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Monday, 11 February 2008

Protecting our environment....the EPF & New Mining Tax Regime

The Daily Mail reports that Government will put in place an Environmental Protection Fund by April.

Mine safety experts from Canada are in Zambia to validate mines safety audits conducted by a local consultant. And Government will effect the operations of the Environmental Protection Fund (EPF) by April this year after receiving a comprehensive report from the expatriate experts.

Ministry of Mines and Mineral Development director of mines safety, Mooya Lumamba, said yesterday in Ndola that the team from WorleyParsons Komex in Canada was in the country conducting checks on the mines based on recommendations of the audit reports from the local consultant. He said the experts wanted to ascertain whether the findings by the local consultant were in line with what was obtaining at the mines. Mr Lumamba said the experts arrived in the country last week and were expected to complete the auditing exercise within two months.

He said EPF was now law and was supposed to be implemented by Government. Mr Lumamba said his department would only come up with the amount mines would be required to contribute to the EPF when the validation exercise was completed. “We will only come up with the amount after the completion of the exercise. But by April this year, the fund should be operational, if we do not encounter any problems,” he said.

Of course, it goes without saying that the principle of tackling environmental and safety concerns is welcome, especially with the proposed tax regime for the mines. There are four fundamental reservations I have had over the new tax regime. They all hinge on the underlying incentive for the mines to keep the new tax regime revenue neutral.
  1. The possibility that mining safety and environmental damage could get worse.

  2. The possibility that the service conditions of workers may be affected.

  3. The possibility that they could cut down on social responsibility.

  4. The possibility of an amplified "resource curse" effect. I have long argued that additional tax revenues without making sure that mechanisms are in place that transfer the revenue directly to locally affected areas could simply incentivise greater corruption. This is why I favour the human approach to mining debate.
It appears that government is moving forward in ensuring that (1) does not happen, but the announcement raises more questions than answers. We know that more detail is expected on the amount of contributions, but surely government should be able to tell us on the intended formulae for contributions? Is there any government contribution to the fund? Is it all funded by the mining companies? Will the mining companies' contribution be deducted from other taxes they pay? Is this a form of an environmental tax on the mines? As for (2) - (4), we have yet to see what measures government propose to ensure that those fears do not materialise.

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