Mbita Chitala has joined an increasing band of people that have resumed the call for the reintroduction of the windfall tax on minerals to capture large profits being made by mining companies. He is urging Zambians to continue demanding the reintroduction of windfall tax if we want the country to develop :
"For us to have money to do everything we want to do, windfall tax should be reintroduced, and that's the only way we can get money from our copper. We cannot tax them Pay As You Earn tax; they will always declare losses, so there is no tax on that. So the only way these resources are taxed is by windfall tax. Anywhere in the world, whether it is in Botswana or America or Norway, it is that turnover tax which is done, even in the oil industry...Minister of Finance Alexander Chikwanda called those calling for the reintroduction of windfall tax as lunatics, but he is wrong. All over the country, all the economists have said it should be done...Even the PF in their campaign they advocated the same thing." (The Post, November 2013)
"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..." (Times of Zambia, February 2013)
Dr Chitala is right that many people continue to call for reintroduction of the windfall tax nothing has been done, including leading PF ministers when they were in opposition. But nothing has been done. If anything what has happened is that mining companies have been in secret negotiations with Government to reduce burden of taxation. It was out of those secret negotiations that the mining companies seemed to have to have secured the removal of the 10% export levy introduced last year on unprocessed mineral exports. Only of course to be recently stopped by President Michael Sata who appeared to have been blind sided in the discussions. KCM has been one of the leading companies pressuring government helped by the Chamber of Mines, Economics Association of Zambia and Mines Minister Chris Yaluma.
Chris Yaluma has not stopped just with support them. He recently announced that plans to cede control of ZCCM-IH. “We are not looking back, but looking forward and getting the mining houses TOTALLY into private hands...We have gone past nationalisation and we are not going back.” (Bloomberg, October 2013). Government currently owns about 87.6% of ZCCM-IH which in turn owns minority shares in a number of mining houses, including KCM. Yaluma’s wants not merely a reduction to shares in ZCCM-IH below 50% as some have suggested, but potentially completely selling its shares and allow individuals (most of them likely to be foreigners) to purchase shares in ZCCM-IH. He wants KCM to run its mines without a government share! Mr Sata actions in recent days suggests that he does not share that view.
In short the government’s position on mining is very chaotic and contradictory. They do not know whether they are coming or going. The fundamental problem in Zambia as far as mining is concerned is a very simple problem which is always missed by everyone. The problem with our mining policies is that they are party political policies, not policies of the Zambian people. Everyone needs to 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 politicians without a Green or White Paper - and therefore without 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 policy is concerned because successive governments have treated it as personal to order without the participation of the people. As long as that continues every government that comes along will constantly change its mining taxation policies because we are making policies in dark corners rather than with full consultation. Zambians are crying for a Zambian solution to our problems, not a PF or NAREP or MMD solution. PF and mining companies 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. But they won't do this because they only think of today and their pockets!
So in as much as I am sympathetic to Dr Chitala on the need for the reintroduction of the windfall tax, I believe a better approach is to push PF to set out a comprehensive national policy on mining. And let them consult with the people for a good period of time. Let us all comment and debate on it - what mining policy do we wish to have? 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 - and the way PF and previous governments have approached it is a complete disgrace.
Chola Mukanga | Economist
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