Editorial

Lesson learnt

WE are not surprised at yet another revelation of the economic sins committed by mining companies against a gullible host nation – Zambia.
This, it appears has been going on throughout the years and successive governments have been cheated out of what rightfully belonged to them in form of taxes.
But this won’t be the case anymore.
Government has taken action, showing its determination to stop the drain by imposing tougher testing measures to stem the submission of low-grade samples to undervalue mineral exports and consequently, loss of revenue by the government through mineral royalty tax payment.
From July 1, officers from the Ministry of Mines and Mineral Development will be going to the mine sites and traders’ warehouses to collect the required samples instead of relying on samples submitted by exporters.
Mines and Minerals Development Permanent Secretary Barnaby Mulenga on Wednesday disclosed how the country was losing millions of Kwacha in revenue through cheating by mining companies that submit low grade assay, instead of the high quality minerals they export.
The false samples are submitted to the chemistry laboratory of the Geological Survey Department when they apply for export permits.
The practice in place is that every client who applied for a mineral export permit submits a sample of the export consignment to the Geological Survey.
A Mineral Valuation Certificate of the entire mineral export consignment was prepared based on the laboratory results.
According to Mr Mulenga, it was on the strength of the valuation certificate that the ministry issued a mineral export permit to the applicant.
This is done after the applicant had obtained a mineral royalty clearance certificate from the Zambia Revenue Authority (ZRA).
“Unfortunately, this practice has opened a window of opportunity for some mineral exporters to deliberately submit low-grade samples to the chemistry laboratory and this has resulted in undervaluing of mineral exports and consequently, loss of revenue earned by the government through mineral royalty tax payment.”
This clearly is treacherous and proves that most mining companies operating here have short-changed Zambians by cheating in their operations.
“The loss of revenue could amount to hundreds of thousands, or even millions of dollars per export, depending on the discrepancy in mineral grade between the sample and the consignment being exported,” said Mr Mulenga.
He said to facilitate the smooth transition from the current scenario to the new one, all exporters should ensure that their applications for export permits were received by the ministry at least a week before the officers’ sampling visit to each region.
Mr Mulenga said the applications should state clearly where the export consignments to be sampled would be located, with the applicants’ physical address and other contact details.
Had the mining firms been good corporate citizens, such measures would not have been taken.
But then, it just confirms what people have always suspected, but never had evidence, that the mining firms were milking the country dry – claiming that they were not making profits, thereby resisting taxation left, right and centre.
Their treachery also came out in the open when the Supreme Court charged Mopani Copper Mines US$13 million after it established that the firm colluded with its parent company Glencore International AG (GIAG) to undervalue the price of copper.
Simply put, Mopani was selling copper to GIAG International at a lower price which in turn sold the same product to Glencore who were then able to sell it at a higher price, sharing the profits.
Worth noting were the court’s observations about the dilemma facing Third World countries in their dealings with international firms:
“The dispute in this appeal is archetypical of the problem posed to the fiscus of many developing economies by multinational corporations engaged in the extractive industry. It also in a way highlights the inadequacy of institutional capacity to deal effectively with such corporations; exposes yearning gaps in the much needed expertise to gather and interpret essential technical information for enhanced tax revenue collection from multinational corporations.”
They pretend to be honest brokers when they are just conmen.
Zambia has surely learnt a hard lesson, to always be on top of things, above all, trust no multi-national.

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