ZAR Attack On Foreign Mining Companies Damaging Further Foreign Investment
News that Zambia’s taxation office, the Zambia Revenue Authority (ZRA), has suddenly foisted a $7.7bn tax bill upon First Quantum Minerals (FQM) should come as no surprise when considering it against the backdrop of the Lungu government’s disastrous efforts to raise more revenue for the country.
As tempting as it is to further tax international mining companies, this short term thinking only leads us into more trouble further down the line. The rationale behind this latest tax is that FQM was labelling spare parts (usually subject to a 15-25% duty) as mining parts, which are duty free. Yet, no conclusive evidence as being produced and it all smells rather fishy when taken against this Government’s recent failure to secure a much needed IMF deal.
Zambia needs foreign investment like never before at the moment, yet this latest punitive measure is only likely to keep international capital away from Lusaka. It will sadly be seen as further state expropriation.
Even if the government is successful is securing additional funds from FQM - who are already Zambia’s largest tax payer - this measure is just a sticking plaster that covers up the real issue here; that the government need to fundamentally alter the way it approaches management of the national economy and the way we are seen to do business. The desperate state of the national finances and rampant governmental mismanagement are deterring bodies like the IMF from coming anywhere near us to help us out.
Zambia’s total public debt at the end of August 2017 stood at $12.45 billion, representing 47% of gross domestic product. Last month the IMF rejected a bid from Zambia to borrow $1.3bn, saying that our proposed borrowing plans ‘continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability.’ This surely is what we have to overcome.
Taxing those investors already hear more now is like giving a starving man an apple. Fine; he can eat it now but he will still be hungry later. However, having the bravery and initiative to tackle the historic mismanagement of the economy and transform it into a responsible and prudent one that works for all Zambians and is respected by international bodies like the IMF and so enabling us access to its loans is like giving that starving man an entire apple tree that he can plant in his own garden and feed his household for months and years. Surely that is the better route?
By seeking this tax bill Lungu’s government damages the prospect of further foreign investment and kicks down the road the important issue of transforming our economy. Zambians surely deserve better than this.