Zambia to engage IMF in Bali this week at Annual Meeting
Africa’s second largest copper producer, Zambia, this week joins the world in attending the Annual Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group ( WBG) in Nusa Dua, Bali, Indonesia from the 08-14 Oct. A delegation led by ex-banker and current Finance Minister Margaret Mwanakatwe will be in Bali to attend these key event. Mwanakatwe is expected to discuss with the Washington based lenders officials, on the side-lines of the annual meetings, issues relating to the copper producer’s public debt with the hope of rekindling negotiations on a possible bailout package.
The Association of Mines Suppliers and Contractors have welcomed the changes to the tax regime in the mining sector and noted the positive pronouncements made in the National Budget that was presented by the Honourable Minister of Finance on Friday September 28th, 2018.
In a reaction by AMCS through the Association president Augustine Mubanga, released last week, he noted with happiness the changes to the mineral royalty tax by increasing 1.5% on each sliding band and the 10% rate that will trigger at USD$7,500/MT and above.
Mubanga said that these changes will ensure that benefits in terms of tax collection are derived and will ensure that the people of Zambia benefit from their resources. Mostly notably is the increase in mineral royalty tax from 5% to 8% on cobalt (USD63,000/MT: LME)– the blue metal.
“We think that government could have done more on this tax, considering the fact that mineral royalty tax on cobalt has not changed in a long time, a fair adjustment of 10-15% was going to ensure that maximum revenue collection is achieved”, said Mubanga.
The Association hopes that the mining houses will not use this increase as an excuse to deny Zambians business, but will encourage these mine houses to even do more in supporting local suppliers and contractors to access even more opportunities.
Mubanga noted that the intention by the Honourable Minister to consider bringing the act to parliament for amendment and that the association has advocated for reforms in the mining sector as opposed to Nationalization.
Mandatory Listing of Mines on LuSE
He said that reforms such as mandatory listing of the mines on LuSE will provide an opportunity to Zambians to own shares and participate directly into the running of the mines, and also government can take advantage and increase its shareholding through ZCCM-IH.
A proposed regulated 40% of procurement to Zambian suppliers
Mubanga further proposed that a regulated 40% of procurements in the mining sector is given to local Zambian owned supplier and contracting companies. This will ensure that more forex is retained in the country.
“The mining sector spends between US$4.5 - billion annually and this includes capital expenditure spend – CAPEX. If 40% is captured it will increase economic activities thereby increase contribution to GDP and employment. The mines have taken advantage of this gap to procure 80-90% of goods and services from outside. The local content proposal should encompass procurement of 40% from local contractors and suppliers.
Mubanga further stated that marginalization of the mines embarked on local companies denies business to them intentionally and this behaviour can be restrained by putting up stringent laws that should protect the local suppliers and contractors.
MCA supports penalty fee on transfer pricing
Meanwhile, the measure taken of increasing the penalty fee for transfer pricing to is a welcome and commendable move and the association must be aware of the fact that prosecuting incidences of transfer pricing crimes are very difficult.
Copper contracts on sales to be registered in Zambia
The Association proposes that selling contracts of copper should be done here in Zambia, ZRA must be a witness to these agreements and registered with both BOZ and ZRA, this can help ZRA and BOZ forecast revenue well.
He further said that all contracts of sale of copper that have been done outside the country must still be registered locally for this can promote transparency and reduce suspicion. Adding that the association welcomes the introduction of sales tax over VAT as this will enhance revenue collection from the tax payer.
Mubanga appealed to government that as an association whose membership deals with the mines; the issue of VAT is very prominent. Enough time should be given for changeover, because this will enable companies to upgrade their software’s, manage the transition in terms of training and if the tax payer is dealing in a variety of products that might attract different tax rates and the management of sales tax might be a challenge from the initial point.