Zambia’s dilemma


WHAT a surprise that Zambia risks being thrown out of the Extractive Industries Transparency Initiative (EITI), the global transparency and accountability watchdog which promotes high and impeccable standards in the extraction and management of natural resources in developing countries.

The EITI, founded in 2003, is a multi-stakeholder coalition of resource-rich developing nations, donors, multinational companies, civil society organizations and investors. Zambia is a key member of the EITI in view of being a major world copper producer and a least developed country despite being endowed with huge natural resources.

One of the EITI’s primary goals is to sustain a more equitable balance between the development needs of a copper producer such as Zambia and an investment climate which encourages mining companies to continue to invest in the country and in the process create wealth for the country’s people.

But apparently this lofty ideal has not been achieved in Zambia between the mining companies and the Government. EITI Zambia head of mission Soforiano Banda told a high-level stakeholder meeting in Lusaka yesterday that unless and until Zambia starts to honour its obligations under the EITI protocols by 2020, she risks being suspended from the organization.

One wonders how Zambia can fail to abide by the requirements of this watchdog when all it does is ensure that the Government receives the correct amount of tax from the mining companies which exploit mineral resources from the country and, in return, the State discloses to its citizens and stakeholders what it has received from the investors.

Simple as it may sound, this process which is often shrouded in secrecy and subterfuge is one of the most controversial governance issues facing developing countries, Zambia included. The biggest dilemma governments face is how to develop a mining regime that ensures that investors pay what is due to the government without appearing to harass or inconvenience the goose that lays the golden egg.

The yet-unresolved tiff between mining companies and the Zambian Government over the Value Added Tax (VAT) refunds which the mines are demanding from the Zambia Revenue Authority and the deep-rooted suspicion by civil society organizations that the former do not deserve a refund because they owe the people of Zambia a lot more than what they pay, is a case in point.

The bottom line is how can the Government ensure all Zambians, the owners of the resources, benefit and share in the prosperity of a booming mining industry while keeping the investment climate attractive enough to encourage more investment in the sector, and cheer the ruthless corporate moguls of New York, Toronto, London and Beijing whose money oils the boom.

To make matters worse most of the mine development agreements which operate today were negotiated at a time of industrial stagnation and the mines were facing imminent closure following a collapse in world copper prices. The shrewd risk takers who bought the mines for a song are not keen to renegotiate these agreements now just because EITI or anyone else is making noise.

The EITI is relentlessly pushing for an open and accountable management of natural resources that promotes economic growth and social development. But poor resource governance by governments often leads to corruption and conflict. This is why Mr Banda wants mining companies to disclose the real owners of these investments and where they keep the money they make from Zambia, and how much.

Because of the secrecy surrounding mine development agreements and the lack of information or access to information on what mining companies are paying to Government, the truth may never be known. This is the sad legacy of Africa’s mining industry.

As the EITI says, until the Zambian Governments can allow stakeholders, including the media, to ‘‘systematically report, review and assess’’ what is going on behind the scenes, we may own the mines in name but certainly the money is not ours.