Editorial

Mining still vibrant

ZAMBIA’S mining industry remains viable for many more years to come as the natural resource base is still teeming with rich minerals in many parts of the country.
While economic diversification has taken off, the fulcrum should not wholesomely be shifted from mining in a hasty manner.
Government and the private sector must strike a balance between nurturing the mining industry on one hand and diversifying to other critical sectors such as agriculture, tourism, construction, manufacturing and energy on the other.
In simple terms, there must never be divided attention between mining and other critical sectors to the extent of disadvantaging the mainstay of the economy.
Therefore, as the Government team led by Finance Minister Bwalya Ng’andu concludes the Presidential mission to resolve issues surrounding the mining industry on the Copperbelt, citizens will be looking forward to a positive outcome.
Obviously, there will be need for Government to expedite the process of VAT refund to Mopani Copper Mine, which has also placed forth request for review of the tax regime.
The bone of contention in this mining tax regime is the increased sliding scale for royalties of four percent to six percent by 1.5 percentage points and the 10 percent tax when the copper price exceeds $7, 500 per tonne.
Government’s contention has been that transparency in production figures and other operational issues in the mining industry must improve to accurately determine profit levels and production hitches.
If transparency in terms of operations was at top-notch, there would never be mistrust while decisions from each party would also not raise consternation.
Decisions concerning tax adjustment on part of Government and changes to production and employment levels from the mines would not meet resistance if trust between them was at first-rate.
Therefore, it is up to Mopani and its majority shareholder Glencore International as well as other mining houses to improve transparency and ultimately earn the trust of the Zambian government.
Some interest groups have attempted to draw a comparison between Zambia’s mining industry and that of Chile, which they have given much credit without considering many other factors.
Yes, Chile is the world’s number one copper producer with an unmatched successful story in mining.
However, it is important to note the differences.
Chile operates the mines through the state-owned COLDECO, which runs the primary mining sites Chuquicamata and El Teniente, the biggest open pit and underground mines in the world, respectively.
COLDECO is about the largest copper company in the world.
The rate of specific tax in the industry depends on the annual sales and in the mining operational margin of the taxpayer.
The other stark difference is that Chile has favourable conditions for mining activities, combining attractive mineral resources with short distances between extraction sites and exporting facilities.
On the other hand, Zambia’s set up is such that the copper mines are spread across many firms with Government owning much less shares.
However, this does not mean that Government cannot increase its shareholding levels.
That said, it is hoped that the squabbles in the mining industry will come to an end once and for all after the tour of duty by the technical committee led by Dr Ng’andu.
Certainly, there are many stakeholders in this whole issue including workers, trade unions as well as suppliers and contractors to the mining companies.
Thus drastic actions such as suspension of operations must never arise but the two parties should in extreme cases settle for a win-win situation.

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