'When looking at the mining taxation rates in other parts of the world, it seems strange that Zambia is criticised for introducing reforms that would see a maximum ceiling of only 10%.' (Philimon Bulawayo/Reuters)
The Mining Indaba is the centrepiece of the annual mining calendar; the Davos of the mining world. At this year’s event, Zambia has a clear message: we are open for business, and we have a plan to make Zambia the foremost mining country in the world. Mining is the backbone of our economy – it has played a vital role in Zambia recording some of the world’s strongest GDP growth rates over the past two decades and has rocketed us into the World Bank’s ‘middle-income economy’ bracket.
For Zambian mining, 2018 was both a successful and a newsworthy year. Successful because we are the second largest copper producer in the world, reaching 861 946 tonnes last year. Newsworthy, because the government of Zambia has made the crucial decision to reform the mining-related tax code.
Tax reform is never easy. Governments around the globe have struggled to ensure multinationals pay their fair share of tax, and we owe a responsibility to our citizens to continue this fight. My job as minister of mines is to protect the long-term interests of the Zambian people, not simply those of foreign shareholders.
Tax reform is also difficult because businesses do not like paying more tax, even when reforms introduce greater fairness into the system. Yet it was surreal for our own trade unions to argue that Zambia had become ‘un-investible’, especially as 2018 saw Zambia named as one of the best places to invest and one of the most business-friendly environments in all of Africa.
As recent developments have shown, the doom and gloom that was painted by some businesses and unions were simply not true. Rather, these complaints were about protecting major corporation’s already high margins. In some cases, these continue, and that’s business. However, as statements by Canadian firm, First Quantum Minerals, and Mopani – which is majority owned by Glencore – have shown: sitting at the negotiating table and seeking compromise, rather than aggressive rhetoric, is the surest path to protecting the mining industry in the long-term.
Reforming tax rates was a necessary step in helping to stabilise and grow the national economy and protect our natural resources. Just as our colleagues in South Africa did in 2017, we need to recognise that countries like Zambia may be blessed with rich natural resources, but that these are not endless or replenishable. Our government, like South Africa’s, is focused on introducing the necessary framework to build a sustainable economy for the 21st century.
We are fortunate that copper demand over the next ten years is set to increase. Technologies of the future, such as electric cars and advanced computing, are reliant on it. Tax calculations are fundamentally made on detailed mathematical calculations, but also upon the principle that supplies are limited, and demand is high.
The government has always been the first to acknowledge the huge contributions that business and enterprise have made to developing towns and cities, and to the economy of Zambia. But as with every healthy relationship, there are times when the dynamics between two parties need to be reassessed. A strong, equal and lasting partnership is built from the ability to tell each other the hard truths, and to guarantee that business is behaving responsibly in paying its fair share of tax. I hope that once these reforms are in place, and both businesses and the people of Zambia see the positives that come from it – that our relationship will be strengthened, and together we will build an economy able to compete on the world stage.
In many ways the debate over Zambia’s taxation reforms has highlighted the kinds of debates happening around the changing world we live in. Like many other industries, mining is evolving. This is clearly highlighted by many of the issues on the Indaba 2019’s agenda; issues like sustainability, female empowerment, and youth-access into mining employment.
When looking at the mining taxation rates in other parts of the world, often with the top rates of tax reaching 30%, it seems strange that Zambia is criticised for introducing reforms that would see a maximum ceiling of only 10%. These competitive reforms follow international best practice, as established in other leading mining nations and by the World Bank. Ultimately, however, we chose to introduce them because they were the right thing to do.
African nations should no longer be somewhere you look up a bottom-price bargain. This is not a sensible sustainable objective, and not reflective of the valuable commodity in the Zambian people’s possession. Companies need to realise that Africa is moving away from a system of foreign aid, and instead towards foreign trade and investment. Zambia believes that the diversification of revenue streams is the most effective way of managing its economy; drawing upon foreign direct investment, international trade, investment in Zambia, and taxation. A multifaceted economy is a strong economy.
We must never forget what that strong economy delivers for Zambians: better schools, infrastructure (including at the mines themselves) and the training of a new generation of Zambians with the expertise to lead our mining industry into a new generation. With these reforms, we have built a better future for Zambia’s mining industry, and a better future for all Zambians.
Richard Musukwa is Zambia’s minister of mines.