‘Bank it Here!’ – Zambia says miners must use local banks
Windhoek – Mining companies in Zambia, Africa’s top copper producer, will be legally required to deposit all earnings from exports of all minerals into Zambian commercial banks first before they can take the money offshore.
The Zambian government says this will give it oversight over mining companies’ earnings from the total tonnage of exported minerals, vital information on revenue flows which it argues would be useful in calculating taxes and or when deciding on new tax regimes.
These requirements form part of amendments of Banking of Zambia Act, which have already been agreed to by President Michael Sata and are ready for implementation.
Mines Minister Yamfwa Mukanga said that remitting mineral proceeds into local banks would also help to buoy the strength of the Zambian currency, kwacha.
Mukanga said that earnings from exports of minerals would be deposited into Zambian banks before they are paid out for dividends, mining equipment procurement, services and any other related transactions.
“We are not saying that by depositing the money into local banks it becomes our money. Its mining companies’ earnings but that money should first come to Zambia, we get our tax and if they then want to take it offshore, that is their business,” Mukanga said.
The Zambian government is also legally empowering its central bank to monitor foreign owned mining companies’ financial transactions in a bid to check losses to the state.
“This will make it easy for us to get our tax and to ensure that we are getting the true value of what is due to us,” Mukanga said.
In addition to boosting the value of the local currency, Kwacha, government says its major thrust is clamping down on under-invoicing by mining companies.
“We have been trying to have a lot of accountability in the mining sector … there has been a lot of under-invoicing and there isn’t much transparency in the mining sector,” Mukanga said.
The Zambian Mines Minister also bemoaned what he termed glaring discrepancies in the declaration of mineral production volumes by mining companies from the sites has dented government’s confidence in the industry, dominated by copper mining.
In some instances, production volumes declared by mining companies contradict government’s own findings, the minister said.
While some companies state their annual production in terms of copper concentrates produced, other companies declare tonnage only after smelting the copper.
Mukanga said discrepancies have made it difficult for the state to calculate mining tax and have also stoked suspicion that companies could be understating their production.
“The production figures are not correct and that is the reason we are not getting proper revenue.
Companies quote one figure, we quote another and there is no reconciliation,” Mukanga said.
“We should have confidence with every figure announced by mining companies, but we currently don’t. If the production figures are reconciled, it would make it easy for government to calculate tax. We depend on that revenue.”
He said that government would now compel companies to declare finished copper, as actual production.
“We have always assumed that the figures they are giving us are for finished copper.
Government now expects companies to use finished copper as the production figure and reporting on production figures should now be done at an agreed particular stage,” the mines chief explained.
While Zambia is taking a cautious approach to state ownership in mining projects, the government will make sure that it owns no less than 25 percent equity in all new mining projects.
Mukanga, however, said that Zambia’s government has no intention of getting directly involved in the copper dominated mining sector.
The government hopes to see its shareholding in future mining projects going up to 35 percent, but its role in the mining sector will be limited to being a minority shareholder and regulating the mining environment.
The state mining investment company, ZCCM-IH, has shareholding ranging from 10 percent to 21 percent in almost all mining companies.
Mukanga said that will change with new mining projects as government has no intention of owning less than 25 percent shareholding.
“For the new mining projects we have to discuss the shareholding level for government participation. We are not going back to the already existing partnerships.
That is up to ZCCM-IH,” Mukanga said.
“On the new mining projects we need to start at 25 percent going up to 35 percent because we are the ones providing the land and the minerals.”
The government has ruled out nationalisation of mines, a policy which Mukanga admitted nearly brought the copper industry to its knees in between the 1970s and the 1990s.
“We have come full circle as a mining country-we nationalised mines and copper production fell to around 250 000 tonnes per year.
“We decided again to privatise and this has resulted in the recovery of the industry. Last year copper production was above 820 000 tonnes and we are getting closer to our target of more than one million metric tonnes.
“It’s a system that is working and we have to leave the mining sector to private investors. Government will play its role as regulator and indirectly a minority shareholder,” Mukanga said.
Last year Zambia produced 824 976 tonnes of copper and 5 436 tonnes of cobalt.
Major mining houses in Zambia include Konkola Copper Mines, owned by Vedanta Resources; Mopani Copper Mines, a unit of Glencore International; Lumwana Copper Mine, owned by Barrick Gold; First Quantum Minerals’ Kansanshi; and China’s CNMC.