Public deserves an informed perspective on mining tax
This week the Chamber of Mines issued a report entitled “A guide to understanding Mineral Royalty Tax (MRT)”, and made it available free of charge at our offices, and as a download on our website.
It comes barely three weeks after the government announced its intention to unveil a new, more accommodating MRT regime based on a sliding scale which varies with the copper price. We welcomed this news, and commended the government for trying to create a more responsive tax regime, that takes some account of the unprecedented pressures currently facingthe industry.
So why is the industry releasing this booklet? Well, the answer is simple. MRT is a hot topic of public debate, but few people really understand the concept, or how it actually works.
This had led to the expression of opinions that although sincerely held, are nevertheless damagingly inaccurate. For instance, it is commonly expressed that any reduction in taxation rate is, firstly, a result of undue arm twisting by the mining industry, and secondly, will have a negative impact on Zambia’s development (i.e. the Government will have to borrow more, to fill the gap). These are truly harmful fallacies that betray a lack of economic (and political) understanding, and frame the relationship between the industry and government as an adversarial ‘zero sum’ game, where one must lose if the other is to gain.
Understandably, people feel strongly about our nation’s resource endowment, but the combination of strong emotion and limited information is a recipe for disaster.
Constructive debate and criticism requires a minimum degree of shared knowledge. How can you and I argue the respective merits of two football teams, unless we have a shared understanding of how the game is played?
To date, the mining industry has not done enough to engage with the public, to impart information and education on the key industry and wider economic issues facing Zambia.
This booklet is therefore part of a wider programme of initiatives to provide insight and information to the Zambian public on the key issues. We started this process in December, when we held a media conference on the current commodity crisis and its impact on the Zambian mining industry. There are further initiatives planned for the months to come on all mining issues, not just tax. We believe this will lead to a higher level of debate and public awareness, which can only be a good thing.
As is often said, mining is a long-term game. In the right environment, mining operations can be productive over many decades. The ‘right’ environment is a combination of stable and good governance, supportive investment, strong operational management and a prosperous, peaceable society. The long-term needs and interests of the mining industry are therefore entwinned with those of Zambian society.
We firmly believe that the diversification of Zambia’s economy beyond copper mining – a long-term imperative for our society – can only be achieved if the mining industry is nurtured, so that it may be a strong springboard for future growth, rather than a piggy bank to be drawn on until empty.
For Zambia and its mining industry to prosper in the long-term, certain steps must be addressed now. There is an urgent need for new investment in the mining industry, to improve or expand existing mining operations, and to open up new reserves.
A number of major investments have been on hold since 2012; unless these are urgently encouraged, the industry will commence an inevitable and irresistable decline, the effects of which will be felt from around 2019 and for many years thereafter.
This decline can only be arrested if there is radical improvement in the stakeholder relationship which feeds in to the creation of stable, good mining policy and governance structures.
This is not just a responsbility of government. For our part, we recognise that there is a need for far greater transparency, and regular stakeholder engagement, than has hiterto been the case. This booklet is just one proof of our intent.
Mr Nathan Chishimba is President of the Chamber of Mines of Zambia.
‘A Guide to Understanding Mineral Royalty Tax (MRT)’ can be downloaded from the Chamber of Mines website at: