The continued implementation of Zambia's latest mining tax
regime, introduced in 2008, is to blame for the job losses and
reduced investments in the country's copper mining sector, Zambia's
opposition leader told Dow Jones Newswires late Thursday.
According to Michael Sata, president of the Patriotic Front,
Zambia's largest opposition party, the tax regime has hiked tax
rates in the sector by more than 50%, increasing mining costs. A
dispute between the government and mining companies over the regime
also threatens to derail future investments in Zambia's copper
mining sector, he added. Zambia is Africa's largest copper
producer.
"No one in the government cares about the jobs that are being
sacrificed by the delinquent and illegal tax regime," he said.
Zambia introduced the latest tax regime after amending its Mines
Act in 2008. The amendment also abolished mining development
agreements signed with international companies operating in the
country, a development that has since put the government on a
collision course with mining companies, with some threatening to
seek legal redress.
Zambia's mining companies laid off more than 10,000 miners
starting in mid-2008, after global copper prices dipped. Although
around 2,500 miners have since been rehired following the reopening
of the Luanshya Copper Mines, most companies are yet to rehire the
remaining 7,500 redundant miners, a situation Sata blames on the
tax regime.
Last month, Sata wrote to President Rupiah Banda asking for the
scrapping of the regime in order to save jobs and attract
investments.
Earlier this year, the U.K.'s Standard Chartered Bank warned
that the tax regime had created fiscal uncertainty, threatening
future mining projects.
"Mining companies are now reacting to the tax regime uncertainty
by winding down investment activity...new investment--which may be
necessary even to extend the current life of more marginal
mines--has stalled," Razia Khana, Stanchart's regional head of
research in Africa, said in a report earlier this year.
Industry officials say that with increased costs of production,
mining companies have adopted cost-saving measures which include
labor outsourcing, a situation that is threatening to stir miners'
unrest.
Last week, Konkola Copper Mines, Zambia's largest copper miner
by output, was forced to call off plans to outsource labor at its
Nchanga unit after union representatives threatened to hold
protests over the decision.
Copper mining companies operating in Zambia include
Toronto-listed First Quantum Minerals Ltd. (FM.T), Equinox Minerals
Ltd. (EQN.T), London-listed Vedanta Resources PLC (VED.LN) and
Swiss commodity trader Glencore International AG.
-By Nicholas Bariyo, contributing to Dow Jones Newswires;
256-75-2624615 bariyonic@yahoo.co.uk