By George Jere
History has the answers to this vexatious problem in Zambia, events tend to repeat themselves.
It was not a long time ago, year 1992 when one major mining company Anglo American abandoned us, Luanshya town was also abandoned, and a major economic upheaval beset the country, as copper prices plummeted.
A Painful restructuring process had to be instituted in Zambia under the HIPC (highly indebted poor nation).The people of Zambia had to make painful sacrifices for the next 10 to 15 years. Important to the success of Zambia’s restructuring process was the attraction of foreign investors to this country. And they responded due to the favorable liberalization policies we had instituted
for the first time in 40 years our copper production reached pre-independence levels of 700,000mt.GDP has reached 6to7% among the highest in the world. New towns like Solwezi have sprung up….and most importantly we are no longer classified a highly indebted nation.
Then we want to turn around today and blame the people (investors) who responded favorably to our call…amazing but it is happening …perhaps a preamble to Zambia’s economic reforms of 1968?
In the forefront of promoting the above allegation is Publish what you earn people (PWYP) a loose body of Christian organizations, trade unions and other civil societies. A discerning look at the PWYP composition reveals it is devoid of economists, financial analysts. Certainly one cannot expect a balanced opinion on financial affairs from such a group to begin with.
It is important to note that all public companies operating in Zambia are subject to independent audits by Zambian owned auditing firms. And the mining companies have mostly Zambian accountants who prepare their books.
According to the daily mail of 14/11/12 Mr. Sikamo a Zambian metallurgist with Chibuluma mine reviewed that it costs$7150 to produce a tone of copper. The current price is $7770 per tonne, meaning the mining net profit is a mere 8%.in lay mans term; the mine gets k8 profit from every k100 sold.
The World Bank report has also listed Zambia as a country with the highest operational cost and that include in the extraction of copper.
Now let’s examine the PWYP allegation and I quote:”From 2004 to 2006 Zambia’s mining tax was only 3.4% of gross sales…..”
Yes that is true because Zambia’s tax rate of 35% if applied to the 8% profit above Results in 2.8% or round off to 3 % tax to gross sales, comparable to PWYP findings of 3.4%of gross sales.
Ignorance is blissful and also dangerous. The PWYP is unwittingly inciting false feelings of injustice that the Zambian people are being exploited.
The assertion by the Deputy Minister Hon. Miles Sampa that Zambia is losing a third of its budget through tax avoidance can only amount to a figment of imagination whose sole aim is to alienate the very investors who are helping our country to move to a prosperous future.