that countries such as Botswana or Tanzania whose political set up have had one party in power since independence have done well in putting up better mining policies?? Our political set up doesn’t guarantee security of tenure for office holders hence the capitalists manipulating our economic systems like the mines. Rwanda has equally done better and changed the presidential term to 7 years. Our parties spend over 2 years in office politicking and less than 3 years tackling such fundamental issues while the opposition spends its entire time heckling to have their friends out of office and contribute nothing to such issues through parliament. Since Levy’s windfall tax, we’ve been politicking and electioneering and have not seriously tackled mining…

    • …policies. 10 years of politics!! Have the capitalists taken advantage of our political weaknesses?? Is our political set up strong enough to support our economic systems or does it need reform??

    • Is this how a PhD articulates himself? Can’t quite follow the argument here. Sounds like Dr. H has issue with how we tax mining companies yet he lays the blame squarely on these same to be fairly taxed companies. He conflates patriotism, (as subjective as it can be), with business incentive, while threatening the Chamber of Mines?, although with nothing specific. It’s hard to reach your intended audience with this. Might score some political points among some, but won’t disuade these profit chasing conglomerates with this article boss.

    • Government buys power from Maamba coal plant at 13 cents then sells to the mines at 6 cents when households and other companies pay 9 cents?
      Where in the world does big business get away with such subsidies buying energy at half price…why are households still paying less I thought energy tariffs for households are cost reflective by now. The problem we have with this weak govt is everything is done in the dark corner every time the mines threaten to lay off people this govt of Grade 12s sends the Finiance Minister and the Mines Minister with a blank cheque book to negotiate further agreements.

    • @Zambian citizen good points. But am not sure that extending the tenure of politicians is the best way forward. Botswana is not a one party state. it’s just that they have had leaders who have loved country above personal interest. Leaders that have been willing to step aside after 10yrs in office. Rwanda may be doing well economically, but what about human rights abuses. Also we have other leaders who have stayed long in power, only to plunder and oppress the people. e.g. Yoweri Museveni, Pierre Nkurunzinza, the guy in Cameroon, equatorial guinea…

    • …cont… I think what we need is strong institutions. That’s what has made the wealthiest nations to tick. institutions. It’s what great leaders who drafted the American declaration of independence and constitution understood. If we have vsyrong institutions that limit political power, protect the rights and interests of the people.
      Strong institutions prevent bad leaders from totally wrecking a country. A good a example is how the strong institutions in the US stop a mad man like Trump from setting the world ablaze. Did you know for example that the US president has no power to declare war? That government expenditure is supervised by congress/Senate? Those are the kind of controls we need. But when I hear the finance minister saying things like, we don’t need parliament to…

    • @Journeyman: Ok. I hear you and your point is valid and true. So who in Zambia should spearhead the mining policy?? Remember LAZ, even with the power it drew from the legislature, became compromised and partisan. So what kind of institution would handle this fundamental economic function and what would be its composition??

    • “….Botswana is not a one party state. it’s just that they have had leaders who have loved country above personal interest.”
      Zambia has leaders who are see their country as a tool for self enrichment both in ruling and opposition. Remember it’s opposition that forms govt. of tomorrow. Remember Nawakwi and the mines privatisation debacle, and this is someone you expect to stand up to capitslists if she ever came to power?? Problem is we the people as well, our standards and expectations as Zambians are too low. We need to raise the bar!!

    • @Zambian citizen I think mining policy must be brought closer to the people, so that they have a say in what happens. deals must not be signed in the dark, without full consultation, and approval of the people. If not directly then atleast through their representatives visa vi councillors, and MPs. But this would require that the councillors and MPs are compelled to meet with their people often. It should be defined in law how often they meet with their constituents to hear what they want and give feedback to them and represent their interests in parliament. That way, they will have no choice but to represent the will of the people

    • Mushota is right – Zambia should introduce tax & mineral royalties at 50% of production or export value, whichever is higher. What is required is strong GRZ action – not Haabazoka statements.

    • The will of the people, coupled with some good scientific and business information must be bthe basis of formulating mining policy. In this way we woy lod achieve the following:

      1. Mining with the interests of the people fully taken on board
      2. No one will be justified in pointing a finger at government because they were consulted in the first place
      3. It reduces the chances of having these crazy deals, because their is transparency

      This would be a good illustration of “Government of the people by the people and for the people”

      That is t the starting point for me

    • It’s time that Zambia increases its shareholding to 49% in all mining companies. The way it is in Botswana. Investors bring in capital BUT the minerals belong to this country and at the end of mining we shall be left with pollution, sinking holes and open pits to deal with. Hence the 49% to 51%

    • Lubinda has spoken sense. On the issue of how Copper is the new Gold, some of us mentioned this fact and in response some resident cretins scoffed at this. We told you dull chaps that the world is moving to electric cars. I said this right here on Lsk Times about 2 to 3 years ago.

  1. I agree with you a 100% Dr Habazoka. I wish to further propose that every cent of copper exports should be banked here in Zambia. In other words these mining companies must open foreign currency accounts with their bankers here in Zambia without any ecception.

    • @MSG Mwiinga, while I AGREE WITH YOU PROPOSAL, please remember that Chikwanda had tried all that through SI 55 and SI 32 which opposition political parties,and some “business consultants” opposed vehemently. This gave steam to mining companies to withhold $s, the exchange rate skyrocketed, inflation jumped and mining companies started threatening government with retrenchments. The next thing was to revoke the SIs and leave the CHEATING MINING COMPANIES TO CONTINUE ROBBING US!! How can a business consistently declare losses but keeps operating and reinvesting to increase production instead of closing?? The only reason is that they make huge profits kept away from our tax payers!!

    • It’s an issue of transfer pricing period! Charge your local company highly on imported services and goods coming from your own holding company or supply Partners outside Zambia …your costs go up and you register a loss in Zambia while u have already paid yourself and get a VAT refund on top of that. Clever

  2. My personal suspicions is that politicians have shares in these mines. And thats why this chaos is encouraged because it benefits them. Starting from Chiluba to todays government, these government guys are pocketing money

    • I doubt this bunch of Grade 12s who got rich yesterday can even know how to go about buying shares in FQM and even to buy enough to enjoy the dividends.

  3. Dr Haabazoka. You’ve never worked in industry. Mining is probably the most complicated business to run. Our government can’t run a mine. Of course they can run it to ruin like they did ZCCM. If they’re failing to make profit with companies like ZESCO and ZAMTEL which are easier to run, what about mining? Copper is all over in Zambia. Let the government open a new mine so that we can see how they will run it.

    • @4 Chanda, a good check in this article will show that ONE OF THE REASONS ZESCO FAILS TO MAKE PROFITS IS BCOZ THEY SELL ELECTRICITY AT BELOW PRODUCTION COST TO THE MINES WHO CONSUME OVER 70% OF TOTAL ELECTRICITY PRODUCED!! That is why we need to serious look at how we can start running some of these mines ourselves!!

  4. When Prof Clive Chirwa came to Zambia to offer solutions faced in the rail industry jealous people spearheaded by PHD syndrome characters mostly losers and slay queens started a campaign to hound him out of Zambia so that his vision never came to fruition.

    The people at the Chamber of Mines will not like what you are advocating for and will try to bring you down. Continue with the same spirit bro, the future looks bright for the people of Zambia once we start collecting about 40% from the mines.
    Am sure all well meaning Zambians want to benefit from our resources,and its only these foreigners who are investors who don’t want to benefit from our own God given Copper, Gold, Emeralds, Platinum, Cobalt, manganese, Silver and mukula
    Its time to make a change otherwise the education we…

    • Chriwa was a threat to their haulage and passenger transport businesses just imagine an efficient ZRL professionally managed even the then PS was gunning for his job ..that’s why the elite first laughed at him when they saw he was not dreaming they started throwing spanners in the works.

  5. ….Where is the warehouse of copper that we send to Switzerland? In China, location of those warehouses is known. Where is the copper sent to Switzerland stockpiled? ….

    That has always been my question….how is copper sold? As long as the Dollar buys our copper( produced in Kwacha terms) and by-passing our local currency,Kwacha, it’s a no win situation.The Dollar has to be exhanged to Kwacha to get our commodity (copper) because the Dollar is a local US currency(forget that crap that the Dollar is a reserve currency)and simply put thats what appreciates a currency.The Chamber of Mines are busy talking about much copper will be dug out of Zambia(and create trenches and valleys for our children) and have been shy to say tangible benefits tour our people…

  6. like I said the government is not with its people, its interest is very malicious and do not promote tenants of good governance fare and just business principles.

    how can we allow our selves to be dancing to the tune of an individual or indeed the dictates of the mining firms if today we have borrowed 9.7 billion why can’t we borrow to restore dignity and honor to our mines and its people.

  7. Zambia’s current foreign currency policy is no different from its past when it was State controlled in the First and Second Republic, despite being today in an alleged “free market” system.
    The only structural changes in Zambia’s foreign currency policy today, as compared to the past, is that it has merely transferred the direct ownership of foreign currency from Government control to a selected group of exporters in the private sector, and not to Zambia’s financial markets in which the forces of supply and demand are meant to operate.
    It is against this abnormal non-market driven structure that the power to determine the exchange rate is still a monopoly of a few, and not one driven by Zambia’s money markets.

    THE PAST
    Understanding Zambia’s State controlled foreign currency…

  8. There is a distinction about management and control/own You can own and manage or manage and control or allow others to co own and share the increased risks and returns in the huge capital mining investments presented bu risks in commodity and operations

    The challenge is creating again a Zambians mining sector supported by Zambian Financial
    and capital,Zambia contractors and suppliers or working smoothly with foreign Capital ad creating those markets for mined copper

    Zambians have the capacity even when capital is in the worlds to at-least up the participation

  9. Perhaps it is this generation which questions such pathetic status quo that will cause zambia’s prosperity. The mines set up is such a scandal that centuries later, Zambians will ask ‘ how did they allow this to happen” just as we question how chiefs sold their subjects for alcohol and mirrors.
    BUT, i have faith in one ECL. He is brave enough to risk a drastic change of practice with the mines( especially KCM). He did it with the the cartel, he did it with the constitution. The only disadvantage we have is a myopic opposition that opposes, nay heckles, the incumbency senselessly. If UPND can support such a move, we will be going in the right direction.
    Go on ECL, do it! Abraham Lincoln risked it for American slaves , Mandela risked it , ghandi risked it, Margaret Thatcher risked it…

  10. Since privitization, the mines have been behaving like a moving target. Unfortunately we have influential Zambians who are in the habit of assisting these companies dodge detection.

  11. Finally, we have a Zambian who understands what’s at stake.. A Zambia for Zambians.. Great articulation of points.. please argue the figures presented you chamber of commerce.. advise your paymasters that our own children’s children need to benefit from these mining activities.. have some guts to stand up for what you believe in like Dr Habazooka.

    • I guess what they believe in is their paymaster, that is the reason they are standing up to de-fund the entire future!

      The Gold and Silver you acquire for yourselves shall corrode!

  12. Why can’t we send people to Chile to study the mining tax regime there? The contribution of the mines to the fiscus is negligible. $1 billion worth of tax refunds and subsidies to the mines by the government in a year is unacceptable. Habaazoka is right.

    • Chile’s economy relies heavily on natural resources like Zambia but the crucial difference here is Chile’s fiscal rule has guided prudent fiscal policies unlike our country under Lazy lungu..its also common knowledge that Chile has a rolling sliding tax policy regarding mineral royalties ie. copper of between 5-9% if copper price on the market is booming more tax is obtained and if loss less tax is obtained…its a win for everyone including the custodians of the land when high and hard time for everyone when the price is low unlike in Zambia where its fixed at a pantry low 3.5%.
      Any way Zambians like to talk talk to soothe themselves like above and be lied to about how they are being ripped off when the same Politicians are in the pockets of miners you will talk till the mining…

    • companies dig up everything and leave big deep holes to dump your rubbish from the streets…you will still be talking about how to tax the mines.

  13. KUDOD TO YOU DR.HABAZOOKA, at least I can BREATH AND HOPE THAT WE STILL HAVE PATRIOTS IN THIS COUNTRY!! So far you ARE INSPIRING HOPE AS THE CURRENT CROP OF POLITICIANS BOTH IN THE RULING AND OPPOSITION IS IN THE POCKETS OF MINING COMPANIES!! They cannot do anything in the interest of mother Zambia, like the Chamber of Mines, they are answerable to their Masters, the mining companies!! IF GOVT IS SERIOUS,LET THEM CALL AN INDABA WHERE SERIOUS ECONOMIC ISSUES INCLUDING THE RUNNING AND TAXATION OF MINES CAN BE DISCUSSED!! SINCE WE ALL SEEM TO AGREE PUBLIC THAT MINING IS NOT BENEFITING ZAMBIANS,THEN WE SHOULD FIND A WAY TO MAKE IT WORK FOR US!!

  14. Aside from the fact that mining is ultra in capital and operations our IDC has the capacity to engage independent consultants for ore reserve calculations, future mining and processing costs to see the gains from the markets in mining of energy minerals and minerals
    These minerals are also main inputs to manufacturing of basic metals for many also aligned industries that support the made in Zambia concept not China concept
    The restructure and structure of participation can begin with IDC increasing its ownership interests in the Mining sector it should begin with the review of mining rights and interests and consolidating them as interests vested in the IDC Contrary to the thinking of others IDC…

  15. that IDC should as opposed to sell of entities consolidate its participation and interest in critical sectors of the economy Increasing the balance sheet in these critical sectors will be important and reposition to make them profitable sustainably so in the long-term Its should be investing and utilising opportunities in new and old companies LEVERAGING OPPORTUITIES I am sure IDC and its funding arms can do this Debt working and cooperating with foreign capital e.gEquity,Quasi-Equity,Guarantees,Trade finance and Venture Capital Funding can be structured utilising a wide range of instruments including these with commodity resources as basis :I am sure IDC and its sectors can project the capital…

  16. the capital expenditure necessary for the development and operating the mine small scale or large and align equity proportions accordingly

    The current RENT system should be graduated to increase the ownership and participation in commensurate to the risks and returns posses

    Capital and networking might be a challenge buy one mine can be used as an example and leverage the others

  17. Sometimes I wonder if I am dreaming or not as to why a person who call themselves Zambians would all want the country to fail. Zambia is not about HH or Edgar. These two will expire and Zambia will still be there. In case those HH supporters would. ..just a supposition. ..they want HH to inherit a rundown country? Come on people let’s leave politics out of certain things and offer tangible solutions. …installing HH or removing Edgar is not the solution.

  18. #1.6 Gay Jay, so you confirm that you don’t think or research your comments? The so called doctor is wrong in many respects, according to my research. E.g.

    “Government buys power from Maamba coal plant at 13 cents then sells to the mines at 6 cents when households and other companies pay 9 cents?”
    It’s actually the other way round and with depreciation of kwacha households pay much kess than 6cents because the tariff was fixed in to them in kwacha equivalent when tariffs were given. The mines tariff waz quoted in kwacha so they pay much more in kwacha.
    I suspect Habazooka has issues with the name Chishimba of Chamber of Mines. Typical you know!

  19. You are also wrong the Mines are the of-taker for the power in supply contracts and the negotiate with the project company and the retail picks the spoils So they have the bargain of power more than the retail by design of these PPA and Bulk supply agreements If well worked out the agreements can go along way in reducing the retail pricing but as usual no implementer will undertake that project without power being guaranteed or backed to back with other EPC contracts and the design of the retail in Zambia does not assure and guarantee that

  20. Or maybe we will hear next that Dr Lubinda Habazoka is the new minister of Lusaka province. I dont think that he would add value to Lungu’s government in any useful ministerial position.

  21. #25 Napthali, I am talking about ignorance of your colleague Habazoka and you are proudly showing us more ignorance of the issue. What is the matter with you? So what do you think you have said? Total ignorance, learn to hide it my friend!!

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