Mines sound warning

THE Zambia Chamber of Mines has warned that Government’s failure to resolve the Value Added Tax (VAT) rule 18 controversy to allow the refund of over US$600 million will have a serious immediate and long term negative impact on the mining industry.

ZCMines president Jackson Sikamo said the immediate impact would be cash flow constraints due to lack of VAT refunds which would include suspension, deferment or cancellation of capital projects.

Mr Sikamo was speaking yesterday at Moba Hotel in Kitwe during a press briefing to explain the  implication of Government’s relunctance to refund the mines VAT.

“Apart from suspension or deferment of capital projects due to lack of VAT refunds, there will be slowing down of production levels, payments to suppliers would be pushed back by 90 days or more and there will be reduction of corporate social responsibility programmes,” he said.

The long term impact would include reduction in mine production,  higher production costs, jobs  losses (direct, indirect and induced) while suppliers of goods and services to the mines would have no business because mining companies will have no money to pay them.

“When mining companies do not have money, there will also be an overall reduction of revenue collection by the Zambia Revenue Authority (ZRA),” he said.

Mr Sikamo said the Zambia Chamber of Mines was appealing to Government to review the VAT rule 18 and make it applicable to all exporters so as to increase mining and manufacturing production and continue to create jobs.

“The Zambia mining industry will continue to be the engine of the Zambian economy for a long time to come. The industry needs to be nurtured so that we can continue to generate revenue required,” he said.

Mr Sikamo said most of the mines on the Copperbelt were not generating profits, but were actually spending more money than they were making.

He said most of the mines were old  and  costly to maintain.

Mr Sikamo  said although the Chamber of Mines was trying to intervene and stabilize  the situation there was nothing the mines could do about the huge electricity tariffs, taxes and other production costs.

“They cannot do anything about the electricity tariffs which are abnormally high. They go up every year. If you increase electricity tariffs from six per cent to 14 per cent, it is too high for mining companies.

“Most of the mines on the Copperbelt are old and  expensive to run. They are actually spending a lot of money on running the mines than the profits they are making,” Mr Sikamo said.

He also said there were no cheats or crooked investors in the mining industry and that those with  the evidence should report to the  police

“The Chamber usually get concerned when some people say the investors running mining companies are crooked because, as far as we are concerned, there are no crooks in the mining industry.

“We would like to assure you that there are no mining companies who are crooked or cheating. If you know those mining companies who are crooks, report them to police,” he said.