Some stories really hurt. This one in the FT does:
Zambia, Africa’s biggest copper producer, appears poised to drop plans to secure more of its mineral wealth.
The move could mark the start of a retreat from resource nationalism among poor countries with plentiful commodities.
A decision on the introduction of a new mineral tax regime, expected by the end of the week, will follow pressure from mining companies threatening to delay projects and cut jobs after the precipitous fall in global metal prices. As a result, executives and analysts expect the government to shelve a proposed windfall tax when it reveals Friday’s budget.
Any move is likely to prove a bellwether for other African countries which are dependent on ores, gems and minerals for the bulk of export earnings.
This is a disaster if it’s true.
I know the copper price has fallen from $9,000 a tonne a year or so ago to $3,000 a tonne now. But let’s be clear: these taxes are paid as a percentage of price. They’re not flat.
But as the FT notes, the companies fought back:
Even though the new taxes and royalties were no harsher than standard rates worldwide, outrage ensued. “They flew too close to the sun and the wax melted,” said one mining executive.
Fred Bantubonse, general manager at Zambia’s chamber of mines, said: “We have taken it very, very seriously. I’m aware of projects that are on hold pending the outcome of our discussions.”
Companies including the biggest copper producer, a subsidiary of India’s London-listed Vedanta, began intense lobbying. Many of Zambia’s mines are deep and flooded: costs, they argued, are high enough without added tax burdens.
This is absurd: what is clear is that revenues are not in any way affected by costs. And the world demand for copper will not end. If it cannot be produced now it will be in the future. And a price variable component to the tax would solve all problems, and is possible. As it is the FT concludes:
Reverting to the old terms would reduce the government’s tax take by more than one-fifth. The money was to have been ploughed into an infrastructure fund designed to help diversify the economy.
Instead, the expected concessions will mean that the state risks seeing little of the benefit once the commodity cycle turns upwards again, said Kapil Kapoor, head of the World Bank’s Zambian office. “This is a perishable resource. Once it’s gone the country has no more access to it. It should be benefiting from it more now.”
He’s right. He’s oh,so right.
And I quite literally want to cry at the continuing exploitation of the people of Zambia for the benefit of those in developing countries, and the wealthiest in the world who own these companies.
Now is not the time to retreat from delivering justice to the world’s poorest people. They need it more than ever now. This tax is a way of ensuring that they get treated just a little better. But that’s important, none the less.
So I beg Zambia not to back down. The world needs you to set the right example, now.