At the ground-breaking ceremony for the Konkola North copper project, President Rupiah Banda on 15th October reiterated his government's commitment not to reinstate the windfall tax provided for in the 2008 Mining Act, which was abandoned in 2009 following the collapse of global copper prices. Banda's statement followed a similar commitment from Finance Minister Situmbeko Musokotwane at the Zambia Association of Chambers of Commerce and Industry (ZACCI).
Chris Melville, Africa mining consultant with Menas Associates today commented:
“Consistent messaging from the government on this issue will be welcomed by mining companies ahead of the election in 2011. Differences of opinion within government were a key factor in the haphazard introduction of the new fiscal framework in 2008 and it is good to see senior members of the government singing from the same hymn sheet.”
“However, political pressures for a greater tax-take are unlikely to go away, with key constituencies – notably the churches and the mineworkers' union – pushing for further revision of the fiscal terms enjoyed by mining companies. These calls are likely to become more vocal as the election campaign approaches.”
“At present, Banda has little freedom of manoeuvre – the opposition PF has switched its stance on the windfall tax, accusing the ruling party of taking an anti-business stance, and Banda was never likely to use the opening of a major new project to outline plans for a swingeing new tax.”
“However, mining companies are not out of the woods yet. In coming months and assuming metals prices stay strong; Banda and his government may struggle to resist pressure to take a more aggressive line with the mining industry once the recovery has consolidated and as the election race heats up.”
© 2010 Menas Associates
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