Collect Adequate Taxes from the Mining Sector
Amb. Emmanuel Mwamba Wrote
With 70% of Zambia’s export coming from the mines, the behaviour of the mine houses on the state of the economy and the foreign exchange market is significant.
For example, the big mine houses, have refused to comply with the The Bank of Zambia (Export Proceeds Tracking Framework) Directives of 2023.
This directed an exporter to open and maintain a bank account with a bank or financial institution domiciled in Zambia for purposes of these Directives.
The exporter and his bank are to ensure that all proceeds of export are deposited in this account.
So the mine houses stash the export proceeds abroad and only send tonZambia residue amounts required to pay wages and recurrenr expenditure.
Infact, funds required for mine operations are derived from the highky porous and fraudulent Zambia Revenu Authority VAT Tax refund mechanism.
Minister of Finance, Dr. Situmbeko Musokotwane has a peculiar belief that tax and other incentives granted to mines and other large multi-nationals, attract investment and stability to their sectors.
To this effect, he abolished one of Zambia’s best profit-sharing mechanism, the Windfall Tax, that was introduced by his predecessor, Ngandu Magande.
When introduced in 2008, the Windfall tax earned the Zambian Government $600million from the mining sector, first earnings in a period 20 years after privatisation.
After the death of President Mwanawasa, his succesor, Rupiah Banda, appointed Musokotwane as new Minister of Finance, who immediately abolished the Windfall Tax.
With this tax incentive abolished, the stability of the Kwacha lost grip, and foreign debt rose sharply from $500,000 in 2008 to US$3.8m in 2011.
Similarly in 2019, Government introduced non-deductible mineral royalty tax that earned the Treasury $1.1billion per year from the mining sector.
When President Hakainde Hichilema won elections in 2021, he appointed Musokotwane to return to the Ministry of Finance after ten years.
Musokotwane’s first call of business was to abolish the non-deductible mineral royalty tax.
If Musokotwane’s assertions were true, DRC which is facing war, instability and lack of infrastructure and lack of reliable electricity, would not have shot to become Africa’s number one producer of copper.
The DRC has attracted international mine houses that include Zijin Mining Group, Glencore, Ivanhoe Mines, Barrick, AngloGold Ashanti, and Eurasian Resources Group (ERG) who have focused on mining copper, cobalt, and gold mining.
Musokotwane’s return to the Ministry in 2021 sparked the same reaction to the economy as was the period he superintendented in 2008-2011.
The foreign exchange market became unstable, both domestic and foreign loans ballooned and Musokotwane’s reliance on aid escalated.
The 2023/2024 drought became a perfect setting for aid. Zambia’s food security was shaken,not necessarily by drought, but by government’s own careless decision to export in the year 2022 and 2023, literally, the entire national strategic food reserves.
Atbthe height of the adverse effects of the drought, Government refused to halt power exports to Bostwana, DRC, Namibia and South Africa thereby depleting its 2024 water allocation for power generation at Lake Kariba exhausted by June 2024.
This action, driven by greed, spawned the worst power shortages Zambia has ever faced.
Strangely, ZESCO refused to halt power exports even when Zambia’s own industries and SMEs were collapsing for lack of power.
Musokotwane extended a global request for grant and food aid.
The fiscal hole created by reduced revenue from the mines has sent the Zambia Revenue Authority (ZRA) into a maddening frenzy to target small tax payers such as landlords and SMEs.
Following reform of the rental income tax regime, the obligation on the tenant to withhold and account for tax to the Zambia Revenue Authority (the “ZRA”) has been abolished.
A tenant must now pay the gross rent to the landlord without any deductions and the obligation to account for the tax on rental income is now borne by the landlord.In addition, the reform has also revised the applicable tax rate for rental income.
Under the new regime, two rates will apply: 4% on rental income below K800, 000 per annum and a whopping 12.5% on rental income above K800, 000.
These desperate measures, and without sufficiently widening the tax base, will not plug the hole left by failure to collect adequate and fair taxes from the mining sector.
And the lack of zeal to implement the industrialisation plan to return Zambia to manufacturing, the country will remain susceptible to the vagaries of volatile exchange rate, rising inflation and debt and failure to curb poverty levels.
We are all admiring what Captain Ibrahim Traore and his counterparts in Mali and Niger are doing with their mines. These countries were basket cases before these extinguished leaders took over. But in a short time, they have turned around their economies. The dinosaur presidents that they replaced were just thieves, conmen, stashing their offshore accounts with dirty money. With the right leader, you get results. With the wrong frauster leader, currency depreciates, fuel prices are high, cost of living is high, and opposition members are constantly being arrested.
God bless Captain Ibrahim Traore, a proper leader that is putting conmen African presidents to shame.
Vote wisely in 2026.
Celebrating someone over the success achieved by other people is nothing short of being myopic. Captain Ibrahim Traore did not build those mines you always crediting him for but they were built by foreign investors and it remains to be seen if those mines will continue to operate after grabbing them from their owners. We did the same in Zambia during KK’s time and formed ZCCM and history is there for everyone to see what happened to the mines thereafter. Mining is not just about getting the profits, it is a very capital intensive business and require highly disciplined business people to run them and continuous reinvestment, otherwise, they would collapse like they did in Zambia.
By the way, the right word to use is “distinguished” not “extinguished” you have used in your comment. Extinguish mean to put out fire or put an end to something while distinguish mean to recognize or treat someone or something as different.
And regarding the taxes in question, Mr. Mwamba should be honest sometimes because these export taxes on gemstones were removed in 2020 and we all know who was in power by then. But the new dawn government wanted to reinstate them but the stakeholders raised their concern over the matter that they could make their stones uncompetitive on the international market and the government listened and did their due diligence so it’s only unwise government like the previous which could not listen to stakeholders which in turn would cause the collapse of the sector in the end achieve nothing in the end. People should know that these taxes were not in effect since 2020 and they were just a proposal by the new dawn government so in essence government has not removed these taxes since they were not there in the first place.
Sometimes some people just prove how illiterate they are.
The Gem stone miners cried to the government that the taxes raised the cost of production of the stones. They also pointed out that there was a “glut” on the market. Meaning there more stones on the market than usual driving the price down as supply outstrips demand. Simple economics.
Government does its due diligence and notes that this is true and scraps the tax.
Some clown thinks he is wiser, and insists that government is wrong.
So who will buy more expensive stones when competitors are selling at a cheaper price?
Ba Mwamba iskulu isuma cause you would not show how shallow and vain your point of view is.
These miners incur fixed costs regardless of production. Would rather they shut down? How do they pay their bills if they dont sell the products?
Sometimes some people should learn, to learn. The would realise that the noise they make is useless.
These taxes can be reintituted when the market situation changes. What government needs to do is keep an eye on the market.
I think what he’s trying to say is… under the influence of other ministers, there were taxes in place that brought in more money through the mines. The burden was not on the SME’S. And the mines did not shut down.
Ofcourse if they wanted to shut down, there are more and more citizens getting into the business of mines. Will the citizens be given the same incentives?
Actually the gemstone mining has the highest number of local owners compared to the copper mines therefore the local investors are biggest beneficiaries of this action by government. By the way, these still pay other taxes so do not be misled to think they don’t pay any taxes.
You were in power for 10 years. Why didn’t you do the same? Nonsensical idiot you are. Let hh do his job imwe basakala nyongo. Atase iwee Mwamba ? Born yesterday.? What can you tell us. Pray to God not umuntu here on earth mwaice wandi. You will perish with pfools. Amen!
I’m just going by what he mentioned in the article… He said the non-deductible royalty tax of 2019 brought in $1.1 billion/yr.
Why was it scrapped?
Am certain by you know better but to take embacilic pfidiot with alot salt because he lies through his backside. In Bemba we say ubufi wakunya pwetete! Can this idiot state what the production and sales level in 2019 to 2021 to Zambia $1.1bn and if that’s the case we’re these pf thieves took this money???
Mr Mwamba during your time As you
Say tax collection was good then why did you default In debt payment?
Ba Group 3, when then know how to write kaya. Group 3 in class. Remember that?
It’s ironic to appoint yourself an adviser when your party PF inclusive of all opposition alliances that have no policies on anything ground the economy into the ground, took over prominent mines, forced others in shutting down and defaulted on the debts they accumulated after stealing and looting all the finances and sharing with slay queens and caders. This guy should get his head examined once he comes back.The trouble is he thinks he is the only clever person and everyone else is dull.