Economist Trevor Hambayi says Zambia’s mining production will continue dropping due to increasing production costs, VAT refund disputes and dwindling copper prices on the international market.
And Hambayi says government should come up with a mining development fund to empower local small and medium enterprises in the sector as an effective long-term solution to the VAT refunds crisis.
Meanwhile, Hambayi says Zambia needs to make a strong decision that will speak to the interest of the nation even if it means shutting down the mines.
In an interview, Hambayi observed that there were a lot of prevailing circumstances which would cause mining production to keep dropping.
“What is obvious is that you hear this from the mines and the taxation that they have is having to contract their production, hence reducing production because of the taxes that they are incurring. And you have obviously now the issues around the power deficit. Now, this is going to increase, it’s the same as a tax that is also going to reduce the production. Now, the third aspect is that the price of copper on the international market is dropping. Then the last one, obviously, is the issue around the dispute between government and the mines over VAT refunds, so all these things speak negatively to the production of the mines whereas from our side, as a country, we are saying that the mines are not giving us sufficient returns. So, it’s a very difficult situation, but in essence, all that is going to reduce production,” Hambayi said.
And Hambayi said empowering local businesses in the mining sector would solve a lot of problems.
“I have always said one of the solutions to this problem, which is long-term, is that we should have a mining development fund that supports the local SMEs who are in mining so that in 20 years’ time, a shift of power of mining in this country would have moved from the big ones to just as many local Zambians. Mining these disputes will not be there. And that is, for me, the biggest challenge because the mines will continue to squeeze for greater profits and the country will continue to push for them to give us more, they cannot seem to be finding a balance,” Hambayi said.
Meanwhile, Hambayi said there was need to made hard choices in order to protect Zambian interests in the mines.
“There is no middle ground, from my perspective. I think that the mines have ruled this country for too long; we, as a country, need to make a decision, even a hard decision that if they (mining companies) are not speaking to our interests, then they must leave! We cannot continue to lose our resources when we gain nothing and they are the ones who are gaining, we subsidize them with fuel; we subsidize them with electricity; we subsidize in terms of taxes…what are we getting as a country? Nothing! So, we really need to decide to make a strong decision that look, if it means that the mines want to shut down, let them shut down, but we need to start speaking in the interest of the country,” said Hambayi, who is a senior partner at the Development Finance Associates.
Government’s outstanding VAT refunds owed to at least five mining companies, including Konkola Copper Mines (KCM) Plc, stands at around K2.8 billion, according to Finance Minister Dr Bwalya Ng’andu.