EITI urges Zambia to review mining contracts
Lusaka ‑ The Zambian government needs to review contracts of all mining companies operating in Africa’s rich copper producer to ensure effective tax compliance and enable the state realise real returns from its mineral wealth, economic commentators say.
In recent years, Zambia has lost millions in revenue earnings from copper and other minerals the country is endowed with because of lapses in taxation from mining companies.
This has prompted the Government to formulate a law in the 2013 budget in which all mining companies will be obliged, by law to declare their copper production levels and proceeds realised from the metal, including copper for accountability reasons.
Extractive Industries Transparency International (EITI) board chairperson, Claire Short, noted that while Zambia seeks to maximise revenue collection from mining companies and ensure transparency in tax collection, there is need to review all contracts signed between the Zambian government and all mining companies.
According to Short, the government would fail in its duty to ensure proper accountability and tax compliance, unless all development agreements with various companies were reviewed and streamlined.
“It makes a lot of sense to revisit the mining agreements signed with all companies for tax to be systematic,” said Short in an interview with The Southern Times in Lusaka recently.
Short, who was in Zambia for an EITI board meeting, noted that while the Zambian government was EITI compliant ‑ making it the 15th country in the world ‑ it was important that all companies obliged to render tax from their proceeds complied with the existing taxation laws.
“Transparency will only be tenable if all mining companies are willing to declare their taxation in a transparent manner and willingly.”
Short added that Zambia’s EITI compliant status would help ensure that the mineral resources are well managed for the benefit of the people and that Zambia was able to achieve its global standards of ensuring transparency of revenue from mining companies.
She lauded Zambia for its transparent approach on the mineral resources, as demonstrated in the 2009 reconciliation report.
However, she implored the media to help publish the figures so that the public could understand and know how much their country received from the oil, gas and mining companies and that in recent months there was considerable improvement in the way the declaration and management of mining revenue was being done.
Zambia was the first country to become EITI compliant in the East African region and the 15th country in the world. Mozambique was also declared an EITI-compliant country last month, joining Zambia and making it the 16th country.
“EITI compliance means that the country has an effective process for annual disclosure and reconciliation of all revenues from the extractive sector, allowing citizens to see how much their country receives from oil, gas and mining companies,” Short added.
Despite the latest report indicating that the local mining sector brought in more than US$500 million in revenue to the Zambian Government in 2009, Zambia had not benefitted, as it should from the plentiful copper and other mineral resources.
Zambia’s failure to maximise returns has been attributed to poor governance and ungenerous contracts signed between the Government and mining companies.
“EITI compliance is a basic platform that encourages the transparency necessary for Zambians to be able to agree how best to address the challenges and it is an important step on the way to better management,” Short stated.