Critics challenged to produce the evidence!

Chamber of Mines president Nathan Chishimba has dismissed as malicious nonsense allegations that “Zambia loses about US$3 billion annually through illicit financial flows (IFF) mainly perpetrated in the minerals sub-sector”.

The allegations were made in an article in the Daily Mail (24 July 2017), featuring Centre for Trade Policy and Development (CTPD) director Isaac Mwaipopo. The article purports to be based on the findings of the latest Financial Intelligence Centre (FIC) report.

“Even a cursory reading of the 2016 report will show that there is no substance to the allegations,” said Chishimba.

Chishimba proceeded to dismiss the allegations, point by point:

  1. The FIC 2016 report records a figure of potential loss of ZMW 4.6 billion, or approximately $400 million. Whilst this is a large amount, it is a fraction of the $3 billion regurgitated in the article.
  1. The report is not on the mining industry, but on the general Zambian economy and covers all industry sectors. There is no mention anywhere in the report that “these losses are mainly perpetrated in the minerals sub sector”.
  1. The allegations imply that it is corporate multinationals that are behind most of the suspicions of irregular transactions. However, the FIC report states that the majority (84%) of them relate to transactions by individuals; only 16% are from corporations.
  1. It is corruption that is the big-ticket item, not alleged mineral theft. The report says the amounts linked to suspected corruption are “significant” – over ZMW 3 billion, 76% of the total potential losses. “Analysis revealed that these were predominantly linked to public procurement contracts,” the report says.
  1. The report shows that the number of suspicious transactions has declined by 6% on the previous year; and the findings suggest that the number would have been even lower if it had not been for an unusually high volume in August, which the report says might have been linked to the Zambian general election.
  2. If the allegations of billions of dollars of annual theft by the mining industry were even remotely plausible, then the report should logically have uncovered evidence of this in their trend analysis. There is no such evidence.
  1. The report notes what it calls “a practice in which Asian nationals purchase copper ore from small-scale miners on the Copperbelt, which they subsequently export to entities that are known to be shell companies or are registered in tax havens”. However, there is no indication in the report that this is a major problem, or that the amounts involved are in any way significant. More importantly, it is an activity confined to particular individuals, rather than Zambia’s established mining companies.

“The portrayal of the mining industry as robbing Zambia of billions of dollars is dramatically at odds with the actual findings of the report,” said Chishimba. “CTPD, and civil society generally, have a key role to play in highlighting corruption, so it is a real pity that they have not got to grips with the actual contents of this report, which indicates large-scale corruption in public procurement.”

Chishimba said the alleged theft of $3 billion of refined copper stretches the bounds of credibility because of the sheer volume of metal involved.

Assuming an average price of $5 000 a tonne for 2016, it equates to some 600 000 tonnes of refined copper annually. To put that in perspective, all Zambia’s copper mines together produced around 750 000 tonnes in 2016.  These figures therefore suggest that nearly 50% of Zambia’s annual copper production is unaccounted for. Firstly, it would require two massive ‘ghost’ smelters, each the size of the one at Kansanshi, to secretly process this additional quantity of copper; secondly, to transport it out of the country would require between 50 and 200 trucks leaving the country unnoticed every single day of the year.

“These allegations are so implausible, that even a hardened conspiracy theorist would think twice before believing them,” said Chishimba. “I challenge the CTPD, or anyone else, to produce the evidence.”

He added that the Chamber of Mines was not the only organisation in Zambia to question these constantly recurring allegations that the mining industry was stealing $3 billion in mineral production every year that doesn’t show up in official statistics.

In an interview with the online mining publication Mining for Zambia earlier this year, the allegations were roundly dismissed both by Mooya Lumamba, Director of Mines at the Ministry of Mines and Mineral Resources, and Ron Smit, chief consultant on the Mineral Production Monitoring Support Project, a four-year programme funded by the European Union.

“These allegations are wholly untrue, and come from a position of ignorance – not just about how copper is mined and produced, but how our mineral monitoring systems work,” said Lumamba in the interview. “It’s alarmism.”

Smit agreed. “We have noticed that this particular allegation has been recycled in the media for several years now, but no one ever offers any proof.”

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