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Monday, 18 February 2013

New Mining Taxes?

Finance Minister Alexander Chikwanda recently signalled that Government is considering introducing new "tax measures" in mining :
"...We will introduce measures and relook at the tax system in the mining sector. Our mining sector has not contributed much compared to the rest of the region. So we want to engage local experts and ensure we have the statistics on mineral production and exports, and then we will find modalities to effect new tax measures to increase revenue collection..."
I commend Mr Chikwanda for his honesty that we are losing out. As well as his latest signal that change is on the way. Two additional observations on his statement.

First, the suggestion is interesting - but remains vague. What are these measures? We need details not merely promises of more study. It is not theoretical physics. These are straightforward issues. The obvious option is increasing revenue based taxes e.g windfall taxation or raising mineral royalties perhaps to 10%. Profit taxes do not work. Alternatively explore an infrastructure based tax that can be ring fenced to be spent in mining areas - that would be a win-win proposal for everyone. And it would ease pressure on mining companies for Corporate Social Responsibility projects. Which are mere bribes against citizens demanding higher taxes and better pay.

Secondly, any reforms must be done differently. I feel we are missing the basic point. The problem with our mining policies is that they are party political policies, not policies of the Zambian people. Mr Chikwanda must remember that to have good mining policies, it is not just about changing taxes or laws, it is how they are changed. Policies forced by PF without a Green Paper and public consultation will do nothing to build a lasting environment for growth because it will have no full buy-in of all Zambians. Lack of consultation and unilateralism is hurting our country in many areas.

We talk about "one Zambia, one nation", but in my view right now there's nothing "one nation", as far as mining taxation policy is concerned because successive governments have treated it as personal to order without people participation. As long as that continues every government that comes along will constantly alter its mining taxation policies because we people ownership. We need a Zambian solution, not a PF or NAREP or MMD solution. GRZ and investors have to realise it is in everyone's long term interests to push for transparency within a publicly agreed framework. Anything else is not sustainable. The approach should be consultative and transparent. Only that will deliver stability in mining policies and facilitate long term investment.

The next step therefore is for GRZ to set out a comprehensive national policy on mining. And consult with the people for a good period. Let us all comment and debate on it. And then let it be implemented after parliamentary scrutiny - and let it stand the test of time. Mining is too important to be left to the care of few individuals no matter how smart or well intentioned our politicians may be. It is a national issue.

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