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Tuesday, 17 May 2011

The government's case for low mining taxation, 2nd Edition

The Minister who speaks for Mining Companies is back with the government's strategy which appears to be built around job creation. We have dealt with every single reason the Government has ever dreamed of under Eight Reasons for Rejecting Higher Mining Taxation.


  1. The minister disengenuously states that 'the mining companies ARE paying revenue to the central government'.

    However, he forgets to mention a) how much profit they make, b) how much they actually pay in revenues, and c) what they actually owe to the government.

    1) Saying 'they are paying revenues', would be like me going to a store, buy a $1,- sixpack of beer, and handing the owner $0,05. If he said - but you owe me another $0,95, could I get away with saying - but I've 'paid you money'?

    How stupid would that shop owners have to be to accept 5 cents instead of a 100 cents, just 'because I've paid money'?

    2) They have 'brought jobs'.

    According to President Banda, there are 58,000 people employed by the mines. This is out of a workforce of 5 million. For these 58,000 jobs, they are allowed to keep $2.5 billion or more in profits. This means that we allow them to keep $43.103,-. My guess is that if they paid miners $6,000 per year in wages ($500/month), that would be a lot.

    So the mining companies actually KEEP at least $37,103 per job.

    They have not 'brought jobs', we are paying them through the nose for every job created - not by the mining companies, but by the demand and speculation in copper prices.

    And that is another neoliberal lie - producers do not 'create jobs', demand creates jobs. And profits. And when that demand subsides, so will the jobs, no matter how may producers there are in Zambia.

    3) The current boom is because of international speculation in commodities. It has to do with the death of the neoliberal economic model, the depreciation of global currencies (the US dollar and the Euro leading the way) and the deregulation of the financial markets, which now allow massive leverage, which fuels speculation.

    When any of these fall away, you are going to see a drop in the copper price to where it was back in the 1990s - $1500 per tonne.

  2. MrK, You made a very good case. Our government gets easily hoodwinked by these investors who are just hunting for quick profits. How can you be satisfied with 58,000 jobs out of a population of 13 million people? It is not only cheating our people, but it is satanic to make them accept this bluff.

    Finally, when we argue that - it is a missed opportunity for not taking advantage of high copper prices now, it is because we are fully aware that at some point they will drop. That is given. When that happens, we also know what companies will do - they'll leave! What will our government be telling our people then? Any government which is not tough enough to confront these investors now, is driving us closer to economic oblivion.

    Whether people hate Sata or not, but somehow we need someone with hot blood in his veins. It is survival of a nation that is at stake. We don't want to be spared at the mercy of someone, neither does any Zambian wish to be a perpertual hewer of wood and carrier of water. Hence, I support your tough stand.

  3. Dr. Kaela,

    When that happens, we also know what companies will do - they'll leave! What will our government be telling our people then?

    Even the thought of them in prison isn't enough to erase the thoughts of all the wasted opportunities for economic development that come from receiving $1.3 billion a year from the mining sector. Also, on the issue of 'corporate responsibility' as an excuse for not paying taxes...

    The mines are now supposed to make a one time investment of $200 million, instead of paying $1300 a year in income taxes and dividend payments. This is what the MMD brags about. They seem to forget one thing - they think we won't quantify the money that is spent, and we'll just be happy that 'the mines are building roads', just like we're supposed to be be satisfied with the idea that 'the mines are paying taxes'.

    Urban roads rehabilitation programme will be paid by mining companies-Musokotwane


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