ZAMBIA WILL NOT BENEFIT FROM THE MINING SECTOR
By Nobert Mumba
The Economic Performance Report just delivered by the Minister of Finance vindicates my position that tax deductibility of Mineral Royalty Tax would just make the country poorer with no corresponding return from the mines.
This goes for CDF whose current design is consumption focused rather than development focus. It also brings into question the integrity of our economic team. Why did they fail to see what we were seeing? Why did they call us names when we told them the truth.
If global copper production can only increase by 6 million tonnes in 10 years why did we think we alone can increase output by 3 million in 10 years with our procrastinating over mining licences.
We disputed their growth projections and now halfway through the year we revise the target when it is almost too late to take corrective action? What has happened to Agriculture because it is a growth driver?
Our interventions are non-partisan premised on our global experience. Now that the Ministers statement reveals that the mining sector has not responded as expected to the generous and contentious tax deductibility with lower half-year output and lower tax revenue, a downward revision of growth from 4+% to 2+%, decline in foreign reserves by $100m despite the latest IMF injection and despite the NAPSA early withdrawal. WHAT NEXT AND IS THERE LIGHT AT THE END OF THE TUNNEL?
My answer is of course yes. But only if we can be honest with ourselves and only if we can have integrity. The “gold” saga is not isolated. There are many more. Even the so-called established mining firms may not even be accounting for the gold the produced and let alone the copper.
They failed to account for export proceeds and claimed in-flows of capital when we introduced SI 55 only to run to their masters who accused us of policy shift, threaten us and we cowed down. We tell the truth and our truth is always vindicated by the outcomes.
My submission is that government must re-visit deductibility of mineral Royalty to maximise tax revenue from the current mining activity given that the ore is a depleting asset and cannot wait for increased revenue arising out of new fields.
Re-introduce legislation on monitoring and acquittal of earnings from exports. Book all revenues from exports through a Zambian bank to enable ZRA have full and unfettered power to detect cheating.
And also introduce registration of foreign debt to stop cheating. All companies externalising funds to repay debt must prove the money or capital came into the country in the first place as it is indisputable that there is more foreign exchange getting out of Zambia than the value it is receiving.
Re-establish the equivalent of Metal Marketing Corporation (MEMACO) for Zambia to effectively monitor its mineral wealth.
On CDF re-orient CDF to focus on procuring equipment and setting up factories in constituencies that will inspire activities targeting value addition.
This will include mechanising agriculture, setting up high-end wood processing and furniture factories at constituency level according to their competitive advantage and naturally occurring activity in their areas. Chicken rearing, tailoring will on its own take the economy anywhere.
Cosmetics is what it is – it easily washes off.
Have a pleasant week family and friends.