Buried Treasure

The Zambian Economist has a good article this week about the difficulties Zambia’s Mining Policy is facing especially in regard to taxation. The Mines Minister has promised an enabling environment for mining investors to sustain their operations by revisiting taxation. First Quantum Mining has recently announced it was holding back from investing $1 billion in Zambia. Two weeks ago there had been a suggestion that mining taxes would have to go up to cover a deficit in Government spending. For Zambia it is a case of once bitten twice shy and keeping her distance from the World Bank/IMF Structural Adjustment Programmes. This announcement led to the usual barrage of self-interested, special pleading from the Chamber of Mines that a variable profit tax is the same as the windfall tax………… Higher taxation will put the mines out of business ………..etc, etc.

 

So it was a surprise to hear that the GRZ will refund in stages US$600m in VAT to mining companies. This had been withheld as the companies had failed to provide a transparent paper trail to the end-user of zero-rated copper exports. The money to pay for this will come from the recently acquired US$1 billion Eurobond, US$700m of which is apparently still sitting at the Bank of Zambia.

 

Another paper called PV Zambia Report - Copper Colonialism makes the point that politicians and newspapers here as elsewhere in the world often portray multinational company investment in our countries, as some sort of benevolent, altruistic, loss-making job creation-scheme. This of course could not be further from the truth.

 

Extractive industries come to take advantage of low taxes and neo-liberal policies which allow them to ruthlessly exploit natural resources, leaving behind corruption and environmental and social degradation which their minimal tax contributions and so-called social responsibility programmes do not come close to covering. Sub-Saharan Africa is a 'global net creditor', contributing billions of dollars to the world economy each year. This comes from 'cash flight' in owed taxes, mispricing, overestimating costs and under reporting production. Sub-Saharan Africa and other places we know well, are not the burden on the rest of the world we are made to believe. This misuse and exploitation of natural resources is plain and simple extractivism. It is not investment, aid or charity.

 

Zambia's copper is a finite resource with economists suggesting that it will be exhausted anywhere between 2020 and 2100. This is highly unlikely, and merely shows how companies and financiers manipulate figures to create investor confidence, enable speculation or to spread fear, uncertainty and doubt.

 

What is true is that there is limited window of opportunity to reverse the trend of losing rather than gaining from this precious resource, making it last, or planning for an economy without it.

At present Zambia produces 1/16 of the world’s copper. It is the eighth largest producer in the world. Copper provides 75% of our export revenue but only 2% of domestic revenue! The world price is $7 300.00 per tonne and in 2012 Zambia produced just short of 1 million tones.

 

Is this resource benefitting the people of Zambia under multi-national company management? If not, how can the Zambian people and the Government gain the maximum benefit from this enormously valuable national asset? There are no simple answers, but instead these are crucial questions to address and consider. Missing information is needed to enable informed debate to help Zambians decide what steps to take. Accurate information could contribute to developing a 'critical consciousness' in Zambia, which examines and creates new models of development, that will serve people's needs. Critical consciousness is necessary to prevent Zambians from being short-changed by neo-liberal rhetoric, which represent little or no change from the old extractivist regime, backed by the same interests.

 

Finally, Zambia is not served well by its NGO culture, this also should be critically re-examined. NGOs employ around 37 500 people in Zambia compared with 75 000 in mining. Many NGOs are out of touch, living and working in gated compounds, driving 4x4s, but declaring anywhere East or West of the line of rail as the bush! They are in receipt of foreign donor aid funding and so are accountable to the donors and not the people they are supposed to serve. They deliver top –down projects that were planned in Head Office to communities and that bring no significant lasting change as they are generally unconcerned with local priorities or needs. In fact ironically they often use, suppress or co-opt existing grassroots movements instead of nurturing them.  They spent most of their time doing surveys, holding workshops, gathering evidence with no follow-up. They seem more concerned with ticking the right boxes so as to get the next tranche of funding. 

 

The notion of 'civil society' should be expanded to include community groups, marginal trade unions and people's movements. The growth of these bodies, which are at the heart of true democracy, should be encouraged and valued. Mass movements are important to secure people’s rights, as workers and as citizens, to change politics and policies and bring into being a culture of questioning and activism. At community level Zambians can learn from successful examples of social movements in India, North Africa, Latin America, Europe and elsewhere, and begin a bottom-up process of redefining 'progress' and 'development' as concepts which will truly serve Zambia's people.