What Is Value Addition in Our Mining Sector

I love to hear people talk about value addition in the mining sector. There is a smooth flow of joy with that topic. Why?

Value addition will entail we export the products of the mines at high value. We then get good returns on the produce. This is compared to the current situation where we export "soil" or concentrates at very low value and get little to no return at all. So value addition is the way to go.

But what shocks me is the famous "value addition" direction we have. Seriously, smelting and refining to me is not value addition to sing songs about. There is a value that has been added in the process, but for that to lead to no export duty is a miss-placed thought. If our export duty is to gain returns on the items being export, we should maintain an amount of export duty on these items since they are products of the mining sector which in all fairness, is a wasting asset. In addition, we should now look at the idea of encouraging and developing manufacturing or fabricating industries/ infrastructure that will move that cathode, copper blister or anode to a wire, a circuit, a electronic component, etc. These are the items that we can produce and gain meaningful returns on.

What good will the export of anodes and cathodes bring to us when we can do so much better?

Infrastructure Development

Few years ago it seemed impossible to embark on serious infrastructure development that was worth talking about. The few years that I have looked at the plans and money involved in road development through Link Zambia 8000 and Lusaka L400 projects has just brought one idea that every Zambian should now embrace, we can develop any infrastructure if we have the desire to do it. So the fabrication and mining related industries can be done. We need the money of course, but ultimately, we need the desire to do it.

We have to be frank in our thinking, mines don't employ people any more. The whole process is constantly becoming mechanized. But on the other hand, forward linked industries will employ more people as the products from those industries have higher value. This is a sustainable way of using our natural resources and get the benefits from such.

A deliberate policy to develop value addition sectors (not merely smelting), will see this country increase its take from the mining sector. Such sectors have also high growth potential compared to many other sectors. Moreover, the fact that our products will eliminate the cost of transportation of the copper, they will be produced cheaply compared to any other country that will get the copper from Zambia and put it on a truck/train or ship. That mere transport cost will be an advantage to Zambia.

A full scale infrastructure development of mining sector "support" industries in the forward linkage should be Zambia's priority after the roads development have been completed. We need to setup a full scale mining infrastructure support project.

Loss Making Position
I have always had problems with companies which are in loss making positions for years and years, yet taxes are paid elsewhere (ok maybe I watched too much stealing Africa but that does not change the facts). If people can own a company and not get any profits from it for years, whats wrong with us doing the same? Its such a perspective which makes me want to have my hands on the mines and run it myself and see for sure if I will enjoy the "loss making position" seriously.

We need to work on our own issues and find a way to deal with this particular element of loss making. We made a lot of mistakes in selling the mines that we will continuously suffer the problems associated with the sell.

Real Value Addition
The only possible real value addition is reach a level of fabrication and manufacturing products with high returns that the mining products we export. I believe all mining products should be taxed and taxed it should be in a way to encourage value addition. The value addition being referred to here is 'real' value addition. I don't think producing copper anodes/ cathodes/ blisters is real value addition as it will be exported to be processed further. So why don't we work on that element of ensuring we also process "further". That is the real value addition and its returns to the country will be more than what we currently.

We should look at mines as a source of an opportunity to reach that "further" processing cheaper than anywhere in the world as transportation costs will be lower than any one - with the exception of other mineral producers. That is the direction we need to be looking at.

This value addition will bring in employment and profits. We should face the fact that mines will never bring in employment as the whole sector will have to be more and more mechanized. But support sectors will need skilled labour to be able to handle and produce a variety of goods on the market. We should aim at moving from cable production to circuit boards or computer mother boards which may only need addition of other elements to be complete. The copper we have will do much of the work.

We need to identify products that can easily be produced here and find a way to encourage that production. Who ever thought China would be the Hi-tech hub of the world? All hi-tech items where produced in the west. Now we look to the east. So lets aim at making it come from the South, after all, we own the ingredients!

True value addition! Lets forget about the anodes, cathodes and copper blisters. Lets move and progress!

So What Is Wrong With SI 89 of 2013???

There has been a lot of debate over this piece of legislation leading to its death. Few actually know what it entails. I thought I should touch on this matter as a way to get back online after weeks of absence!

So what is it? Statutory Instrument 89 of 2013 had one action and it can simply be explained as: it allowed mining companies to export mineral ores and concentrates without paying export duty. So they only paid mineral royalty and then got free "exporting rights". Mineral ores and concentrates? - That is rightly described by our president as soil! I agree with him in full. 

Some say, but mineral royalty was paid! Yes it was! But like all costs of production, mineral royalty is deductible! So its taken as a cost and will affect their overall "profitability" for tax purposes. But on the other hand, export duty sticks and will be "revenue" to government and the people of Zambia. Especially that the item being exported is in raw or intermediate state. on the other hand, if value addition has been done to this, from concentrates or ores to finished or semi-finished products, you can export without duty since you have added value. I actually believe our mineral royalty is useless on the basis of being deductible if we want to get something out. But sticking with best practices, we have it!

From the above therefore, one would expect mining companies to be interested in adding value and then export without duty. But we have a strange bunch of investors that would otherwise find any loop-hole to export without paying taxes. So they stockpile and make it impossible for the people of Zambia to collect the mineral royalty. In my own belief, this is the worst kind of blackmail that we have since in the mining sector and it should be fought with strategy.

Export duty would be the only sure way of getting something out of this. But it was almost tactically dodged! I wont go into who did this and why. That to me is a political and assumption laden topic which would not do justice on this blog.

Mining Tax Regime

I think our mining tax regime needs not only a face-lift, but an entire body work. There has to be a way that we make sure the mines do the best in there work and contribute to this country. 

Our selling of the mines is the greatest mistake that Zambia made. We may have had to sell, but we should have done it with out heads, not cheques! Any sell is welcome, but it must be done in a way that will benefit this country and the future generations especially that it involves non-renewable resources. It is for this reason that I always regard Chiluba's government as selling the biggest part of Zambia. I stand by my words.

Let us be frank, if the mines wont pay taxes and are not owned by us, then why do we have them? If we own them and don't pay taxes, its our mines, our exports and our returns. If we make no profits, we have at least got the benefits that the mines currently get. Why would they own mines which will never make any profits? But there are towns in europe that benefit from the returns on the mines when the same mines fail to pay export duty is it really rational for us to let the mines be in the same private hands they have been?

Option one as far as I am concerned is get the mines back and pay them for the wasted time. We then find a way to run the mines. 

Inefficiency? Well, every parastatal is expected to be inefficient. But serious, ZTE, Philips and BBC are parastatals, would we say they are inefficient? I should add that Zamtel is a parastatal and there must be something that was done when it was sold that has improved its efficiency. That is what is needed to be done also in the mining sector. If the current owners have made it efficient, we too can make it efficient. After all, they have made foreign owners happy!

Option two is to make sure we change the mining tax regime and ensure that the mines pay their fair share of taxes. Why is it that there is always a blackmail when government changes or tries to tax the mines? Employment is the only contribution these mines add to Zambia. They also use it as a tool to blackmail us to have their way. So if we run the mines, we control the employment, get the financial benefits and don't have to worry about tax avoidance which to me has been a bigger problem. If we can't tax them properly, we will never get anything out of this, and we will continuously complain about it.

We need to resolve this issue in full and in our favour. I hate thinking about the silly court cases that they always want to threaten the people with. But seriously, I think we need to up our game and prepare adequately in getting back the mines. This is a failed attempt at privatization. 

Back to S.I. 89 of 2013, it allowed mining companies to export mineral ores and concentrates without paying export duties. Clearly this meant, they mine and get everything without a single ngwee left in the country except the employment they created. No one should support this, and we should make sure we do everything possible to stop it.

Marketing Failure

I have spent hours looking at the resulting effect of a naming crisis and the best I can come up with is - Disaster.

Any chance you get as a country to shine - you should seize it. It counts. The good stuff bring a lot of interest to the country and maybe even more tourists. The ugly stuff - pushes everyone away. So for a country like Zambia aiming high at attracting investors, tourists, capital inflows, etc would benefit from a good marketing plan. We should look at all the nice things that we can let the people know about us. If not, we lose out! Simple marketing philosophy.

I believe we have missed that chance with such a distance off, its disastrous. Who would think of all the creativity that this country has - look at the flag! None matches! The name - worthwhile! The currency names, seriously Kwahca - Ngwee who has such!!! That's the Zambian spirit! Impress through out. Well, so we thought, not knowing our marketing took another turn.

A stadium is being built in Lusaka with a 50,000 capacity. Ordinarily you expect people to be excited that it is almost complete now. So the naming session started. An opportunity to come up with a sell-able, breath taking name, marvelous name, You know - the Zambian way! After all, the football heroes are buried near the stadium. Heroes who died in the plane crash off the Coast of Gabon in 1993. (Did I give too much away in the name for the stadium ... wait for it)

After the naming session, the country went crazy with social media! Facebook, Twitter had all the crazie stuff. Why? The name was/is:

"Gabon Disaster Heroes National Stadium"

So maybe we marketed the country on a wrong platform - disaster name and not a marvel of a name!

Here is the reaction:

And the social media responses:

MM:

    Good news fellow Zambians on behalf of Hon. Kambwili i would like to apologise for the small glitch in the stadia naming. It was supposed to be " Off the Coast of Gabon Disaster National Heroes Stadium" thank you

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NC

Naming of the Lusaka stadium as "Gabon Disaster Heroes National Stadium" continues to attract attention from Zambians today.

But Potphar Mbulo's comments attracted my attention:

"No I object. we are Africans and we are precise in naming. On the contrary, GRZ should name the new stadium as "Gabon Disaster Heroes plunged Into the Indian ocean on their way to Senegal For a World cup qualifier Match National STADIUM'

LOL"

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P B B K posted to The Zambian Peoples PACT.

This is what happens when u smoke fwaka yaku ‪#‎Mpatamato‬

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MCC

Retweeted ZESCO EXPLAINS IT (@_ZESCO):

We've been reliably informed that Govt plans to Rename us "The Zambia's Disastrous Electricity Supply Coorporation." ZDESCO

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CZ

we seem to have a challenge in western province either its Equitorail Guinea Gabon 2013 (EQG 2013) or Barotse Killings Stadium however in Livingstone there is no problem i.e Mukuni's disaster at bunji jumping stadium lol- Jack Munsaka

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CNM

Kanshi since government likes the name, they shud just finnish it off and call it,' Gabon Disaster Heroes plunged Into the Indian ocean on their way to Senegal For a World cup qualifier Match National STADIUM

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ES

Mailoni brother's stadium even sounds better....

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CN

ba conducter, nipempako ninga sale pa gabon disaster?

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E N R N

"@CenturionLincon: @FreshENJ Its Carbon Air disaster at Heroes Stadium!!" eish, it's wild I tell ya

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Gabon Disaster Heroes Buffalo Plane Investigation Manufacturing Error seating Capacity 50 thousand National Stadium.

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E N R N

"@philmwenya: @freshenj the footballers should be first to boycot games..."yes, let 'them' and their tuma suits go to the stadium alone.

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E N R N

Here's an idea, if 'they' stick to that silly suggested name, let's all not attend a single game to make every match a real DISASTER!

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CIC

Seriously..."gabon disaster national stadium"....really😧´.... Y not jst heroes national stadium or april 28 national stadium...

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S A G G

Gabon disaster heroes national stadium...???? Are you kidding me?? Who thought of that MORONIC name?? Is that in memory of Gabon as a country? its like calling the reconstructed post 9/11 buildings in new york "victims of terrorism heroes twin towers"..we are DISRESPECTING the dead.CHANGE IT.....

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CL

Weird quote attributed to Zambia's Minister of Sport via The Post: "Let me confirm that the Lusaka stadium has been named and it is called the Gabon Disaster Heroes National Stadium," Kambwili said in an interview. "Now this shows that President Sata is not self-centred because if he was, he could have said it will be called Michael Sata Stadium. But he appreciates the role different citizens have played in the development of the nation."

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CMB

1993 Gabon Disaster Heroes National Stadium

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MBM

Just catching up with the whole stadium naming debate....awe shuwa that's why BZ proposes that we throw away all manners of identification ama reg,license,under-5 cards etc we shall be the laughing stock of the region,pela if you can't come up with a name asking never hurt nobody,they could have even run a competition in the paper like they do with kids for essays nefyashala....I'm sooo moving to malawi...fyachila..

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MS

Chuck Norris: What's the name of this beautiful new stadium?

Me (very excited): Gabon Disaster Heroes... ***KICK!***

Chuck Norris (in Spartan like tone): This Is Zambia!!!

Me (thinking to myself, half conscious): Might as well have said "Chuck Norris Stadium", I would still be standing

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MS

Ti pempa boma iti yanganepo pa nkani ya zina ya stadium, ndaba ma ticket yaza nkala ma size A3.

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YG

@ZedDictionary: THE GABON DISASTER HEROES STADIUM: A large stadium in Matero with a disastrous name.

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AM

Gabon Disaster Heroes Stadium lol....I wonder is because wi ........? First of all this is Zambia in case someone missed the memo. secondly, Disaster should be removed from the name all together. Even under the influence of Ganja smoke there is no way a name like that would find the pride of place in my mind. So it leaves Heroes Stadium, good place to start but not the best either. Ok am nauseated.

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SM

Doesn't this government have a spin master(s)? Now is the time to swing into action. ‪#‎Gabondisaster‬ stadium naming crisis!

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TM

@AJStream: The Zambian govt named a new football venue "‪#‎Gabon‬ Disaster Heroes Natl Stadium" http://t.co/pEyUAckOHi

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MK

I told u that the excited Zambians will show case their ignorance now look at this

1. Piki Piki Na Piki Do Li National Stadium.

2. Sembe Nina Mvelela National Stadium

3. We had no idea what name to give National Stadium

4. Isambo Lyamfwa Memorial Stadium

5. Father Frank Bwalya Memorial Stadium

6. Fikaisolva kuntashi

7. We meant More Money In our Pockets National Stadium

8. Or Leave Zambeef Alone National Stadium

9. Juju yenu taya bombe lelo National Stadium

10. Nga Twa Monekela Kuichaila Stadium

11. With Immediate Effect National Stadium

12. George Bush Has Been Here Several Times National Stadium

13. Retirement Is 65years National Stadium

14. My Vice President Is White National Stadium

15. Fi Zambia Watch Dog Tukafikata National Stadium

16. My Wife Is A Doctor National Stadium

17. UNWTO 2013 Was Held Here National Stadium

18. We meant 90 years National Stadium

19. Zambeef Will Embalm You National Stadium

20. I Don't Like South Africans National Stadiums

21. GBM All For Gender Based Violence Stadium.

22. BUFI National Stadium

23. Them If I've Lost National Stadium

24. Christopher No Juju Katongo National Stadium

25. On Your Way To Broken Hill National Stadium

26. My Wife Is A Doctor National Stadium

27. I Hate People With Bold Heads National Stadium

28. Dora Siliya Is MMD Stadium

29. Tauli Munandi National Stadium

30. Semeke National Stadium

Courtesy of @___

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SOS

Th name is too long. The stadium should be called "30 Heroes Stadium" or 28th April Stadium".

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KB

Kindly subsidies the independence stadium name from gabon heroes to simply Heroes stadium, ba Hon. Kambwili please.

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Did I miss any juicy pic or comment? Let me know. 

G8 Focus on Taxes, Transparency, and Trade

It is such a great time in many African countries economically. After the Asian miracle, we have an Africa which is growing fast than other regions of the world. A great time indeed.

But this growth has many many obstacles which make some gains in GDP growth mere academic exercise for a lot of countries - Zambia included. Why? Well to start off, we have an economy propelled by the mines whose contribution to the economy is actually not that great. We have read about the way our multi-nationals have taken almost everything out through tax avoidance or worst case tax evasion. If there was a good contribution from most of these multi-nationals, our tax contribution as citizens through (Pay As You Earn) PAYE would be reduced. But alas, even Switzerland gets a bigger chunk of 'our' money than we do!

Why is the state of affairs like that? Well, partly because I believe the West benefited from this arrangement! Do you think Switzerland would not enjoy stolen money presented to them as taxes? Honestly? They have built an economy out of the proceedings of crimes (as my Zambian law would put it). Think about it, they have built a system of secrecy on all banks and they are proud of it and say, you want to sort it out, deal with your issues in your country. The West enjoyed this and it was business as usual. 

But as you know, there is a little thing I learnt from Martin Luther King's statements and now quotations. I have kept this in my head at all times and has really guided me to make some decisions since I was in grade nine.

"Injustice anywhere is a threat to justice everywhere" - Martin Luther King Jr.

There was an injustice on many resource rich countries and the beneficiaries just turned a blind eye to the happenings. But the threat has now caught up with them! Tax avoidance has now not only hit the resource rich third world countries, it has hit the "first world". It has hit them so badly that the G8 meeting has put the three (3) Ts on the agenda.

But as life would have it, the G8 is a group of 8 from the world's eleven (11) wealthiest countries. The three (3) missing countries include China, Brazil and India. 

The good news, the west and us are being attacked perhaps by the same enemy! So we now have an opportunity to make things right and just. ?The demand from the resource rich nations has just been one - access to information. The g8 meeting is also working on making access to information a priority and an agreement should be worked on those lines. So maybe because we speak the same language on this issue, we can now move together and make progress? I seriously doubt it! The west still enjoys and would like to enjoy the fruits of crime in African countries. I will be shocked if they prove me wrong by actually working for the better standing of all countries facing this enemy. My belief is that they would come up with agreements that will suit themselves and leave the third world on their own path to freedom. Maybe under the G11 would we expect something seriously correct - maybe!

I have great respect for Cameron for making this topic priority. He has done a lot by just putting it as an agenda item. I wish more could be said on this issue. And I believe his statement "Making sure we have more trade deals so we keep prices down, making sure we have greater transparency so we can help developing countries get the tax and revenue that they need, and this issue of taxation, making sure we crack down on tax evasion and aggressive tax avoidance, so right across the world, countries get the tax revenue they need to keep taxes down for hard-working people." as quoted here, is a good one, but I think the motivation is wrong. It should have been done on its own merit when the issue started coming out! Not when they have been hit by the same "crime". If they had not been hit, they would have gone on with business as usual. That is exactly what is wrong with the economy structure at the moment. Things only change when the powers that be are in the firing line. We need to strike a balance and act when something wrong has been sighted.

Lets pray and hope the G8 makes a good outing of these issues as they can make things better for the world. We have to work to improve the taxation and justice in revenue collecting. I always say, there is a time that the west will need justice in such matters when the developing countries actually develop. It looked like a joke, but today, even the G8 countries are not among the 8 wealthiest nations. There is a group of "emerging economies" that have emerged and got into the top 8! Imagine 40 years from today who will be among the top 8 wealthiest countries.

Fight Tax Evasion/Avoidance ... Don't Give Aid

A lot of African people have stood up and said no to Aid. For obvious reasons, Aid has been around for decades with little to no hope of seeing Africa move a step closer to development and provide for its people. 

In extreme cases, people have even claimed a reduction in living standards as statistics show that African people have become poorer in the time of Aid. From 11% poor to 66% is a scary statistic. 

"Despite a deluge of Aid between the years of 1970 and 1998, poverty on the continent skyrocketed from 11 percent of the population to 66 percent, which means over six hundred million Africans are now impoverished." (Guernica)

This is under the claim that over 1 trillion dollars have been sent. A figure nicely fought by pro-aid people like Owen Barder that the figure is less than trillions of dollars! "since aid began in the 1960s donors have given a grand total of $502 billion to sub-Saharan Africa, which is worth about $866 billion in today’s prices. (Table 29; excludes debt relief.)". But is it really trillion dollars or no does not bother me. The fact that it has not worked will not make a point for it because the figure is $200billion less to be regarded as a failure! Will it make the point more true if they said 'despite the 500billion to 800billion of aid, there is nothing to show that aid is helping Africa (oh sub-Sahara Africa?' I think the substance that aid has failed to improve the lives of the continent is priority in considering this issue even if you disagree on the figures. I think the case that this policy should be re-looked at is a good one and one that should be taken on for people truely interested in seeing the growth of Africa and an improvement of people's life. Surely, there is no transparency on aid (even recognized by the OECD - "The current lack of transparency and predictability of aid have been recognized as key bottlenecks in making aid more effective."), will a $200billion not be spent through back door "help"? If you really want the $1 trillion to show up somewhere before you indicate that aid has failed.

My alternative to aid has been fairness in trade and the West not stealing the resources from Africa. After all, it is common knowledge that the West benefits more from Africa and only send Aid as a personal action to sleep at night. 

By calculations that need not be very complicated and require a lot of resources, just qwids (1) I have created a graph of aid inflows into Africa from 1960 to 2012.

Now we see how much aid has been increasingly off-loaded into Africa and one would expect a corresponding effect on eradicating poverty. The simple graphic data I could find is on a working paper by Dr. Mark Perry (University of Michigan) from this post.

Not much improvement from the '70s to warranty a fight to maintain the status quo. Obvisoiusly, updated data is needed and I am working on it.

On the other hand, data from different sources shows the same dismal result - aid is not helping at all. "Helping Africa is a noble cause, but the campaign has become a theater of the absurd – the blind leading the clueless. The record of Western aid to Africa is one of abysmal failure. More than $500 billion in foreign aid – the equivalent of four Marshall Aid Plans – was pumped into Africa between 1960 and 1997. Instead of increasing development, aid has created dependence.....
The more aid poured into Africa, the lower its standard of living. Per capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent between 1975 and 2000. Over that period, per capita GDP adjusted for purchasing power parity declined from $1,770 in constant 1995 international dollars to $1,479. The evidence that foreign aid underwrites misguided policies and feeds corrupt and bloated state bureaucracies is overwhelming."(CATO Institute). I think Andrew Mwenda and Dambisa Moyo are on to something that can clearly be seen although fought by the likes of Bono and Bill Gates. Aid is not doing Africa any good.

Tax Problems

I believe this is an area where Bill Gates and the team can help Africa and not handouts! There is a lot of out flows in revenues from Africa which can have far better impact on development prospects and eradicating poverty than aid. I would have loved to show how good Bill Gates' company was doing on that front, but this is not helping. I wouldn't want to think of the effect on Africa itself.

So if Africa and the West got together and fought this battle and seriously on disclosure, more results would come out than what Aid has done so far. Maybe as a result of recent fights by the West, Africa may actually benefit! 

"Rich countries have promised much but delivered little meaningful support to African countries on tax evasion, said a report ahead of a G8 meeting chaired by David Cameron.

The UK prime minister has made tax and transparency key subjects for next month's summit at Lough Erne, Northern Ireland, but this year's Africa Progress Panel report, Equity in Extractives, criticises the rich countries in the Organisation for Economic Co-operation and Development (OECD) for their failure to strengthen disclosure standards.

Africa loses twice as much in illicit financial outflows as it receives in international aid, the panel said. It is unconscionable that some companies, often supported by dishonest officials, use unethical tax avoidance, transfer pricing and anonymous company ownership to maximise profits, while millions of Africans go without adequate nutrition, health and education, the panel added."(Guardian)

I have said it before on this blog, no help is coming out of the West on this issue. It has more contribution than Aid will ever have. Most importantly, it would kill the dependence that Aid has created.

Edited:
You may wish to read the latest developments on this topic here (Give us access to information on tax havens and tax avoiders, African leaders tell David Cameron ahead of G8 Summit.)

Dambisa Moyo Vs. Bill Gates

I was very disappointed to watch Bill Gates' response to a question on Dambisa Moyo's "Dead Aid". Watch

Seriously it is one thing working on codes and programming and living in a country full of poverty and "Aid". Dambisa Moyo is Zambian, a poor country which is a massive recipient of aid. Bill Gates and visisted it on several occasions and probably was taken to meet some of the poor people he "helps" out. But the issue is the experience on the matter and not being a by-stander and being led to meet poor people so you can dish some aid to them. The two have had completely different perspectives of the same thing.

But that is not the issue as I saw it. They are people who have simply empathized on the poor and got a great understanding of the issue in totality  So we would expect that Gates can have a good understanding of the issues that are being addressed here. Maybe even better that Dambisa.

But surely saying Dambisa's book promotes evil is a hit below the belt no matter how much you think you know the issues. I don't think it even comes close to being an insult, it is disgraceful of the man. Look at the facts on the table. I will use some well known sources for easy of reference:

"despite one trillion dollars in western aid over the past sixty years, the economic lot of the average African has only gotten worse. Most Africans now live on one dollar per day, and sub-Saharan Africa remains the poorest region in the world. Despite a deluge of aid between the years of 1970 and 1998, poverty on the continent skyrocketed from 11 percent of the population to 66 percent, which means over six hundred million Africans are now impoverished." (Guernica)

Meaning, the more aid keeps coming to Africa, the poorer the people are becoming. Logically, a rethink of the whole system is in order. But does that re-thinking worth being called "promoting evil"? Surely have respect for intellectual alternative that is being offered. With due respect if this was an area that she has no connection with, you wouldn't disregard one that much, but an economist from Africa talking about an alternative to the system and that is promoting "evil"?

I think the whole thing was probably mis-understood by Gates. Someone credited as being an analyst of great intellectual standing would not go out and literally be so "un-intellectual". I don't think he has even looked at his competitors over the years as that! 

The more I read about the issues, the more I realize the people involved in the debate and unfortunately, can easily be grouped into only two - promoters of aid and promoters of alternative thinking. The promoters are mostly from donor groups or individuals and the alternative thinkers are from poverty and aid recipient countries!

I have never seen anything worth talking about aid. It is mostly used by so called "donors" to get what they want. I even coined a word for one - Gay-Aid. Where the "gay rights" are used in order to get "aid". Malawi is an example of that outcome. Without serious brain gears turning, you reralize the problem of "aid". It does not work to improve people's livelihoods but makes a good thing to use for the west to get their way. African leaders have long been known to use aid to win elections or control certain views all of which do not promote growth and economic prosperity.

On the other hand, if people are being taught to improve and infrastructure built from the financial sector, they would be great responsibility in making sure the goodness of the spirit to build is achieved. This is unlike a situation where one stands with a plate for a donation from Gates foundation to eat. Why would any government think of improving and providing for the people? After all, gates will do it while they steal the wealth through corruption and bribers from west countries' companies. Responsibility and the desire to work and produce results is killed by aid. I seriously look for evidence of a continent that developed from aid! I would be give you a large one which has not move forward over decades because of aid. The facts are on the table not debating the person. 

Guernica and other worthy of read sources have facts that Mr. Gates should have disputed and provided his own facts and not debate the person presenting her facts! It is always that simple!

Sorry, I may get derailed when people disrespect the whole issue of intellectual debate that I may divert myself but when facts are presented, an ad hominem in this time and age is really a hit below the belt!

Tax Avoidance Now Hitting The West

Africa has been trying for many years to find a solution to tax avoidance. There was little interest from Europe and the USA. Mostly because they actually gained from this tax that escaped from Africa and landed in their banks.

But life is a funny thing. What goes around, surely comes around. Now the USA is at pains to stop tax avoidance. Apple is accused of $74bn US tax evasion and thats what the news is all about.

The good news that has come out of this confusion is the push for harmonized tax system that will make it impossible to avoid paying their rightful contribution to the nation's treasury. Good news fro countries like Zambia whose tax base has been greatly eroded by such actions of multi-nationals.

I believe the way out is simple. Most tax havens would die without helping multi-nationals avoid taxes. So if there is a move to stop that, these tax havens will reject such a move. Do you think Ireland and Mauritius to agree to measures that will make it impossible for them to get money into their economy? But on the other hand, if the countries being affected unite to fight this kind of tax treatment and setup was to make these companies pay, great things can come up. Maybe even disagree to have Tax Agreements with these nations to force them to comply and make tax avoidance a thing of the past.

A positive outcome of this whole tax avoidance to me is the indication that the world is slowing becoming a solid market place, where if you ignore what is happening in Africa - tough luck, it will hit you in America harder than you thought. Apple is hopefully a beginning so that the world can come up with a solid united fight against tax evasion and avoidance.

SI 32 of 2013

Sorry I have been out of touch on serious assignments. But I think we need to have some space for one of the few happenings in the economy of Zambia - Statutory Instrument no. 32 of 2013.

I will have to do a blog on this but you should look at it from and see what it has for you. I know there are a lot of lies about it and some dreams too. I will offer my opinion as soon as I have time. It can be found here.

Time To Nationalize

It is always interesting to look at how Economist look at different views they have on an issue in the economy. An interesting view if you are an Economist in the field also.

I have been looking at the issue of the mines and the outcomes of which party is in charge of the mines. Right now, we are made to believe mines are not making any profit and so their contributions to taxation. Seriously if the operations are so bad that no one pays taxes, it would not make business sense to even own the mine. So why don't the owners leave? Why would anyone continue with a business operation which does not make sense (both generic, economic or business sense). If it really was the case, they would have left. 

I believe they have not left because all these loses that they complain about is a properly engineered part of transfer pricing! They find all loses in the chain and the money and profits show up in Switzerland. How else will a company pay taxes in Switzerland over Zambia's minerals when Switzerland has no copper? That is an issue that shocks me. 

My perspective is even strange to other economists. I think it will make good sense if the same loses that the mining companies are complaining about leading to no payment of taxes to be enjoyed by government. Why can't government take over the burden from the mining companies and the little resources enjoyed by the owners of the mines be ploughed back into Zambia? The country will not experience loses as much as the mining companies. The difference will be, there will be worry about the loses and exports since all returns from the mining activities will be back here in Zambia!

I know any modern Economist avoids using the words of nationalization and favours privatization. I believe things should be looked at a different angle altogether. Zambia has been using modern economic theories and perspectives since time in memorial, have we seen any goodness out of that? When the mines were owned by the people of Zambia, the mining towns were doing way better than today. Even ZESCO was selling electricity properly and a rate better than it is today. So the two experiences we have had should give us a lesson we can surely use to our advantage. Even the football pitches were a marvel to be in. Need we forget the schools that we all dreamt of going to? So what has changed with going back and getting the best out of it.

From where I stand, the whole western world has ganged up on Africa and its resources. There is too much complex way of ripping the resources of Africa such that if we try to follow the logical steps, we will be doomed. Ireland, Luxemburg, Netherlands and now even Mauritius have been set up in such a way that they will use all possible ways of reducing taxes so that Multi-Nationals find their way to Africa through these places and rip all the resources. There is 10 times more resources leaving Africa than the ones coming in in form of "AID"! Had this been a straight forward business, Africa would have been far better than any country in Europe or the Americas. But that does not appear to be.

Moreover, if we look at the China arrangement, you will agree with me that China does not follow the "modern" economics. They use planned economy and have been heavily criticized by the west. Did the Chinese system fail them? No they have producing for the world! So anyone looking at a way to develop, would surely think China is a way to go! They have more state owned enterprises competing in the world than you would imagine. We have taken these as our brands for some reason without looking at them and their history. Look at these:

ZTE Corporation (Zhongxing Telecommunication Equipment Corporation)

ZTE is no upstart. The company was founded in 1985 by a handful of state-owned companies affiliated with the Ministry of Aerospace Industry and has grown along with China's big phone companies, which are ZTE's top customers.That is pure genius!

China National Petroleum Corporation (CNPC)

British Broadcasting Corporation (BBC)

ABN AMRO Bank N.V. 

Bharat Electronics Limited

So why do we fear nationalization  After all I think the mines will contribute more to the economy when all their owners are Zambians. Many countries have a way of dealing with State-owned enterprises, we can find a way that can work if we divorce politics from the running.

I know its wishful thinking, but it is worth every typed word. We should nationalize the mines - The benefits far, far out weigh the costs (I am a student Economist, I should know that!)

Zambia Launches First Ever Citizen's Budget

Zambia has today, 26th February, 2013 launched the first ever Citizen's Budget. This is in line with ambitions to make government operations transparent and enable the ordinary citizen participate in the economic issues of the country. Being informed will surely get people talking and will contribute effectively to the operations of government.

By a simple definition:

"A Citizens Budget is a non-technical presentation of the Government budget which is intended to enable the public, including those who are not familiar with public finance, understand Government plans."

This is expected to inform the people in a clear and simple language on what is contained in the 2013 Budget. Considering that the Budget itself is highly technical and complex, it is mostly understand by people involved in the budget. The ordinary people barely get a grasp of the budget. You would be shocked to see what things are contained in the Budget if you have a chance to analyse it.

I agree, it is sad to see what one would have to to get all the things complied in our Budget. So next stop is finding a way that this can easily be done and presented to the public.

So the idea of Citizen's Budget has come at the right time, and at a time that Zambia needs to be more open and inclusive. A time that every ordinary person should know what the budget contains and what it will mean to him and others around him.

We have opened up the Budget to a wide spectrum of people and views. This is an improvement as now people will be seeing what is planed, what the intention is, what is expected, and the ultimate outcome. People will be able to follow the Budget in a clear and simple manner. The promise by the Minister of Finance of releasing the Citizen's Budget on an annual basis is welcome and something to smile about.

You can get the 2013 Citizen's Budget here(PDF file of about 2.5 MB).

2013 Citizen's Budget

Zambia Sugar's Sweet Nothings Report

Another report has come out clearly showing how multi-nationals are not helping Zambia by simply paying their fair share of taxes. What is sad is that this company comes from the UK where they send aid to Zambia but the amount of aid is far less than what Zambia losses out in taxes. 

ActionAid did a research "Sweet Nothings" which is contained here. Take time to read it and watch a clip here.

I think we need to seriously look at our tax laws and especially our Agreements with tax havens to avoid tax being avoided by Multi-nationals. Having spent time looking at the activities of many of these companies, I have unbelievably been convinced, if there is any suspicion of tax avoidance or evasion, this country must take matters into its own hand and deal with it.

There is no point is getting aid, which is most cases is fraction of what is being stolen from here. The legal system is not doing us justice. We need to amend what needs mending and cancel what needs to be cancelled. How long do we need to scream "trade not aid"? I actually think we should change that to "fair trade not aid".

Mining Taxation - What Are We Doing About It?

Many economists in Zambia right now call for windfall tax for the mines in order to make mines contribute their fair share of taxes. Basically the idea is that mining is receiving a lot of returns as the copper prices are high. We should therefore setup a mining tax regime that will be able to capture that "extra" profit that the mines are getting. Its a fair argument and one that makes sense when you look at it. Every work pays taxes, Zambia being a small economy, the taxes needed to provide services are smaller. Therefore the profits that the mines make in a day would nicely cover all the expenses.

However, we must never live believing the mine owners are interested in the wellbeing of Zambians. If they did, the economy of Zambia right now would be far better than were it is right now. Only a fraction of what they get would change everything. But its that greedy and selfishness of mine owners that make the windfall tax a useless path for me. I know a lot of economists would be shocked to hear that. But I have points that need to be taken into consideration before you judge me.

Stealing Benefits Them

Mine owners will do everything they can to steal every little Ngwee they can from Zambia and proudly send it to the west without a problem. Switzerland makes more money from mining of copper than Zambia. Do the Swiss people have windfall tax?

These people will proudly contribute to the tax in Switzerland than Zambia where the copper comes from. All sorts of transfer pricing and complex avoidance of tax methods are employed to make sure they pay nothing to Zambia and pay a lot more to Europe.

The point is, its not the windfall that will make someone eager to steal wealth from our mines to contribute a fair share. They aim at stealing and having a windfall tax when there is a complex plan of transfer pricing, will bring little to the treasury in any case.

Most mines "sell" the produce at "arms length" to their sister companies. Now if that was true, Zambia would raise money tax revenue from copper that Switzerland. Since it isn't, there is a proper case to assume the "arms length" being talked about does not exist. If there was even an ounce of honest in mining companies, the returns from copper would be in levels that we would not complain about.

Government Has Sovereign Right to Tax 

We have to remember for this discussion that a government has the sovereign right to tax. Government is the only power that can tax or not. It has control on what it can tax and how it can tax it."

Allison Christians

"Tax policy creates and reflects relationships between the market, the citizen, and the state. As a result, traditional tax policy discourse centers around the premise that decisions about taxation should be made exclusively within nations, independent of outside concern and interference."

What we need to add to that is that, tax avoidance has outside interference and its that outside force that make certain decisions irrelevant. Windfall tax being one of them. It is easier to avoid the complexity of taxing these companies that make people choose a simple path of windfall tax. I think otherwise. We should remember that our government has the right to tax without interference, and it should make the right decision to tax.

So unless there is no way of detecting the avoidance of tax in the system, the government should make the right decision and take necessary steps to tax all that need to be.

Are We Going Back on Tax?

I always complained about lack of export duty on mineral outputs. Seriously, this is a wasting asset and we allow it to go out of the country without the exporter paying anything? That was a bad thing that the previous government took on board.

 

However, this has been nicely worked on and there is progress in that direction. What worries me is the loss of the "Sovereign Right" to tax. What we cried about on copper seem to have been transferred to Manganese!

Manganese is it now the new plan to change from copper to manganese? Or is it that the new players in the powers are linked to manganese? This is something we need to work on and not go back on taxation.

 

Why allow people to export and not pay for the wasting assests and you complain about the failure of the mining industry to contribute to the revenue share!

 

Nothing is more to my heart that a failure of the system due to the people involved in it. Seriously, we have the most sacred job of taking care of the country now for future generations to benefit from the wealth that we have. But the moment we come into the picture, we come up with plans of making sure people "steal" the assets that are needed to develop the country. We should not make statements which are parallel to what is happening on the gorund we must take it upon ourselves to ensure we do what is right for the nation. This clearly is not happening at the moment. It has not been happening for the past 30years or so. Zambia is bigger than all of us and we must be within our powers what is right.
I seriously didn't expect that the country's wealth will continue getting out of this country without paying the simplest of all charges - export duty. But it is happening.

Coins: K1.00 and 5 ngwee

The K1.00 coin (Former K1,000.00) and 5 ngwee are featured here. You realize that it is hard to talk about coins as Zambia has not had them in a while. We had them, but they were not worth anything.

So this is a very useful introduction in the economy. We have an opportunity to use this form of exchange for a lot more issues. To note are the durability issues as compared to paper money. Coins are durable and so less money will be spent (money which was spent in printing paper money every now and then). Once coins have been minted, it takes a relatively longer period for the next session of minting.

Here is a close look at the one kwacha (K 1.00) and five ngwee (K 0.05) coins.