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Friday, 24 July 2009

Towards the vanquished windfall barrier ?

Copper prices have been on the rise for the last six months and will soon break the $2.5/lb barrier that would have triggered the windfall tax that has now been abandoned. The windfall tax was designed to match rises in the price of copper: it was set at 25 percent while copper sold for $2.50 per pound, 50 percent for the next 50 cents and increased to 75 percent when copper fetched above $3.50 per pound.


  1. Cho;
    Have a look at the following web site:

    I think the Zambian govt did not need to come up with a new formula or rely on the 'expertise' of non copper producers in devising a formula for taxing the mining companies. I think what the Chileans are doing would have sufficed. Afterall we are dealing with the taxation of a similar commodity.

  2. The problem is not bad advice. The problem is that we have ministers who are bought and paid for by the foreign owned mining companies.

    When you have a Finance Minister who goes out of his way to state that the windfall tax was 'onerous' on the mines, and whose smirking face can be seen covering The Post, claiming that 'the windfall tax will not come back', your advisers are not the problem.

    This is what happens when on top of no transparancy about government dealings, there is foreign ownership of the mines.

    The problem is that they are corrupt as hell.

    So when Rupiah Banda says 'there is no money' to recapitalize ZAMTEL for a mere $200 million, even though he could easily collect that from the mines, you know he is corrupt as hell, and stealing the people of Zambia blind.

    The Finance Minister is stealing the people of Zambia blind.

  3. Using the Chilean formula the Zambian govt would have collected 20% of the gross value of copper exports i.e Zambia produced 567 000 tonnes of copper in 2008. The average copper price per tonne in 2008 was $7000. Thus total copper export income was nearly $4bn. The Tax that should have been collected as per Chilean formula would have been $800m. The problem has been all the succesive MMD administrations. When Chiluba and gang agreed to royalties of 0.6%; Chile was already charging 4%. But the 'ZCCM special privatisation team' that included Francis Kaunda were not aware of 'prevailing good practice' by the most succesful copper producer. Chile is what it is today because of the way the copper industry has been managed. It is also true of Zambia but for the wrong reasons.
    Nawakwi and other Chiluba Ministers insist that they came up with these policies because among other things the IMF told them that the life span of some mines was less than 10 years. You wonder why Francis Kaunda couldnt dispute this since as ex Chairman & CEO of ZCCM he must have had knowledge of the geological profile and potential of these mines. But as per Zambian 'expert'behaviour he might have felt intimidated!

    In the meantime the country is going to pick the bill for the $50m debt left by Enya Holdings ex owners of LCM. This deal was negotiated for by Corpus Christi(Zambian law firm!) between the Chinese and the Isreali Enya Holdings. Rumour has it that govt was not party to these negotiations. Fingures crossed as to what the High Court will rule next month on this theft!

  4. Frank,

    The Government DID send experts to Chile!

    Before the regime was implement Magande sent experts all around the world and at great expense.

    I recall even laughing saying, when they came back they forgot to learn the important feature of the Chilean model : stabilisation fund that has kept extreme real appreciation under control - What can we learn from Chile?


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