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Friday, May 20, 2022

Giving Mines a Tax Holiday when Copper Prices are $11 000 per tonne is saddening

Headlines Giving Mines a Tax Holiday when Copper Prices are $11 000 per...

Patriots for Economic Progress(PEP) has said that giving the mines a de facto tax holiday at a time that copper prices are at record highs of approximately 11,000 dollars per metric tonne, was a very poor decision by the government because mines have been able to operate and make a profit when copper prices were at 3,500 dollars.

Mr Tembo says it is saddening that Zambia is not benefiting in any way from this windfall while at this point the country should have been leaping huge tax dollars from the mines.

Mr Tembo has advised the new dawn government to come up with homegrown solutions instead of depending on the International Monetary Fund–IMF- bailout package for the country`s economic turnaround, expressing concern that government has premised the entire economic plan on the IMF programme which he said if it does not come through will negatively affect the country`s economic recovery agenda.

Below is the full statement

FOUR MAJOR ECONOMIC BLUNDERS OF BALLY’s PRESIDENCY SO FAR

By Sean Tembo – PeP President

1. IMF BAILOUT: Believing that Zambia needs an IMF bailout loan in order for us to turnaround our economy. Additionally, Bally has premised his entire economic turnaround plan on the IMF programme, meaning that if the IMF doesn’t come through, he will be scuttled. The truth is that we can turnaround our economy by using homegrown solutions. Simply by stopping the theft of public funds, Zambia can double its revenue base.

2. TAX HOLIDAY: Giving the mines a de facto tax holiday at a time that copper prices are at record highs of approximately $11,000 per metric tonne, was a very poor decision on the part of Bally. The mines have been able to operate and make a profit when copper prices were at $3,500 which means they are now making supernormal profits with copper prices at $11,000. And yet the nation is not benefiting in any way from this windfall. Whether this decision was done in order to pay back the money which the mines funded UPND during its 23 years in opposition or it was just innocent incompetence, remains a matter of speculation. At this point we should have been leaping huge tax dollars from the mines, and we could’ve easily been servicing our debt obligations, including the upcoming Eurobond.

3. GOVT RECRUITMENT: In economics, when they say that employment creation is a key accelerator of economic growth, they do not mean government recruitment to suddenly ballon the civil service, no. They mean private sector employment creation. Am sure Bally wasn’t paying attention during his economics class at UNZA when this topic was being taught. So for him, when he became President he immediately committed to employing 40,000 plus additional civil servants, all at once, at a time when we have the largest fiscal deficit in history. A fiscal deficit means that your expenditure as a country is higher than your revenue. So the natural thing to do under those circumstances is obviously to either cut your expenditure and/or increase your revenue. But Bally is doing the exact opposite. He is increasing expenditure and cutting the revenue through the de facto tax holiday. What a poorly baked economist indeed.

4. SHUNNING LOCAL CONTRACTORS: For whatever reason, Bally has a strong apathy against local contractors and suppliers. My view is that he thinks all these people are affiliated to the previous regime. And therefore, since he wants to punish the previous regime as much as possible, he prefers to shun local contractors and suppliers in preference for foreign ones. A case of ZESCO poles tender is one such example. Bally has also decided not to pay a single local contractor or supplier since coming into office, under the excuse that he is still auditing them. This has destroyed the Zambian entrepreneurial base almost completely. Additionally, this has reduced the amount of money in circulation and also destroyed thousands of jobs. Right now, no matter what you are selling, the business environment is very poor. There is just no demand out there. All thanks to Bally and his desire to punish the previous regime.

28 COMMENTS

  1. For them to access the 1.4billion dollar IMF loan they have to exempt the mines from paying taxes. Imagine someone telling you that you will only get your Zanaco if you stop work….so how are you going to repay the loan?

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  2. DEJA VU
    IT HAS NOTHING TO DO WITH THE IMF
    FOR GODS SAKE POST FACTS AND NOT HEARSAY
    THE TAX INCENTIVES WERE INTRODUCED IN THE PAST SIGNED AND SEALED

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  3. Another one , Sean tembo……….

    Can’t think of any other industries to improve apart from the mines………..

    Why ????

    Because the hard work is done already and the mines are operating………….

    Other industries like tourism, agriculture, manufacturing, media need hard work, research and real plans and ideas to develop them…………too much hard work for the likes of Sean tembo………

    All they know os msling noise …….

    Lazy ass.holes………

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  4. Remember we have a president who sold our mines for nothing to the same imperialists. So this should not come as a surprise. He is a sick man in the head. A big liar and crook

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  5. #2 Are you more privy to what’s going on than other people? What is the point of waiving tax if there’s nothing in return… for your information these guys only employ their nationals. As for the Chinese they subcontract operations to other Chinese companies who bring their own people. They only employ Zambians who are prepared to work for less than 2,000 Kwacha per month. So tell us what would be the motivation for the tax holiday,

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  6. When you get kwacha kwacha and dollar dollar as sponsorship for elections that is the end result…. Privatization phase 50 ….

  7. We had road blocks for a reason, but when the f00Iish upnd took over, they wanted to show you that they are abasungu. So they removed road blocks and now a poor innocent woman has been abducted in broad day light and is missing for almost a week. This govt has totally failed and is a risk to our security. I understand the army’s sentiments

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  8. It’s clear that Stup!d KZ lives abroad, otherwise he would have known that police roadblocks have been back for some time, doing the same corrupt thieving they did during the PF time!

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  9. I totally agree with Mr. Tembo on this needless giving of a huge tax break to mining companies, especially at a time when Zambia badly needs to fix its ailing economy . When is Zambia going to truly benefit from its mineral resources? Our resources have made billionaires out of foreign investors, with Zambians left holding an empty bag. Countries like Chile have immensely benefitted from their copper exports, making their country virtually a First World. Zambia, being among the 10 most copper producing countries in the world, should have been in better shape economically by now. But instead, the country remains among the poorest countries in the world. In the coming years, when copper is exhausted, Zambia will have nothing to show for it; only empty gaping holes dotted…

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  10. The legitimate question to ask is whether tax-deductibility of mining royalties take into account price participation when the price of copper reaches a certain level. Tax-deductibility of mining royalties is international practice and not unique to Zambia under the UPND government.

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  11. Let me put it this way, if you’re renting my property it’s obligatory for you to pay the agreed rent at the appointed time whether you earn an income or not. Or if you quarry sand from my property you’re required to pay the agreed fee irrespective of how you use that sand. It’s either you pay or you don’t quarry. This is the same as the Mineral Royalty Tax. Mining companies must pay regardless of the price of the commodity. This is to compensate for exploitation of our resource. So whoever made MRT deductible is a criminal traitor. MRT is a part of the cost of production, it isn’t an overhead. Can you imagine that I come to your farm and dig trenches then after I’m gone people ask how much you made from my activities then you respond that I didn’t pay because I sold sand at an…

  12. cont.. You respond that I didn’t pay anything because I sold the sand at an unfavorable price. What do you think they’ll take you for? Your answer is exactly about my opinion about the UPND

  13. What Sean Tembo wont tell you is that there are 10 year Developmental Agreements protecting the mines to keep the tax as it is…these were signed during MMD, PF came to power and when they was threat by the mines to cut workforce they rushed to the mines and ecxtended these agreements. Rwandan President was laughing about this when he was in DRC that its nonsencial for African countries to seek aid and debt relief when they are giving multi-nationals like Glencore and FQM tax holiday.

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  14. Ayatollah – Well said …Politicans have been playing around with this but because they have been compromised dont have the balls to do it, its either you want windfall tax which means you get nothing in bad times and enjoy in good times but our countries are so poor and dependent on mining revenue that they can not manage in bad times. Another method would be the sliding scale where you raise the percentage between 5% and 15 % based on the copper market price like in Chile.

  15. @16 Tarino Orange, the development agreements were outlawed by LPM long ago. They don’t exist. I think that should’ve been in 2005. That’s how the Windfall Tax was introduced

  16. Sean, there is always a point when a people should agree and work on something as a team. You have a point, we cannot keep putting money in these investors at the expense of the poor Zambians. That tax holiday should be removed. UPND you will do good to listen, for the days of hiding behind early days are over.

  17. Though the points above are actually valid, achieving the IMF package will be a milestones towards performing the economy and government financing especially during the forecast economic outlook that is not so optimist All funding methods that will optimise the performance of the economy to register some growth surpluses needed to be seen by those in the committee of official creditors will also be important The IMF should not be seen as a final arbiter because that is what is also causing issues of effective restructuring All available financing methods must be explor including local measures in tax maximisation and fiscal consolidations because there’s some time before Zambia can make a good Faith negotiations case with official creditors the voting at IMF etc Notice also that the IMF…

  18. Unemployment and employment follows the economic cyclical The Gov can provide the environments for employment creation as required in the constitution The first thing is to grow the economy home grown side by side with exploration of various funding needs to perform the economic sectors

  19. The attempts to quick fix the economy through sovereigns debt restructuring doesn’t reduce the intertemporal value of the debt portifolios if the restructuring result in low GDPs and capital flows The distribution of the surplus and what remains for reinvesting into the economy nis what is critical long-term for Zambia that is why home grown has always made economic sense first because debt restructuring can make or break the economy though importantly so if not we’ll managed or rushed

  20. Looking at the expenditure growth and effect on the gross deficits and in an event that doesn’t get support with the G20 and committee of creditors official,to achieve a quick closure and restructure,including any form of debt relief on and before the final restructuring, Zambias expenditure profile remains elevated and could be huge to manage if revenue consolidations local given the gloomy outlooks becomes worse This said we hope for IMF package to performs the economy and restructure to repay the soverigns it’s requires resolutions first with creditors and then IMF which debt and what maturities is also important including sharing the fiscal burdens To say we Donot need the IMF could also not be right but having that as the only is also wrong stratergies

  21. It’s about a good faith negotiations looking at the voting engagements at the IMF that is why lazards advisory is important in this commitment The tax structure is also within ourmaking we can change marginally and participate in price appreciation without being said to be inconsistent it’s to the both mines and Gov to achieve economic sustainability

  22. The difficult situation could be failure to achieve economic Transformation and growth in the sectors for revenue mobilization as written there that with growth in expenditures and mounting debt arrears The key in any of those is the growth in the budgetary surplus and how that restructure the economics and translate favourably on the FInancing methods and costs on the fiscal and budgetary plans The IMF and restructuring in debts is important but not as a single stratergies or plan

  23. it’s good that people are being employed infact we need to produce more numbers in workers to power the economic sectors like Nigeria Foreinstance more than 90000 uearly in education and others and deploy them in private sectors and public and export that in educational and medical tourism for revenues also it’s also important to notice that our economy is not at it’s real full potential that is why we may have these numbers looking for work now if the sectors are nearer to potential the numbers of employment creation could be higher than these especially in the private sector remember also that employment is a cyclical and structural issue that should be seen in government decisions and so far we are yet to see and relate the performance on employment creation and opportunities…

  24. RMB raised $3 Billion for the South Africa Treasuries together with HSBC others what about here in ZAMBIA with our Banks

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