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FQM blames government for mine job cuts

FIRST Quantum Minerals director of operations Matt Pascall says massive job layoffs especially on the Copperbelt are a result of frequent changes to mine tax laws, which hurt investors.

And Pascall says there is evidence to show that Zesco’s installation of two new additional turbines at Kariba North Bank led to increased load-shedding as they were used outside normal plans.

Meanwhile, Pascall says most taxes from private companies do not help the government create new jobs as they just go towards civil servants’ salaries and paying interest on Eurobonds.

Speaking at the just-ended sixth ZIMEC conference, Pascall said at least eight significant changes to the mining fiscal regime seen since 2008 had severely weakened investor confidence in the country’s lifeblood.

He said the real problem with frequent mine tax changes had been the instability and unfavourable investment climate created, which had discouraged investors from making further investments in the mining sector.

“Since 2008, there has been some wobbles and those wobbles have continued and more recently have contributed to disinvestments as you have seen with massive job layoffs on the Copperbelt,” Pascall said.

He also said it was not correct to measure the industry performance by the amount of taxes it paid to the government but to include its direct contributions to the country’s economy such as through jobs and other supporting industries.

According to Pascall, in the last eight years, Kansanshi Gold and Copper Mines had paid US$3.2 billion in taxes, which excluded the US$270 million Zambia Revenue Authority (ZRA) owed it in VAT refunds.

“Those jobs and investments are created by the private sector. If that money is drawn out [from the private sector] in the form of taxes, which is often seen as a measure of how much the industry contributes to the country. I am afraid most of that money just goes in paying civil servants’ salaries and paying off the debt on the Eurobonds,” Pascall said.

“And so not a lot of it [tax revenue] is available to create employment. In fact, I will hesitate to argue that governments worldwide create jobs because everyone in the government sector just absorbs tax.”

And Pascall said there was evidence to show that excessive usage of water in Lake Kariba after Zesco installed new turbines had contributed to load-shedding in the country as there was increased water outflows in the lake.

“Every single year in history, since that dam was built, the water recharges after December; there is one exception and that was last year,” Pascall said.

“From December [last year], the water level declined and the reason for that was in December, two additional turbines were commissioned at Kariba and they should have just been there to produce power between about 6 pm and 9 pm when there is high demand but…[some] reports indicate that in fact, these turbines were run 24/7 and you could see that in the lower Zambezi, the water levels were a lot higher than [what was] being experienced previously.”

He challenged Zesco to explain how it spent the money from the extra power generated from the two generators.

“That power [from the two generators] was certainly not consumed in Zambia. Presumably it was exported and at that time, South Africa was in a situation where it was suffering a lot of load-shedding. If that power didn’t go down South [Africa], presumably it was sold and it would be interesting to know where the money went. It also would be interesting to know if it was worth doing that when it put our own mining industry at risk,” said Pascall.

 

Source – The Post Zambia