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The raging impasse between the mining companies and Government over the withholding of over US$500 million in Value Added Tax (VAT) may force most of the mining companies to lay off some workers and shelve new projects in order to remain sustainable in Africa’s rich copper producer.
Recently, Mopani Copper Mines, Chambishi Metals and Konkola Copper Mines, among others, have expressed misgivings over the delayed resolution of the outstanding VAT refunds by the Government owed to mining companies and other exporters.
They contend that unless the matter is resolved urgently, they might be forced to review their operation, including retrenching some of their workers, at the same time, reviewing their contributions in Corporate Social Responsibility (CRS) to various communities where they operate.
Meanwhile, the Zambia Revenue Authority (ZRA) recently told the Post that the agency would only consider refunding companies their VAT only if they show proof of their exports through receipts.
The mining companies argue that this is beyond their reach as their efforts end at exporting the commodity and that they do not know the end users of the copper once sold on the international market.
Mopani Copper Mines recently vied that the withholding of the US$200 million in VAT has affected the company operations and fears for the more than 21,000 workers, contractors as well as suppliers that rely on their sustained operations.
Chief Executive Officer Dan Callow in a statement expressed that the withholding of the VAT has forced the company to either withhold various projects while suspending others with a view to find amicable and durable solutions.
And Chambishi Metals says over US$200 million has been withheld in VAT by the Government and also reveals that it is affecting their operations and profitability.
Glencore-owned Sable Zinc Mine Limited in Kabwe says it has equally been affected by the VAT refunds and has been forced to retrench 170 workers and placed the unit under care and maintenance pending solution of the matter amicably.
However, the Government, according to The Zambia Daily Mail citing Minister of Mines, Energy and Water Development Christopher Yaluma, expressed disappointed that the mining industry is using the VAT refunds to blackmail the Government.
Yaluma warned the Government will not allow mining companies to hold it to ransom.
“Mining companies need to be straightforward and not try to bend rules. As a government, we will not tolerate this. Before they [investors] come here to invest, they set aside capital to run their operations.
“But how come they are now basing their businesses on VAT refunds? If that was the case, we would not have allowed them in the first place,” Yaluma as said.
Yaluma wondered when mining companies started to rely on VAT refunds to run their businesses and divulged that Government has not yet received official communication on the reported laying off of workers at Sable Zinc stating that if it’s true, then they will have to undo the retrenchment before dialogue can commence.
And Mineworkers Union of Zambia (MUZ) general-secretary Joseph Chewe is cited as confirming to local media that 158 unionised and 12 senior employees have been retrenched at Sable Zinc Mine Limited in Kabwe.
The retrenchment has been necessitated by delays in the enforcement of the Zambia Revenue Authority (ZRA) VAT Rule number 18 (1) (b). The miners’ union says it has correspondence from mining companies on the notice of redundancies from Sable Zinc Mine Limited.
The company has officially written to MUZ and that 158 unionised employees have since been declared redundant, Chewe stated with a call to Government to resolve the controversy surrounding VAT Rule 18.
According to a letter of notice of redundancies signed by Sable Zinc general manager David Littleford obtained by the Daily Mail in Kitwe, the last day of the affected employees will be November 17, 2014.
Littleford echoes that the withholding of VAT refunds amounting to K64, 905,765, has affected cash flow and made it impossible for the company to continue operations.
“Sable Zinc has been forced to place its operations under the Mineral Processing License 102158-HQ-MPL, on care and maintenance,” Littleford stated.
However, if unresolved, the impasse might affect Zambia’s forecast output of 1.5 million tons of copper by 2016 from the current 760,000 tons.
Several new projects underway in Zambia, including the US$2 billion Kalumbila mine and US$800 million to be spent by Mopani Copper Mines to sink new shafts in Mufulira and Kitwe might be shelved, according to mining companies.
The mining sector has contributed over 723,000 jobs since the privatization of the mines in the late 1990s, with mining companies contributing over US$8 billion in investments in the sector since taking over the various units previously under Zambia Consolidated Copper Mines.
