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Wednesday, 13 October 2010

Mphande vs Musokotwane

“Other than incompetence they just (government) don’t know the importance of taxation to development and in relation to poverty reduction-that’s all. They really don’t care for Zambia, they care for their Chinese, Indians and foreign investors-they don’t like Zambians. They are not working in the interest of the country for sure.....But you put it on record, that is why our country is not going to develop, it cannot develop on internal resources, our only internal resource is valuable and proper taxation of the mining industry, without proper taxation of mining companies, this country cannot develop and that is why it is not developing....So it is just foolish for this government to postpone development to our country by the unjust taxation system, whether its windfall tax or royalties what is important is that what we are collecting from the mining industry is not fair for the country..."
Dr Situmbeko Musokotwane (Finance Minister) :
Dr Musokotwane explained that it is not possible to re-introduce the windfall tax on the mines as it is unreasonable....the finance Minister said that Zambians should not mislead themselves that there is no any other tax from the mines. He observed that most people think that without the windfall tax, Zambia is not receiving any other tax from the mines.....Dr Musokotwane stated that Zambia’s windfall tax was too high and unreasonable. He said that if Zambia introduces the windfall tax, it is likely to discourage investments in the mining sector in the end collapse it.
I score this 1-0 to Mphande because the Minister's argument is hollow and I thoroughly debunk it on  Eight reasons for rejecting higher mining taxes... The government needs fresh arguments. All the reasons they have put forward don't hold water. Since I wrote that piece I have yet to hear a single new argument  by government and their pro-mining companies allies worth wasting additional intellectual capital on. As such the debunked reasons remains at eight. 


  1. Cho,

    score this 1-0 to Mphande because the Minister's argument is hollow and I thoroughly debunk it on Eight reasons for rejecting higher mining taxes... The government needs fresh arguments. All the reasons they have put forward don't hold water. Since I wrote that piece I have yet to hear a single new argument by government and their pro-mining companies allies worth wasting additional intellectual capital on. As such the debunked reasons remains at eight.

    What the government needs to do, is the right thing. They need to tax the mines for at least $1.2 billion a year - mind you, even with that tax, $1.2 billion at least will still be leaving the country every year. So the mines cannot complain that they are not making a profit anymore.

    What we need is someone with enough of a spine to tax the mines.

  2. members of GRZ don't care zambians !

    they prefer no put windfall taxes,
    they prefer no ask dividend for zccm-ih,
    they prefer zambians in poverty

    with windfall taxe GRZ could receive more than 400 M$ per year

    with dividends for ZCCM-IH GRZ could receive near 800 M $ since 2005 and with the increase production and copper with h more than 350 M US$ each year !!

    dividends is a du, why zccm-ih take between 10 and 20 % in each mine ? for pleasure ?

    But i think GRZ think that it's difficult for zambia to use money, it's the reason that they prefer no ask this money for GRZ!

    but are they problem to ask money for them ?..

    you understand now why zccm-ih no published its annual resultat since 2005 ! in this result you'll see that the sum is very important and you'll see that GRZ is more that a friend with the foreign groups

  3. Cho,
    "I score this 1-0 to Mphande because the Minister's argument is hollow and I thoroughly debunk.........."

    You couldn't have scored this discourse any other way. Your views on the windfall tax are well known so to expect impartiality from you on this topic is near impossible.

  4. General,

    Please save the ad hominems and deal with the issues.


    The finance minister is corrupt. That is why he is defending the mines. That is why he has not insisted that ZCCM-IH received all the dividends due to it, defrauding the shareholders of ZCCM-IH, when he was a non-executive director there. This is also why he is now shielding the mines from taxation as Finance Minister.

    And his narcissism knows no bounds. He even stated that there will be no significant poverty reduction in 30 years, if the free trade model is followed - he just doesn't care about the people of Zambia at all.

  5. @ enkorbingo

    Why doesn't Microsoft pay dividends?

  6. because the company prefer to develop the value of its asset, but it's not the same sector !.

    For ZCCM-Ih it is different, no dividend, no increase its asset, no annual account since 2005 !

    The foreign companies who have the majoritary in the mines, use the zccm-ih's cash and develop their business in other countries... and zccm-ih have not asset in these new projects...

    no dividends is a scandalous situation but when the foreign groups steal the country the situation is more scandalous !!

    Indeed, I never talk about mopani, and yet !.. glencore transfert the copper in other country with low price.. ie mopani sell its copper to glencore at low price, without benefit !

    The benefits in the pocket of glencore.. not for mopani

    The business model for ZCCM-IH (HOLDING) is the business model for each company Investment HOLDING:


    IF ZCCM-IH receive 350 M $ each year..(it's the actual minority interest for each year with copper 8000 $ and actual production (increase next year with KDEEP))

    THE GRZ and ZCCM-IH could :

    - invest in new mining projects, with or without partner, to develop job and fight poverty

    - Investment in other projects, not in the mine industries, but to give new futur for Zambia

    - For no more depend to the donors...

    year after year, microsoft develop new Windows...
    Year after year more and more cash for Microsoft

    year after year, less and less minerals in Zambia..
    but never money for GRZ, never money for Zambians,

    The shareholders of foreign groups can now buy shares of Microsoft with the cash earn from zambians minerals, with the cash from ZCCM-IH !

    thank you Mr Capitalist !

    Yes it was a good comparison !

    PS : if the real value of ZCCM-IH is publish, the rating for Zambia will be better...
    but GRZ don't care, the power of money is too strong !

  7. @ enkorbingo

    If ZCCM-IH needs the money that bad to develop new mining projects, why don't they just use capital gains. I mean let's use the Microsoft example.

    Let us for example say you own a holding company. Let us call this ABC holding just for example sake. Let us also say Microsoft stock is selling at $75/share. Let us say you buy 1000 Microsoft stocks at $75,000. Let us now say Microsoft stock gains value to the tune of $120/share, if you know full well that Microsoft does not pay dividends, why not just sell the stocks for $120/per share and use that money to invest in other projects.

    That is my argument concerning ZCCM-IH. The value of the mining companies is worth more today than when they were some few years ago. If ZCCM-IH needs the money that bad to develop other mining projects, they could sell some of their stock and use that capital gain to develop elsewhere.

    I'm sorry but for me, the "dividend" argument does not fly. Companies are not obligated to pay out dividends. They choose to depending on their dividend policy. It is not criminal if a company does not pay out dividends.

  8. Enkorbingo,

    You can click on the 5 year button to see that ZCCM-IH has not increased in value from where it was 5 years go. There was as shortlived bull run and crash from 2007 to 2009.

  9. Mr capitalist

    it's possible for zccm-ih to do like this but zccm-ih no published its annual reports since 2005 thereby and the shares of zccm have a little price while its real value is more expensive.

    if you see the last annual report the value of ZCCM-IH is null ! with 20 % KCM 20 % kansanhi 20 M shares equinox minerals !

    no one want zccm share, if you see on lusaka stock exchange only one change in the last four years !! lol

    investors are afraid zccm share because the board lie every time,

    the board communicate every quarter that he will publish annual accounts 2006 2007 200 2009.. but the investors wait, and still wait

    zccm could just use capital gains but the board is not profesional and don't know to show the real value of the company

    never communication about the company, or bad communication...

    how investors can trust on zccm ?

    if no trust, no use capital gains

  10. @ enkorbingo

    If no one was itnerested in ZCCM-IH shares, they would have sold them by now. The shares would be valueless and would most likely not be trading on the LUSE depending on their policies.

    My analysis of this situation is ZCCM-IH owns shares in mining companies that have gained in value. Investors are not buying because of lack of information but are not selling either because of the fact that ZCCM-IH's stock assets have gained value. In short, the share price will not show that much fluctuation if any at all.

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  12. More articles on the Windfall Tax. Even the IMF now admit that the mines are not contributing to revenues in any significant manner (let alone pay up $1 billion or more per year).

    IMF notes mining sector’s low contribution to national treasury
    By Chiwoyu Sinyangwe
    Fri 15 Oct. 2010, 04:00 CAT

    Government will not re-introduce the windfall tax-President Banda
    Friday, October 15, 2010, 9:38

    And of course the Banda government is adamant about not reintroducting the windfall tax, even though the finance minister has admitted that while using this foreign investment led model will not lead to reduction in poverty for another 30 years.

    Now what makes them think they have 30 years? By that time, the population of Zambia is going to be 24 million or more. How stupid does minister Musokotwane think everyone except himself is?

  13. "Dr Musokotwane stated that Zambia’s windfall tax was too high and unreasonable"

    I don't see why the Minister has to reject the idea of some sort of windfall tax just because their last design didn't work. Why can't we have a windfall tax that has higher thresholds that are inflation indexed, and is tax-deductable?

    An alternative windfall tax that is less of a burden to firms would be more acceptable but still much easier for ZRA to audit - precisely the reason for the tax.

    Different quote, same topic. This one from from RB:

    "The vision of my government is to have (the) mining industry contributing more than 20 percent to the Gross Domestic the next five years,"

    Two things to note here:

    One, this flies in the face of the government's mission to diversify the economy. An increase in the GDP contribution of mining is doing the precise opposite. i dont think he really means this but it shows the usual sloppy thinking.

    Secondly, an increase in GDP contribution doesnt really help Zambians. Yes, some increase in employment and demand in the rest of the economy is good but the real benefits from mining must come from taxation. An increase in GDP contribution without a corresponding increase in tax revenues is not entirely useful. Furthermore, the export of copper represents a draw down in Zambia's natural capital stock. Exporting loads of copper just means a decline in our natural wealth, unless some of it is captured by taxation.


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