I think we all agree here that – when it comes to extractive resource which has finite lifespan, the thing to do is to maximize earnings from that resource and develop alternatives before it runs out. Copper and other minerals will run out, what happens then? Why are our current officials so adamant about the re-introduction of windfall taxes? Don’t they understand what is at stake? Why are they refusing to increase copper revenues when the prices are good?
Many people have counseled that we should levy these windfall taxes. Chares Milupi, Bob Sichinga and others have talked about it. Even some important cooperating partners like the US Embassy and IMF have also suggested that we should go for it. Nej, our people don’t see it that way. Here in Canada, Potash a strategic resource based in Saskachewan, has been protected by Federal government from aggressive (hostile) takeover by foreign companies. In other words, national interests superseded international open business concerns.
MrK has part of an explanation – corruption. I also butted with MrK about ideology – [put differently, the belief that neo-liberalism as being the fault]. Corruption and reliance on capitalism may certainly be to blame. But we need to analyze more deeply to find a solution. For, we can’t go on like this. Explaining the theories and merits and demerits of windfall tax, has been done many times on this space. Chola Mukanga, Henry Kyambalesa and others have given us before deeper analyses on this issue, yet nothing happens.
Chola Mukanga, did a comparative analysis of types of taxes being charged in other countries – and clearly disproved the argument that if windfall taxes were re-introduced, that would scare investors. Indeed, there are many places where tax schedules are much higher than those being proposed in Zambia, yet companies are still mining. I also did spell away fears of – the Rule of Law argument and the violation of international agreements. I argued that – where “sovereignty” counts, any agreement entered into can be undone. It happens every day. This is premised on the logic that – a country cannot work against ITS OWN interests. It is illogical to give away everything you own – in the name of being respectful, leaving nothing for yourself.
Perhaps what is missing in our case – is having a core of Zambians (minimum threshold) who understand the importance of this issue (mineral taxes & royalties). Do we have enough ordinary Zambians who clearly understand that, what is going on is a suicidal course? If there are, then they don’t show it. And why Zambians don’t react even when their interests are at risk is puzzling. One explanation is – ‘a curse of peace’. We think that, if you protest to protect your interest is unpeaceful. That is why even when you are shot at, you do not react. We’ve seen it in Sinazongwe. We’ve seen it when the “anti-corruption clause” is being removed. There are many examples.
To make matters worse, we’ve wimpy opposition parties. The nearly 70% they represent in popular votes in Parliament is meaningless. The Minority government pushes down our throats anything they want without fear of any repercussions. Because opposition parties fail to publicly protest or block in Parliament any move that MMD takes regardless of its disadvantages to Zambians, they (government & MMD) get away with it. [Add this to the corrupt resources at their disposal]. Therefore, we depend on the goodwill of MMD. And because MMD is not willing to collect fair and reasonable taxes on behalf of Zambians, unless Zambians use their vote next time round to express their displeasure – Zambia risks becoming a resource grabbing ground for foreigners.
During KK days – perhaps UNIP and its government, was a far much more superior model in looking after national resources and assets. For sure, the attitude then was pro-Zambian as opposed to pro-investors today. And unlike now, you had an “enforcer” force. Today, because there is no enforcer block any where in the system – that is why even if corruption is rampant, there is no body we can call on to stop it or discourage it. The people who are supposed to check it are either too ignorant, passive, or themselves bribed out or bought with forex, sugar or fertilizer packs. Until when the Youth or the slumbering Zambians wake up – we are on the road of being enslaved yet again by foreigners.
In addition to the above comments – I want to re-iterate, that on major points, I have the same point of view as stated on Chola Mukanga's rebuttal Mining Taxation Debate (A Response to Kyambalesa) . Henry Kyambalesa has no convincing reasons why: a) Zambia is not entitled to earn more money from copper when the prices are good; and b) Zambia should defer charging for its resources to some unspecified time in the future. Besides the price fluctuations, who knows if copper will still be useful then? It could be obsolete before then.
To support the bureaucrats’ reluctance in taking on international investors is preposterous. Zambians are entitled to economic benefits from the sale of their resources. Why should investors enjoy all the benefits of high prices? To diversify into other non-copper sectors and for building infrastructure necessary in a functioning economy, we need money. And money should come from copper when the going is good. We need to go back to KK’s “spend and share era” from today’s “sink or swim era”. Elites in Zambia can afford to wait – because, they’ve been enjoying ALL the resources coming Zambia’s way in the last forty years. Not the poor Phiris and Tembas.
To argue that – “you don’t want more revenue because it will be squandered or spent on increased expenditure”, is a silly argument. Where is your financial discipline? Are you saying that our financial managers are allowed to waste as soon as they see more money? Besides, to say that – “if you tax them more, they would squeeze you out somewhere else” – say in low wages, poor safety etc., is the same thing as admitting that Zambians are either unsophisticated or stupid. Where would your watch dogs be?
You see – to expect that foreign companies (in for making a quick buck) would 100% be honest in their dealings with you, is utopia. You see, even if you wanted to – you cannot legislate companies to be more responsible. You have to bite them from behind IF you want them to do what they are supposed to. They won’t do it on their own accord. Thus, I don’t know why any body would honor or worship foreign exploiters. In developed economies where people are more awake and make everybody accountable – companies try to take a moral and ethical responsibility in becoming part of the holistic solution. But when they are in our backyards, they don’t care. This is the more reason why we should tender our possessions more carefully. Food for thought!
Kaela B Mulenga
The guest author is an economist based in Canada
Related Posts :
Mining Taxation Debate (A Response to Kyambalesa)
A defence of the current mining taxation regime (Guest Blog)