Mining scams

Fri, 16 Jun 2017 09:41:59 +0000

THE reports we carried this week that our good neighbour Tanzania lost between US $30.7 billion and US $48.5 billion through unpaid mining taxes due to under-declaration of mineral exports by one of the largest mining companies in that country, deserves special attention by both the Zambian government and ordinary citizens.

The investigation, which uncovered the startling facts that have shocked Tanzanians, was commissioned by President John Magufuli who has turned upside down the way of doing business in that country after discovering that many multinationals were fleecing the country by attaching themselves to those wielding political power.

President Magufuli has ordered that the offending gold miner must pay the outstanding taxes and royalties amounting to almost US $50 billion, and called for an urgent review of mining laws and government ownership in the country’s mines.

According to Professor Nehemiah Osoro, who chaired the investigative presidential mining committee that looked into the historical economic and legal aspects of mining in Tanzania, the scam has been going on for the past 19 years, aided and abetted by government officials and agencies.

The report found that between 44,277 and 61,320 containers of copper concentrates were shipped out of the country between 1998 and 2017, according to customs data from the Tanzania Revenue Authority, but shockingly, the containers declared by the mining company were far less than what customs documents showed.

As a result of these anomalies, Prof Osoro disclosed that in those 19 years the mining firm avoided to pay US$42.7 billion income tax and US$42.1 million in withholding tax. It also failed to pay US $4.9 billion in mining royalty and US $715.1 million taxes from under-declared shipping fees.

Prof Osoro estimates that the US $48.3 billion the government was denied by the mining company could have funded three national budges in line with the 2017/18 estimates as well as fund the construction of an 853-km railway line from Dar es Salaam to Mwanza.

Although the mining company has vigorously denied defrauding the government, calling the report unfounded accusations, the tone and essence of President Magufuli’s suspicions that all is not well in the mining industry, is exactly the feeling of many Zambians about our situation.

The Zambia Extractive Industries Transparency Initiative has been educating Zambians on the need to pay attention to what was going on in the mining industry and put in place stringent measures to ensure that we know the exact tonnage of minerals being mined and exported, their true value, who is buying the metal and what happens to the money after the metal is sold. The bottom line is we know next to nothing.

For example, the mining company in Tanzania declared that the content of its concentrates comprised three types of minerals – gold, copper and silver. But the presidential report found out that other minerals like sulphur, iron, zinc, nickel and seven others were also exported as concentrates.

In Zambia, especially North Western Province, we know that there are large concentrates of gold, uranium, iron, nickel and zinc. But when was the last time Zambians were informed how many ingots of gold or ores have been exported and for how much?

All we are concerned about is copper, copper, copper when these other metals, although found in small amounts, are worthy far more than the copper we export. What happens to these minerals, which are equally our inheritance? How come their significance is ignored? Who is benefitting?

We may think we are a leading copper producer, when we could be the world’s largest uranium, gold, zinc or nickel exporter. In Tanzania’s case the value of the undeclared other minerals was a staggering US $26.3 billion.

Another revelation from the Tanzanian report is that minerals exchange hands inside the country without the knowledge of the authorities. The minerals are bought and sold several times inside the country and exported by third parties, in the name of the mining company, who do not pay anything to the government.

The scam in Tanzania may appear so remote and unreal. The truth is, we could be far worse. Forewarned is forearmed.