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.