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New monitoring system poised to raise mining revenue

MINERS processing copper at one of the mines on the Copperbelt.

ZAMBIA’S mining industry is poised to continue on the recovery path in view of the implementation of a stable mining tax regime and the mineral value chain monitoring mechanisms, aimed at promoting transparency in the operation of mining companies.
This is meant to ensure that citizens benefit from the country’s rich mineral wealth.
Minister of Finance Felix Mutati has challenged mining investors to take advantage of the stable and responsive mining tax regime to increase their productivity and invest in capital expansion projects to create more jobs for Zambians and sustain existing ones through wealth creation.
Government is implementing the mineral value chain monitoring mechanisms to monitor mining activities of all mining companies throughout the mineral value chain from exploration to exportation.
This is meant to increase revenue from the mining sector to accelerate the country’s socio-economic development.
Zambia is internationally recognised as a major producer of copper in Africa and ranked among the world’s largest producers of cobalt. However, the country’s taking from the mining sector does not match with the significance of the industry.
The implementation of the mineral value chain monitoring mechanisms has been necessitated by lack of transparency and truthfulness in the manner some mining companies conduct their operations in Zambia.
During the golden era decade, Government collected between 25 percent to 30 percent of Gross Domestic Product (GDP) on average annually in tax revenues, compared to below 10 percent during recent years.
This is despite the privatisation of Zambia’s mining industry that has recorded a significant foreign direct investment (FDI) since 2000.
According to Mr Mutati who recently unveiled the K64.5 billion 2017 national budget, Government will focus on the physical flow of minerals from mining ores through processing into concentrates and refined products, and exporting.
Copperbelt and North-Western provinces are the main focus of mining activities in Zambia owing to their abundant copper mineral deposits.
Ministry of Mines and Mineral Development director Mooya Lumamba says all mining companies should regularise their operations if they are to sustain their operations as the mineral value chain monitoring mechanisms hit the ground running in the first quarter of next year.
“The mineral value chain monitoring project and the mineral production monitoring support project are of interest not only to the Ministry of Mines and Minerals Development and the Zambia Revenue Authority, but the whole nation, as the mining sector continues to play a pivotal role in the economic, social and cultural welfare of our country,” Mr Lumamba said.
Various stakeholders are elated by Government’s move to implement effective mining monitoring mechanisms in the mining sector that will provide accurate and reliable data on the sector, relevant for effective policy making and improving tax administration and mining sector oversight.
Public Policy Institute of Zambia (PPIZ) president Febian Chewe says the implementation of the monitoring mechanism is long overdue.
He commended Government for putting the interest of citizens first by formulating policies that will increase revenue from the mining sector.
Mr Chewe believes that Zambians have not realised the full benefits of their mineral wealth since the privatisation of state-owned Zambia Consolidated Copper Mines (ZCCM) at the end of the 1990s.
Apart from copper and cobalt mining, the industry also engages in the production of gold, emeralds and lime, which most Zambians, believe they have not benefitted them.
Mr Chewe says transparency throughout the value chain is vital and will enable Government collect the much-needed revenue in taxes through ZRA to effectively implement pro-poor development programmes.
“We need compliance from all mining companies to the mineral value chain monitoring mechanisms which are meant to promote transparency in this important economic sector. We are in support of this move,” Mr Chewe said.
He said the monitoring mechanism will spur growth of the mining sector as companies will now be able to remit correct taxes based on their production levels and exports.
MUZ president Nkole Chishimba says lack of transparency in the manner mining investors conduct their operations is a major challenge that has for a long time been robbing the country of millions of dollars in unpaid taxes.
Mr Chishimba said some mining companies have retrogressive tendency of claiming that they were making losses and laying off workers whenever there is a slump in copper prices on the international market.
“Some mining firms have even stopped mining to concentrate on smelting despite the country having enough copper ore,” Mr Chishimba said.
He said the mineral value chain monitoring mechanisms that Government has put in place will help in exposing mining companies that are deliberately posting losses in order to pay less taxes to the government.
The mine union further wants Government to ensure compliance to Zambian laws by all mining investors and that those found wanting should be made answerable.
“We are not happy as a union to see some mining companies placing viable mines under care and maintenance and laying off workers when the price of copper goes down,” Mr Chishimba said.
CNMC Luanshya mine has placed the Baluba Mine under care and maintenance with Konkola Copper Mines (KCM) equally doing the same on its Nchanga Underground Mine in Chingola.
Mr Mutati wants the best from the mining companies following the guaranteed stability in mining tax regime and has urged them to reciprocate the gesture by investing in capital expansion projects. He also wants them to increase their production targets so that Zambia could compete with other mineral-rich countries like Democratic Republic of Congo (DRC) and Chile.
“To ensure that the sector continues to play a pivotal role in revenue generation, Government will implement effective mining monitoring mechanisms and ensure a stable and responsive mining tax regime.
“We prefer to be stable with our mining tax regime like the Democratic Republic of Congo and Chile. The DRC, which was nowhere in terms of copper production, is currently producing 1.3 million tonnes per annum compared to 700,000 tonnes we are producing here annually,” said Mr Mutati in Kitwe recently during a post-budget discussion that was organised by KPMG Zambia Limited.
Zambia Chamber of Mines president Nathan Chishimba says mining companies have welcomed the implementation of the monitoring mechanisms and Government’s assurance to maintain a stable and responsive mining tax regime.

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