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Wednesday, 24 August 2011

Why mining companies are laughing

recent World Bank paper on the long term outlook for copper :

Global demand for copper is expected to remain strong. Long-term forecasts are by nature uncertain, but global demand for copper is expected to grow at around 3 percent annually, reaching 25 million tonnes by 2020. Much of the increase in demand will be driven by economic growth and urbanization in emerging economies, especially China and India.

Limited global supply should support high (but volatile) prices and continued investment. Global supply of copper from known sources is expected to peak at 20 million tonnes by 2013/14 and decline thereafter, resulting in a shortfall in supply. As a result, copper prices are expected to remain high in real terms, though they will be subject to cyclical fluctuations and periodic, short term volatility. To meet the shortfall in supply and to take advantage of high prices, the global mining industry is looking to increase investment in copper mining and refining.

Good mineral potential, combined with strong demand in the global market, provide an excellent opportunity for growth in Zambia’s copper mining industry. Assuming other conditions are right (e.g. Zambia’s mines are competitive in terms of costs and productivity levels), Zambia can capitalize on its mineral potential as well as the strong demand for copper in the global market.
The problem of course is that it is not Zambia which is capitalising on this mineral potential, its mining companies which are already earning well over $6bn per annum while Zambia gets a paltry less than $100m thanks to low mining taxation and rampant tax evasion. We tackle these issues in our monthly essay - Debunking the Government's Case for Low Mining Taxation in Zambia.


  1. just an example : Mopani

    According to NGOs in its pilot audit by Grant Thornton, the govt lost an estimated income of USD 175 million in tax revenue between 2003 and 2008 and zccm-ih lost $300 million !!!
    At least, $ 500 million !!!

    "The auditors found that MCM resisted the pilot audit at every stage. The company's book-keeping was incomplete, several legally required documents were lacking and the general ledger analysis showed several loopholes and couldn't be matched with the trial balance," the organisations stated. "The auditors also found an inexplicable doubling in the costs of the company between 2005 to 2007, which shows that the company has been artificially inflating its costs to minimise the profits shown in their books so that they could pay less taxes. Despite the fact that the audit was finished in the fall of 2009, it was kept secret."
    The Zambian government has declined to investigate Mopani's tax affairs despite calls from development charities. "We are disappointed with the government's lukewarm reaction," said Savior Mwambwa, executive director of the Centre for Trade Policy and Development, Zambia. "They need to take action and change the whole taxation system."

    The govt has been knowing this swindle because it has a representative on board through ZCCM-ih

    and rupiah closes his eyes !!!??? and he heaps praise on Mopani Copper Mine’s Social Responsibility !! $20 m, a crumb vs at least $500 million !

    Who would have the cheek to affirm Rupiah and his govt are not corrupt ?? WHO ??!!

  2. mining companies and its shareholders are laughing for another reason : they bought zambian mines for a song !

    In the 60′s and 70′s ZCCM ran mines and built hospitals and schools, provided free medicine...
    In the 90s there was low copper price ($1,500 a ton), it was difficult to run mines and Zed was crippled. At this time, IMF hold a gun at Zeds head to nationalize mines because they thought Zambian people are too incompetent and they pretended copper price will be low for many years (Edith Nawakwi explained that).Then mines were sold for a song and DAs were concluded. (Thanks to Chiluba the thief !)
    Then copper price has been increasing and now foreign mining companies make huge profits and the govt has difficulties to build hospitals, roads (whereas copper hits a record price of $9000 a ton !) because now mining cash goes to western, chinese and indian shareholders.

    ie KCM

    2004 : the govt (zccm) sold 51% KCM to sterlite(Vedanta) for near $50 million (25 + 4 years * $5,8 million)
    2008 : zci sold 28,4% KCM to vedanta for $213 million
    today financial analysts evaluate KCM at least $6 billion
    $4,8 billion part of vedanta 79,4% and vedanta only paid $261 million

    and it is the same for Kansanshi, Mopani,...

    and Vedanta is going to list KCM on the London Stock Exchange to materialize the gain

    those foreign plunderers pretend Zambians must scrap Windfall tax and they refuse to cancel the Das !!

    and Rupiah is the best defender of foreign mining companies ! what a shame ! we need a clean sweep !

  3. I think natural resources must be protected constitutionally. There should be no way that they could be sold for anything other than market value.

    What I would like to see, is that natural resources are only sold:

    a) sold to the state at an uninflated cost and
    b) sold by the state at international market prices.

    This would take all of the shenanigans out of the industry, it would end all resource conflicts (Libya, DRC, Nigeria, Ivory Coast...) etc.

    I think this could start at a national basis, but it would be much better to do it on a continent wide or even global scale.

  4. MikeTe,

    Clean sweep,eh?
    From Rupiah to Sata? Or from Rupiah to HH? Well....And what difference will these people make?

    Natural Resources (companies) can be sold at market value if you have intelligent leaders which Zambia seems to lack! When Kuwaiti Zain sold its African mobile assets to Indian Bharti Airtel a number of African countries like Congo (Brazzaville), Gabon and Tanzania got part of the $10 bn sell price because they had capital gains tax on their books! As usual sometime back the Zambian govt was 'advised' not to have this kind of tax on her books because it was not business friendly!(Our intelligent leaders took the advice just in the same away they accepted the '1997 advice' that Copper will run out in 7 years!). Imagine the fact that the Special Privatisation Team of ZCCM was led by one Francis Kaunda. Lol! Zambians are authors of their own misery! One wonders were this inferiority complex comes from! Is it from Kaunda's pseudo socialist rule or from the water we drink?

  5. I agree with the article. Mining companies are the ones that earn more than what Zambia get. Although Zambia can capitalize on its mineral potential, mining companies have the power to make their own way of capitalization. This is because they are the ones who produce the mineral.

    1. congratulations Mining equipment, your bosses have won. Simuusa was indeed removed from ministry of mines

      However he said :

      "In terms of taxation, mining is contributing only 3% against exports of 60% to 70%, and we are saying that should be changed,"

      "It is sad that Zambia being so richly endowed in mineral resources, we have got copper and high grade coal yet we are ranked among the 20 poorest countries in the world. That is quiet unfortunate and as the PF government, we want to turn this around,"

      "In this new government we want the mining sector to be properly supervised …in fact, we know that the key to turning this nation around is in our mineral resources. One of the measures we want to take as PF government is to increase Zambian participation in our mining industry…we are not going to nationalise the mines but we would want to increase our participation."

      “the government would like State-owned Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), which currently represents the state in mining ventures through equity stakes, to actively participate in the industry by running and owning some mines.”

      this is an incomprehensible decision, it is a great victory for foreign mining companies

      Sata’s victory is an electoral scam...


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