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Zambia is not in a debt crisis – EAZBy Mukosha Funga on 11 Sep 2018
Economics Association of Zambia president Dr Lubinda Haabazoka says the country is not in a debt crisis and it has room to borrow more.
And Dr Habazoka says government should consider nationalizing mines which are not making any profits.
Speaking on ZNBC’s Sunday Interview, Dr Haabazoka said Zambia was not in a debt crisis.
He said the best route for the country to take was to refinance debt that would provide room to borrow more.
“Do you know why it (our debt) is manageable? Because I have heard stories that no ‘we are in a crisis’ and when I tell people that there is no crisis but yes our debt is very high, they start saying I have been bought. When I was saying ‘don’t get loans’, people were saying ‘you are in the opposition’ so I don’t know now where I stand. I am standing in the middle. Now government is able to meet its obligations. Our laws are very clear, when government gets revenue, the first thing you look at is where you are supposed to pay. So we are paying now, civil servants are getting their salaries on time, government is meeting its obligations. Yes, there are challenges with contractors and what not but that just tells you that that’s not the priority of government. The priority is debt service, salaries and other government expenditure. When you look at our credit rating, it was recently downgraded. Why? It is because we are able to meet our obligations now but there is concern that we will be unable to pay the Eurobonds which are going to fall due in the next five years, because those are bullet payments. So the solution to the problem is to restructure and refinance the debt,” Dr Haabazoka said.
“I was for a sinking fund years ago but now I am against a sinking fund because time has passed for us to have enough resources in a sinking fund. We have a lot of projects that are competing for government resources…what government should do is refinance the Eurobond.Get other loans that are conventional loans which we are going to start paying interest and principle over time. For example, after 25 years, we are able to service debt. What is the advantage of that? The amount of money that we are spending monthly on servicing all our debt on average is going to reduce because instead of paying that amount in a short period of time, the same loan, you have increased the tenure therefore increasing the repayment period. We can actually borrow more because now we are able to pay the loan. So we can play around with the tenure, the interest rate, getting cheaper loans and even actually borrow more. Because if you get a loan of say 50 years, I know people will say you are transferring it for the future but you are able to service the debt and build infrastructure so why not?”
And Dr Haabazoka advised government to nationalise non profit making mines.
“So after refinancing, we need to look around for ways we can locally generate revenue. So where can we get locally generated revenue? Unfortunately, it’s only the mining industry. God knew why he put copper and cobalt in the soil. Look at the mining companies, we are spending over a billion dollars every year refunding them VAT. Honorable Chikwanda did not pay them VAT for about six to eight months. We were owing them over $680 million in VAT Refunds which we are still actually paying. Why are companies refunded VAT? So that government reduces their cost of doing business. So as EAZ we are saying as government, can you stop because the mines have not been posting profits, they have not been paying corporate income tax, the only thing they pay is mineral royalty tax. In 1990, ZCCM made a profit of $180 million, from 1997 to today, the mines have never produced any corporate income tax excess of $180 million. So let’s change, instead of refunding the VAT, let us do this, if we sell copper for example of $100 million, we are going to say $16 million, which is 16 per cent VAT, $16 million of it is not taxable, it is not tax deductible, we are only going now to look at the remaining 84 per cent. From there we remove your expenses, we remove the mineral royalty whatever, then we come and tax you. Government is going to save in excess of one billion dollars,” he said.
“Government presence in especially the mining sector it very important. I think it is high time we started taking back mines that are not performing because if the private sector is unable to run the mine, they are doing a disservice to the nation.”
Asked if he was proposing that government should nationalise the mines, Dr Haabazoka said, “Those that are not profitable, yes!”
Asked how that would sit with private investors, Dr Haabazoka said they’d be forced to pull up their socks.
“They know that if they are not going to post profits, government is going to come for us because you know, we are not talking about government grabbing a cooking oil making factory, that is wrong because if you are not producing oil, another company will produce. But this is copper, which is not growing. This copper is limited in the ground and this copper is supposed to benefit you and me so we should be able to mine it to the benefit of the country,” he said.
“ZCCM, for example, the infrastructure we are talking about now was built by ZCCM, the roads, the schools, the hospitals, in 1990, one of the most difficult years in Zambia’s economy, ZCCM made a profit of $180 million, supporting Power Dynamos, Nkana, Kafilonda, everyone, supporting all those clinics, schools, parks, but they still made a profit. So sometimes you sit back and say ‘gentlemen, this is not working’…so for us to look like we are not just nationalizing, we need to go and get those mines which are not making a profit. If you are making a profit, continue operating but you continue fighting with CEC for non payment of power, we are buying electrify from Mamba at 13 cents and selling you at 6 cents when the consumer in the household is buying at 7 or 8 cents?”
Asked if government was able to run a mine, Dr Haabazoka replied in the affirmative.
“Government is able to run anything,” said Dr Haabazoka
About Mukosha Funga
Mukosha Funga is a Zambian journalist interested in good governance and anti corruption reporting.
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