Illicit financial flows impeding Zambia's economy

Illicit financial flows impeding Zambia's economy

TAX Justice Network Africa says rampant illicit financial flows in Zambia's mining tax regime have continued to impede the country's economic growth.

In an interview at the just-ended Southern Africa Resources Watch organised workshop on the Africa Mining Vision (AMV) constituency building workshop, Tax Justice Network Africa policy and advocacy manager Savior Mwamba said Zambia was a clear case of how a resource-rich country was not benefiting from its mineral wealth due to illicit financial flows in its extractive sector.

Mwamba said the country's mineral wealth had been literally stolen over the past years due to serious illicit financial flows.

He said the design of Zambia's tax regime was so complicated that mining companies were able to manipulate transactions through inflating costs and underestimating revenue.

"Despite copper production going up, the country is not still benefiting from mining. We need to look at not only the non-monetary benefit but also the tax revenues as the only way government can raise enough money to invest in communities. Look at Kankoyo in Mufulira which hosts one of the biggest mining companies (Mopani Copper Mines). The infrastructure there is literally nonexistent, it's deplorable," Mwamba said. "As long as the government puts its hands off the mines, Illegalthey will always be held at ransom as we saw with Konkola Copper Mines when they wanted to lay-off hundreds of workers."

Mwamba said the government must re-look at its stake in the mining sector and increase its shareholding as the 20 per cent was not enough to exert control and influence on the mines.
He said the government must also implement the revenue sharing mechanisms which were already provided for in the Constitution to ensure communities directly affected by the impact of mining begin to see tangible benefits from mining activities in terms of infrastructure development and environmental mitigation.

"It's only government that can make decisions to ensure that citizens begin to see benefits of mining because transnational mining companies are always profit driven and it will not happen that these companies will one day wake up and say they want to deal with all these issues affecting Zambians. The government must take a review of the current design of the mining policy," said Mwamba.

During a media seminar in Siavonga, Bank of Zambia governor Dr Michael Gondwe said it was impossible for the current growth in the mining sector to impact the country positively for as long as small supporting industries like transporting copper was done by foreigners.

He said despite high growth numbers, mining was not benefitting the country because there was no meaningful participation from indigenous entrepreneurs.

"Look at the mines...the space of Zambians driving copper to the export market is very small and yet this is something Zambians can do," said Dr Gondwe. "Zambians can buy trucks by getting loans and other arrangements but they are not there. If you look at who is providing nuts and bolts to the mines, I don't think there is any Zambian doing that. All imported and yet these things can be manufactured here in Zambia."