THE matter surrounding the sale of Konkola Copper Mines (KCM) has continued to attract sharp criticism among various stakeholders with the Jesuit Centre for Theological Reflection (JCTR) calling for the review of the tax rebates and other fiscal incentives pertaining to the mines.

Meanwhile, opposition MMD president Nevers Mumba has condemned Vedanta Resources chairperson, Anil Argawal for his alleged revelations the company bought KCM for a song and was reaping from the mine.

JCTR media and information officer, Mwiinga Shimilimo said it was clear that Zambia is not significantly accessing a fair share of mining revenue for sustainable development from current mining activity in the country.

“As JCTR we acknowledge the challenges of revenue mobilisation for sustainable development in Zambia. It is a fact that our current development challenges require vast human and financial resources,” Ms Shimilimo said.

KCM was sold to Vedanta Resources in 2004 at a cost of US$25 million from the sale price of US$400 million. A YouTube video has been leaked allegedly showing Mr Argawal boasting that ‘KCM was bought for a song’.

She urged Government in the short-to-medium term to review the tax rebates and other fiscal incentives pertaining to the mines and undertake a comprehensive forensic audit of the mines particularly those identified as undertaking unethical business and assess whether they are paying the correct tax.

“While we concede that taxation based on net profits is the international norm, we are also alive to the fact that it has lacunas for over inflating the cost of mining operations. We therefore urge the government to consider an appropriate mineral revenue sharing mechanism that would significant contribute to sustainable development,”she said.

Ms Shimilimo said the deficiency amounts to gross negligence on the part of Government, as significant potential revenue meant for sustainable development is not accounted for from the country’s natural resource, particularly mineral endowments.

“We further appeal to government that all impending decisions and judgments regarding the mines must be premised on a sound risk management profile owing to the extreme sensitivity of the Zambian economy to mining,” she added.

The MMD president said there was also need for Government to take legal action against KCM to ensure the firm pays back the losses Zambia incurred.

“We believe that the dignity of our people should not be ridiculed by any person locally or abroad,” Dr Mumba said.

He said Government should ensure that no individual or group of individuals, corporate or otherwise manipulate the existing tax laws.

Forum for Democracy and Development (FDD) is also in support of Government’s plans to recover losses incurred during the sale of KCM.

FDD spokesperson, Antonio Mwanza said in an interview that Government should also immediately re-introduce windfall tax in all mining companies.

UPND deputy spokesperson, Edwin Lifwekelo said the party wants Government to take immediate steps that would address concerns of the stakeholders, if Zambia is to get any meaningful benefits from the exploitation of the country’s mineral resources.

The Road Development Agency (RDA) has directed the contractor engaged to work on the Ndola-Kitwe dual carriageway China Jiangxi to re-do the works on sections of the road that have developed potholes on his own expense.

Reacting to complaints by motorists over the shoddy works carried out on the road, RDA Senior Public Relations Manager Loyce Saili says the RDA is aware of the poor quality roads the contractor has done on the road.

Ms. Saili has told QFM News in an interview that engineers have since been instructed not to certify the work that has been done so far because the concerns of the people are justified that the contractor has failed.

Ms. Saili says government through the RDA is spending huge amounts of money on road works and will not accept shoddy works by contractors.

She adds the Solwezi-Chingola road and the Zimba -Livingstone road as some of the roads that have cost government huge sums of money.

Ms. Saili says the RDA will not waste money paying for shoddy works.

Transport, Works, Supply and Communications Deputy Minister Colonel Panji Kaunda says the kwacha has continue to depreciate partly due to huge profits in the construction industry leaving the country.

Col. Kaunda says this development was as a result of most contractors in the construction industry being foreigners.

“Today the kwacha is struggling because most jobs worth billions of kwacha in the construction industry are awarded to foreigners and they also take the huge profits they make back to their home countries,” he said.

He warned that the trend would continue if government did not take deliberate steps to minimize the trend.

Colonel Panji said it was for this reason his ministry had come up with the Affirmative Action for Youth Empowerment in the Construction Sector Program to address the situation.

ZANIS reports that Col. Kaunda said this yesterday during an extra-ordinary District Development Coordinating Committee Meeting held at Livingstone City Council Chambers.

He further said there was no properly organized labour force in the country despite youths being trained as artisans, bricklayers, carpenters and power electricians among others.

“There is no properly organized labour force in this country. We train so many artisans, brick layers, carpenters, power electricians and hope they get jobs but available jobs have so many conditions attached which our youths don’t have and this disadvantages their job prospects,” he said.

The deputy minister described this situation as a social and skills problem which would be addressed by the effective implementation of the Affirmative Action for Youth Empowerment in the Construction Sector Program.

Earlier, the Deputy Minister paid a courtesy call on Livingstone District Commissioner, Omar Musanje.

Mr. Musanje expressed concerne over Ministry of Works and Supply officers who certified shoddy works by some contractors and appealed to Colonel Panji and the National Council for Construction to intervene as government was losing colossal sums of money due to sub-standard works.

Statement by the MMD president on KCM taxation Debacle

(The Buck stops with the PF Government)

The PF government is currently firmly in its third year of governance and should therefore begin to take full responsibility for every aspect of the Governance structure of our country. Passing the buck or blaming other actors for their lack of competency is not going to resolve the numerous problems facing this country. They were voted into office with a clear understanding by the voters that they would fix our problems, correct the mistakes made by the MMD government and improve the working conditions and general standard of leaving for our people. At this point in their governance, they can no longer continue to give excuses and to externalize problems, most of which are as a result of their own making.

The above advice holds true in specific reference to the KCM debacle. I wish to remind the PF government that they had promised the people of Zambia an immediate up scaling of revenue from the mining sector. This was to be done through the introduction of a Windfall Tax. They also undertook to introduce a more effective and efficient tax regime, overall, that would guarantee more money in people’s pockets. More money through an effective tax regime and the creation of 5 million jobs were their core promises to the people of Zambia. They also undertook to change the structure of the mining sector, particularly to bring about a positive relationship between Mine owners and wage earners; a relationship which would tilt towards greater advantage for the working class. Contract employees were also promised better conditions of engagement, through government intervention, by the large mining houses.

None of the above has happened in the three years that President Michael Sata and the PF government have been in Office. MMD therefore is of the view that PF’s lack of capacity to collect appropriate taxes remains a PF scandal. It is for this reason that great lamentations have been expressed by the ordinary mining worker.

The MMD does not condone and strongly condemns the reported comments by the KCM CEO Mr. Anil Argawal. The alleged revelations of the company cheating the Zambian Government are very sad. However, this only serves to expose the incompetence of the PF government. Although the MMD is a firm believer in healthy relations between government and investors, we believe that the dignity of our people should not be ridiculed by any person locally or abroad.

While the statement of Mr Anil Argawal is atrocious and its consequences are deplorable, the onus is on government to ensure that no individual or group of individuals, corporate or otherwise manipulate our existing tax laws. If all we do is to cry foul, then we have failed as a nation to implement our own laws and regulations. It is the Zambian government that must ensure that we are receiving equitable taxes from all companies operating in Zambia.

It is the PF government’s responsibility to ensure that all business houses abide by all labour and taxation laws. They can not be allowed to give any more excuses three years down the line. When this matter first came up, some time in February 2014, The Vice President of the Republic, in fact made an attempt to defend the company and indicated that the situation was so bad at KCM that they did not want to instigate a receivership by putting undo pressure on the firm.

Given what has now transpired, The MMD demands that verification of these revelations be done by relevant government agents and if confirmed to be true, severe penalties must be applied. While government pursues this case, our submission is that extreme caution is taken so as not to bring discomfort to well meaning and law abiding investors in the entire Zambian economy. We must continue to create a conducive investment atmosphere in the nation while taking to task those who abrogate our laws. We also join those who are asking for a Forensic Audit to be done through out the entire mining sector in order for government to develop a platform for a fair and equitable Mine Tax Regime. It is our hope that the mining sector will in the future contribute its fair share to government revenue while giving it enough room to breathe so that it is able to reinvest, expand and employ more of our youth in Zambia.

Dr Nevers Mumba
President
The Movement For Multi Party Democracy

20/05/2014

A political activist Dante Saunders has observed that calls for the president to fire under performing government officials will always fall on deaf eyes as long as the country continues to be governed under the same constitution.

Speaking in an interview Mr Saunders the country continues to have a number of challenges in dealing with ministers and other government appointees because the president has been given too much powers under the current constitution.

He said the country needs the new constitution which should help the people participate in the governance of the nation as opposed to the current situation were the president is the only person who is allowed to drop under performing ministers and other government appointees.

And Mr. Saunders says the call for Finance Minister Alexander Chikwanda to resign or be fired by the president is a waste of time as that will not happen.

He said president Sata can not fire Mr. Chikwanda because he is a relative and that Mr. Chikwanda has no morality to resign by himself.

He said this is the more reason the country needs the new constitution which will limit the powers of the president and empower the citizens to have a say in the way they are governed.

Yesterday former Special Assistant for Policy and Project monitoring to late republican president Levy Mwanawasa, Jack Kalala demanded for immediate resignation of Finance Minister Alexander Chikwanda for calling people who were agitating for the re introduction of the windfall tax lunatics.

Mr Kalala said if Mr Chikwanda does not resign on his on then Zambians should force him out office as letting him continue would vindicate his statement that Zambians lunatics for demanding for their rightful share from their mineral resources.

The KCM Debacle and Taxation of the Mining Sector

In the past week we were treated to a shock revelation by Anil Agarwal the Chairman for Vedanta, how his company is making an annual average of USD500 million from its Zambian subsidiary, Konkola Copper Mines (KCM). The reaction of many Zambians to this revelation is that of shock and anger. And rightly so! It is beyond belief that such a huge amount of money can be made with little or no benefit to the country whose poverty levels stand at over 60%.

For us the scandal is not in selling KCM at USD25 million. Those charged with the responsibility of disposing of the asset may argue and even prove that, at the time that was the best price they could get. The price of copper was very low then, with copper trading at USD1,500 a ton compared to the 70’s where copper was trading at USD4,800 a ton. The copper prices remained depressed until 2005 when the world copper prices started rebounding, by 2011, Copper was selling at over USD8,000 a ton. Be mindful that average copper production costs are about USD4,900 a ton.

UPND would like to urge the PF Government to take immediate steps that will address concerns of the stake holders, if Zambia is to get any meaningful benefits from the exploitation of our country’s mineral resources. The scandal is not words coming from KCM owner, the scandal is in government’s failure to benefit from the high copper prices that have been prevailing since around 2006 despite that being a campaign promise. The Mwanawasa administration was able to bring in USD480 million in one fiscal year at the introduction of windfall tax. When Mwanawasa and Magande were collecting the USD480 million, we were producing less than 600,000 metric tons of copper per annum. The mines are projecting to hit one million tons a year by 2015, which means Zambia could easily get USD1billion if we reintroduced windfall tax from the mines.

There is need for the PF Government to increase an understanding of how best to deal with mining corporations using blackmail and deceit in covering up costs of mining projects and equipment that are brought into the country resulting in mining corporations not paying anything to government by exaggerating costs. We need to do a lot of work in strengthening the Ministry of Mines which lacks the capacity to adequately supervise the exploitation of the country’s mineral resources.

The mines need well trained and highly experienced engineers and economists who are able to interpret feasibility studies of these Mining Companies. This experience is needed to analyze and bring out issues which will benefit the country. The Zambia Revenue Authority must also monitor these mining projects and equipment brought into the country to avoid losing revenue through the so called hidden costs. Our vision as UPND is to create capacities in the local industries to ensure that local companies are able to supply quality goods and services to the mines.

We therefore, urge Government to consider the introduction of the windfall tax to address the ever rising youth unemployment in the country instead of engaging in rampart borrowing to cover for Government inadequacies of addressing the economy which is currently in I.C.U (Intensive Care Unit) going by the raising cost of living.

Edwin Lifwekelo
UNPD Deputy Spokesperson