Zambia’s copper outturn has continued to fluctuate-barely days after the country; Africa’s leading copper producer, raised its bar of the red metal on the international metal market, according to the Lusaka-based Bank of Zambia.

According to the data by the Central Bank-copper production from Zambia took a downturn-declining 2.5 percent in the first quarter this year compared to a year earlier, says Bank of Zambia Governor, Michael Gondwe.

In his address to Lusaka-based journalists, August 5, the Bank says copper output dropped 2.5 percent to 276, 075.0 tons from 283,042.3 in the first quarter of 2014. On a year-to-date basis, copper production stood at 559,117.3 tons representing 16 per cent higher than the 480, 892.6 tons produced in the first half of 2013.

Earlier, Bank of Zambia stated on its website that copper production in Zambia rose to over 400,000 metric tons in the first quarter of 2014 from around 300,000 tons produced in the same period last year.

Copper production rose to 473,249 metric tons between January and May from 399, 515 tons produced in the same period last year, the Lusaka-based bank stated.

The development was chiefly attributed to the increase in the mineral output to new developments currently taking place in the mining sector across the country. Copper production increased by 18 percent on year, during the period under review. “Copper export earnings grew by 7.4 percent to US$3,209.1 million during the first five months of the year from US$2,987.5 million recorded over the same period last year, driven by higher export volumes,” the Bank said according to data posted on its website recently.

Copper export volumes, at 477.485.3 metric tons, were 19.4 percent higher than 399,919.8 metric tons recorded during the corresponding period in 2013. The average realised price of copper, however, declined by 10 percent to US$6,720.86 per ton from US$7,471.77 registered during the same period last year.

However, it said the decline in copper prices by 9.1 percent to the US$6,691.00 per ton as at June 11 this year from US$7,360 per ton at the end of December 2013, impacted on market sentiment.

Government policy would remain focused on diversifying the export base through supportive interventions in economic sectors and activities with the greatest potential for exports.

The revised 28.8% energy tariffs for mining companies in Zambia-Africa’s rich copper producer has taken a new twist with the chamber of mines contesting in the courts of law, that decision by the energy regulatory body effected on 2nd April this year.

The courts have since granted a judicial review to the chamber of mines of Zambia on the matter to allow for hearing and determination of the matter.

The chamber, a consortium of mining companies operating in the Southern African state, argue in their affidavit that the decision by the Energy Regulation Board(ERB) to revise the energy tariffs was incorrect arguing it was not the correct body to have done so, the Post newspaper reported citing an affidavit filed in the Lusaka High Court.

Chamber of mines executive officer, Maureen Jangulo, in her application made to seek judicial review of the decision before the court’s principal registry, on behalf of the mining companies, its members, contends that the ERB was not authorize by the Energy Regulation Act, Electricity Act or any other law to vary tariffs in the applicants’ Power Supply Agreements (PSAs).

The chamber contends further that the applicants in the matter stated that, among other mines, Lumwana Mining Company, Kansanshi Mining, Lubambe Copper Mines, Mopani Copper Mines, Chibuluma Mines, NFC Africa Mining and Chambishi Metals Plc, were companies incorporated under the companies Act and whose principle business was mining.

According to the provisions of section 8 of the electricity Act, then the respondents and the supplier of the electricity were required to notify and offer applicants a hearing on the proposed tariff adjustment before the decision of vary the electricity tariff was made.

Both affected parties were not afforded a chance to have a hearing on the matter before the decision to review tariffs was made, Jangulo argued in her affidavit.

Additionally, the chamber acting on behalf of the mining companies-its members argues that Lumwana Mine and Kansanshi Mines entered into PSAs with Zesco limited while the other copperbelt companies had agreements with the Copperbelt Energy Corporation (CEC) for the supply of the electricity for their respective mining operations.

According to the PSAs signed by the mines with Zesco, Jangulo contends, Lumwana Mining company and Kansanshi Mining Plc, electricity tariffs to be paid by the two applicants were supposed to be adjusted by indexation or in reference to the terms agreed by the parties either through tariff reviews to be held by the parties every three to five years, or through the terms agreed to by the parties pursuant to an industry wide tariff adjustment, the affidavit reads in part as cited.

The Lusaka High Court has since granted the chamber of mines judicial review against the ERB’s decision to adjust the tariffs for foreign mining companies operating in the country.

High Court Isaac Chali granted leave to the chamber of mines to commence judicial review and set 28th July this year to commence hearing.

On 2nd April, the ERB announced a 28.8% power increase for mining companies, a move which the mining companies contended had come amid low copper prices on the international metal market.

Chambers of Mines of Zambia Chief Executive Officer, Jangulo had earlier argued that the ERB power tariff increases were done unilaterally.

The chamber had then argued further that while the mines understand the need for utilities to earn a fair return on investment to be able to efficiently and sustainably operate and maintain the infrastructure, cognizance must be taken of the long-term nature of the mining business.

Due to the long-term nature of mining investments, corresponding long-term planning from a policy and regulatory perspective is necessary to attract and retain investment in this sector.

She pointed out the fact that power supply to mining companies is governed by commercial contracts entered into mutually by ZESCO and respective companies.

This was taking into account the full commercial circumstances prevailing at the time of entering into such contracts, and anticipated to occur over the life of the contract.

Jangulo had added that the mining sector had agreed to extra ordinary tariff increases of 35% in 2008 and 30% in 2011 outside existing contracts on the understanding that investments would be made to improve the quality of power being supplied to the industry.

As Zambia seeks to raise enough revenue to meet various financial obligations including infrastructure development, renowned economic analysts contend the policy deprives the treasury of resources.

The Statutory Instrument (SI) number 89, which demands Government slapping a 10 percent export levy on copper concentrates by mining companies to allow maximising tax revenue to the treasury, has again come under debate with some commending that it be scrapped.

Recently, President Michael Sata directed that the policy, which suspended 10 per cent export duty on copper ores and concentrates for one year, be reversed.

On 21 March this year, Finance minister Alexander Chikwanda waived statutory instruments 33 and 55 which barred economic players from transacting in currencies other than the local one, the Kwacha and the SI 55 which demanded that mining companies should work with various bodies to monitor and regulate their export programmes.

However, the delays to review the SI 89 has raised eyebrows of some economic analysts with Lusaka-based business and economic analyst, Professor Oliver Saasa advising the Government to act quickly and revoke the policy as it was detrimental to the growth of the economy.

Saasa argued that it was unfair for the Government to treat mining companies as ‘homogenous groups’ with regard to their tax obligation and community social responsibility.

He urged Government to consider revoking Statutory Instrument (SI) number 89, and allow more tax revenue to be collected to beef up the treasury.

Government risks missing a clear opportunity to draw a distinction between firms which are compliant with meeting their tax obligation if it lumps them together and treat them as homogenous groups, he said in a case study report he undertook recently entitiled. `Economic Impact of the Trident Project’ done in March this year.

Saasa urged the Government to stop using averages in reporting the mining companies’ tax payments to avoid missing out on potential opportunities that can be generated from listed companies on the capital market and those who are operating outside the Lusaka Stock Exchange (LuSE) noting:
“There is a risk to miss the opportunity to draw a clear distinction between firms such as Kansanshi Mines that are publicly listed on the Lusaka Stock Exchange (LuSE) and that are more compliant with regard to meeting both their tax obligations and community social responsibility commitments,”

Mining companies meeting their tax obligations and community social responsibility commitment should be separated from those which are allegedly not fully complying with Government expectations and that a solution should be found to address the seeming stand-off between First Quantum Minerals’ (FQM) Trident Project in North-Western Province and Government authorities, Saasa argued.

He cited the Zambia Environment Management Agency (ZEMA)’s delays in approving the resettlement plan needed by the Trident Project to proceed with some of its major development as a cost to the mining company, FQM time and resources to make it proceed with its projects earmarked for Solwezi, where it operates.
He called upon the Government as a matter of urgency, address the challenges posed by the country’s lack of a single source of definitive copper production data and that this would help address the often heard of complaints that the mining companies are under-reporting on both production and export figures.

“More importantly, without accurate statistics on mining production levels, it has been difficult to project accurately revenue from the mining sector, let alone to efficiently collect it by way of taxes,”

Saasa further asked the Government to aim at maximising tax revenue to the treasury over the longer-term than focusing at shorter-term gains. This can be done by encouraging mining investments that support long-term profitability and the acquisition of advanced and appropriate technology.

The strategy, he added calls for the adoption of tax systems that are neutral and progressive in a manner that motivates corporate innovation and profit-seeking.

“In this regard and as an example, it is strongly recommended that, in addition to SI33 and SI55 that Government revoked in March 2014, Statutory Instrument number 89, which introduced the 10 percent export levy on concentrates is also immediately revoked,” Prof Saasa said.

Recently finance minister Chikwanda noted that the Government may lose income from Kansanshi following the revocation of the Statutory Instrument permitting export of copper ores and concentrates tax-free.

Chikwanda appeared before the expanded parliamentary committee on estimates in the company of Secretary to the Treasury Fredson Yamba and finance permanent secretary in charge of budgeting Pamela Chibonga recently.

Chikwanda said the Ministry of Finance had realigned Statutory Instrument 89 in line with President Sata’s directive that it be revoked although the move would result in revenue losses.

Mineralorogist and scholar who is also former deputy mines minister Marthius Mphande noted that Statutory Instrument 89 squarely rests on Chikwanda.

In response to lawmakers who had pressed the finance minister to categorically state if the President’s directive had been fulfilled, Chikwanda said: “We have realigned the SI which should have been in force up to next year September.

“It’s a complex issue on concentrates because Kansanshi Mine is building a smelter to process but it will take a year or more to complete and so there will be no income as concentrates will not be processed locally.”

Chikwanda said the government was aware of such an anomaly where Zambians were not benefiting from their mineral wealth.

The lawmakers in the committee also wondered whether the government could consider reintroducing windfall tax, which was a sure way of maximising profits from the mining sector which Chikwanda claimed there was extensive fraudulence in the mining sector, where players were quick in declaring losses even when they had made huge profits.

Government could no longer ignore concerns by majority Zambians that the nation was being ‘robbed’ of its mineral wealth by investors.

“Mines are not renewable like agriculture, and so we need our citizens to benefit more from this sector. We need to come up with a tax that will compel mining houses to pay whether they have made profit or not; that’s their own business,” Chikwanda said.

In Revoking SI 89, which Chikwanda signed on October 4, last year, President Sata admonished Zambia Revenue Authority commissioner general Berlin Msiska and commissioner of customs Dingani Banda for allegedly advising the finance minister wrongly.

The SI 89 reversed the November 2011 decision of the PF government to impose a 10 per cent export duty on copper ores and concentrates